Archive for December 3rd, 2014

What is free banking all about?

December 3, 2014

There has been some hot and stirring debate on free banking in the blogosphere.

Ueasymoney blog sums up the debate and provides links on who said what on the topic. For those interested in history of money and banking, studying free banking is a must as this is how it all started. Adam Smith wrote on free banking in his wealth of nations tome. Also read this website where leading free bajmking scholars are writing some really fab and interesting stuff.

There are two schools of free banking — Currency school led by Hume and Banking school led by Smith:


(Brief) history of American economics..from words to models

December 3, 2014

Ross B. Emmett of Michigan State University has this interesting paper on history of American economics. In the process he points how US econs changed their way of explanation from words to models.

Economics today is a model building and testing science. But scientific economics was not always understood in terms of models. Economics first emerged as a separate field of scientific study in post-bellum America. The laissez-faire orientation of early American moral philosophy gave way to social reforms informed by the historical/institutional examination of the sources of rapid change in the American economy.

Early professionalization occurred within the context of the debate laissez-faire theorists and Progressives, leaving early twentieth century American economics a conflicted pluralism, with a nascent neoclassical theory tradition competing with institutionalism and the slow emergence of Keynesianism. The shift to model building occurred behind the scenes of the debates between vestiges of institutionalism, the Keynesian synthesis, and the Chicago School. By the end of the twentieth century, all economists, regardless of policy orientation, were modelers.

There are interesting examples at the end of how this transition to modelling happened. The examples are based on Coase theorem, labor economics and education economics.

And of course as Americans dominate much of everything including economics, this changed the economic thinking across the world. Models have become the centrepiece for everything in economics…

Has microfinance lost its moral compass?

December 3, 2014

In this piece

This paper argues that microfinance in south Asia, like mainstream finance in North America and Europe, “has lost its moral compass”. Microfinance institutions have increasingly focused on financial performance and have neglected their declared social mission of poverty reduction and empowerment. Loan officers in the field are under enormous pressure to achieve individual financial targets and now routinely mistreat clients, especially poor women.

The values of neo-liberal mainstream finance in the rich world have spread to microcredit in the villages of Bangladesh and India. This situation is hidden from western publics who are fed the lie of “the magic of microfinance” by their media, guided by the needs and interests of mainstream finance seeking to provide some “good news” about the financial sector as scandal after scandal unfold. Urgent action is needed, particularly from the leaders of the microfinance industry, to refocus their organisations and workforce on achieving both financial and social performance targets.

It has interesting stories on how this social enterprise is just becoming like its greedy big cousin…

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