Archive for July 1st, 2016

Why does Germany have one football team and UK three?

July 1, 2016

A good piece as usual by Prof Ricardo Hausmann.

He says the main reason for Brexit was obviously fear of immigration. Uses the England football team example to make his point:

Of the 24 teams that qualified for this year’s UEFA European Cup football (soccer) tournament, only one came from Germany. Three came from the United Kingdom: England, Wales, and Northern Ireland. That seems rather odd. After all, East and West Germans reunited only in 1991, and Bavarians united with Prussians only in 1871, whereas the annexations/unions of Ireland, Wales, and Scotland to the Kingdom of England go back to 1177, 1542, and 1707, respectively.

So why do Thuringians, Saxons, and Swabians root for the same German team, while UK citizens root for so many? (Scotland and even Gibraltar have their own teams as well.) Wouldn’t they have a stronger team if they chose the best players to represent them all?

Presumably, British citizens understand this, but they prefer to have their own national teams rather than a stronger UK team – even if this means losing to tiny Iceland. After all, if it is only about the strongest team, you might as well root for Barcelona. For a team to represent “us,” it somehow has to be us.

Seen in this light, the Brexit vote is less surprising. The “Remain” campaign focused on the economic benefits of staying in the European Union and the costs of leaving, some of which fell due immediately after the results were announced: the British pound plummeted and stock markets wiped out a couple of trillion dollars of wealth.

And yet 52% of those who voted preferred a country where Poles and Romanians would not be permitted to live, work, and compete for a position on the economic team. Letting them in might produce a better team, but it would no longer be our team.

Hmm..The real problem is us vs them:

At the core of the issue is the sense of “us.” What does it mean to be a member of the EU, Nigeria, Iraq, Turkey, Switzerland, or any other political entity?

The sense of us is a subroutine of the brain based on the sense of self, which is one of our brain’s many creations: a sensation of being an ongoing entity that experiences things, remembers its history, can act, and has feelings and goals – what the eminent neuroscientist Antonio Damasio calls an autobiographical self. Our brain is also acutely aware of the existence of other selves, with their feelings and intentions, and it is particularly good at reading what others are thinking, feeling, and planning.

We use this same mental apparatus to develop a sense of “us”: the people we care about and root for. We think of this “us” as if it were a person with an autobiography, a temperament, predispositions, and aspirations. We regard firms as legal persons, and we talk about countries as if they were a composite person with clear characteristics: Germans love order, Italians are passionate, and Brits possess a stiff upper lip. And, obviously, the sense of “us” implies a sense of “them”: those whose welfare we consider less fundamental than our own.

As Joshua Greene, Director of Harvard University’s Moral Cognition Lab, has argued, our moral sentiments evolved to support human cooperation. Just as evolution gave us sexual desire, rather than rational arguments, to ensure procreation, so we have evolved feelings of empathy, affection, disgust, and rage to respond to one another’s behavior. Our moral sentiments both limit individuals’ abuse of the common good, expressed in the conflict between “me” and “us,” and maintain the coherence of the group, to support the competition between “us” and “them.”


The European project will succeed only when it creates a European sense of “us” so powerful that it feels right that, say, Bulgarians should be permitted to live and work in Birmingham. When all are European, all may live wherever in Europe they please. They might even become the team to beat.

Which Thinkers Will Define Our Future?

July 1, 2016

Brad Delong thinks of three thinkers – Keynes, Polanyi and Tocqueville.


25 years of 1991 reforms starts from today..

July 1, 2016

It all started on July 1 with the first devaluation.

Indian Exp has an interview of Dr MM Singh, one of the key persons behind the job:

1991 and the Budget of July was a watershed in India’s economic and political history. There was so much done. Industrial de-licensing on Budget day, trade policy, exchange rate management and much more. How do you look back on that period? Were those ideas or solutions known already to policy-makers or were they imposed by multilateral lenders as critics claim?

I don’t see much originality in those. These were ideas which were being discussed inside the government and outside, too. All I did was put them all together in a coherent whole, when I got an opportunity. The Budget for 1991 set out the roadmap that we wanted to adopt for the next two to three years. It gave SEBI legal status. Before that, SEBI was no more than an advisory body. The banking system needed reforms and I announced the setting up of the Narasimham committee on financial sector reforms. Then, there were tax reforms..

Read on..

Problem is not the tenure as much the noise around the position

July 1, 2016

Once again, we have noise coming from Indian central bank. It is like saying please sir no more. please spare us. We have other things to do than just follow the controversies at India’s Mint’s Street.

India has seen unprecedented attention to this position since 2013. After the sheer drama in last few days (or months or years?), we thought things will settle down. But they cannot as the central bank ensures attention and noise is always there.

Now we are told that 3 years tenure is too short. Really? Why take it then? It is not as if these things were not known in advance. The tenure was hardly a suspense and fell from nowhere.

Moreover, length of tenures have hardly mattered in the past. If the government wanted to extend the tenure it just got extended. Plain and simple. The institution just kept moving along with minimal fuss and noise.

As Anil Kumble said so well recently, it is not about me or any other coach. It is about the Indian cricket team. Similarly, it is about Indian economy.  No one is bigger than the system and if he/she is, we know the outcomes.

It is perhaps for the first time when there has been a serious threat to the institution itself. It was made to look as if the entire thing will just collapse due to one position. The critics and finocracy surely made their case for a steep fall but nothing of this sort happened. It was all such a farce really where the supposed benefactors of Indian economy wanted it to be doomed.

The next set of individuals have a really tough task at hand. How to restore things to normalcy at Indian central bank. And remember this men of money quote from John K Galbraith all the time (perhaps get it inscribed at the reception so that all incoming can read and remember):


Who cooked Adam Smith’s dinner?

July 1, 2016

Didn’t know about this book at all – Who cooked Adam Smith’s Dinner? It is by Katrine Marcal who has written a scathing review of economics built around “rational man”:

It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest

When Adam Smith wrote that all our actions stem from self-interest and the world turns because of financial gain he brought to life ‘economic man’. Selfish and cynical, economic man has dominated our thinking ever since and his influence has spread from the market to how we shop, work and date. But every night Adam Smith’s mother served him his dinner, not out of self-interest but out of love.

Today, our economics focuses on self-interest and excludes all other motivations. It disregards the unpaid work of mothering, caring, cleaning and cooking. It insists that if women are paid less, then that’s because their labour is worth less – how could it be otherwise?

Economics has told us a story about how the world works and we have swallowed it, hook, line and sinker. Now it’s time to change the story.

In this courageous look at the mess we’re in, Katrine Marçal tackles the biggest myth of our time and invites us to kick out economic man once and for all.


Malcolm Harris reviews the book:


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