Archive for December 11th, 2014

Why rapid growth is a strong predictor of future slowdowns?

December 11, 2014

An interesting piece by Larry Summers and Lant Pritchett (detailed paper here).

They say low growth after high growth is just a mean reversion. There is no reason why high growth shall continue forever. This is a harsh reality countries have to face and accept:


Jack Bogle – Active Investor in Passive Clothing

December 11, 2014

Cullin Roche reflects on a recent article by Passive investment guru – Jack Bogle. Bogle says that he will only invest in US markets and ignore others. As per Roche, this decision is itself an active one and likely to harm his investors.

A finance professor once told me that passive investing is far more active than it is made out to be. The amount of work needed to ensure your portfolio mirrors that of an index and so on is not an easy job. It requires continuous rebalancing and reallocating of portfolio..

Economists aren’t as nonpartisan as we think

December 11, 2014

Zubin Jelveh, Bruce Kogut and Suresh Naidu have a blogpost on the topic. The post summarises this paper by the trio

They start with this basic paradox. Most economists proclaim to be independent thinkers but gain legitimacy and hype from some government appointed post:

According to purists, the field of economics is supposed to be free of political ideology. Economics views itself as a science1 and the prevailing consensus, best articulated by Nobel-winner and Chicago-school doyen George Stigler, is that “the dominant influence” in economics “is the set of internal values and pressures of the discipline” which help keep it nonpartisan.

And yet most well-known economists achieve their star status in the political sphere. The econowonks reading this could name the politics of economists Paul Krugman and Greg Mankiw without much hesitation. And a little Googling would uncover the ideological leanings of Martin Feldstein, John Cochrane, Christina Romer or Jonathan Gruber. Even Thomas Malthus and David Ricardo had disagreements over free trade that were mirrored in the House of Commons.

The authors go onto show how top econs political biases shape their research as well:

Still, economists’ beliefs are separate from what makes them successful academics: their research prowess. We can easily discount the political opinions economists express in op-eds. But they’re also publishing research in peer-reviewed journals. Are findings on tax rates, minimum wages or government spending also influenced by ideology?

This is not just navel-gazing, as economics research informs public policy.2 A recent Congressional Budget Office analysis of the minimum wage describeshow results from academia influenced the CBO’s projections. If those findings were at least partially influenced by political beliefs, then the CBO’s assessments may be unwittingly biased.

So we set out to test the idea of nonpartisan economics on a large scale. In arecent paper, we researched whether economists’ political leanings were associated with their professional work.3 The answer: yes.

Our main proxy for research was the text that appeared in academic papers. To identify political leanings, we had to figure out a way to measure the ideology of any economist — not just people like Krugman and Mankiw. Luckily, there’s a growing body of research on how to detect people’s ideology (ormood or personality type) from the way they write.

Nice bit..In a way paraphrasing Keynes who said politicians are influenced by some defunct economist. In this case, economists themselves are influenced by some funct or defunct political thinking. At the end of the day, politics is supreme and central to most things in economics…

The rise and fall of debate in economics..

December 11, 2014

Food for thought post by Joe Francis, an Argentina economy specialist (a country whose economics must be keeping him both busy and amused).

He says how econs do not discuss any more:


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