Archive for April 18th, 2016

Subsidies are the last refuge of a failed policy maker?

April 18, 2016

Ajay Shah has a post on the topic. The summary is:

Many times in India, subsidies are being used to express sheer value judgments; they are just the faddish thinking of one bunch of hausfraus running policy versus another. At other times, a market failure is indeed present. But instead of more subtle interventions and the minimum use of force — based on a sound scientific understanding of the anatomy of the market failure — we tend to rush to the excessive use of force that is a subsidy. Every subsidy is grounded in the monopoly of violence of the State that is required for tax collection. We should be far more circumspect before doling out subsidies. Subsidies are the last refuge of a failed policy maker.

One may disagree with what the author has to say but points have been well argued.

I guess the problem is not subsidies but open ended ones. Some form of subsidies might be needed to get things going in initial years. But they continue to go forever without looking at merits of the case. What is needed instead is a closed end approach to subsidies where after a definite time, they should be phased out.

Towards a theory of shadow money..

April 18, 2016

Those who think shadow money/banking is a new idea and came to the fore only in 2008 crisis, should know better.

Similar concerns arose when banks started offering deposits and one was not sure whether they should be counted as money or not. Over a period of time, deposits are not just counted as money but has become the most dominant form of money as well.  So will repos the new shadow banking instrument make the similar transition as well?

Daniela Gabor and Jakob Vestergaard of INET have a paper on the topic. A broad summary is here..


How it is still easier to become Financial Adviser than a Hairdresser?

April 18, 2016

Jason Zweig points to research on the topic:


Egypt for Sale..

April 18, 2016

Interesting piece by Barak Barfi is a research fellow at New America.

He points how Egypt has continued to live on foreign aid and its claims of being a regional power are just false claims:


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