Need Economics with less math and more Jane Austen…

Interesting piece by Profs. Gary Saul Morson and Morton Schapiro, both from Northwestern University.

RBI monetary policy trivia: Why policy has been announced mostly on Tuesdays?

I have been wanting to write this post for a long time but somehow keep forgetting.

I have been noticing for a while that RBI prefers to announce its monetary policy decision on mostly Tuesdays. So, just wanted to check whether the noticing matches with the facts. For most this will be just trivia and feel free to ignore.

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Thomas Alva Edison too had a plan for monetary stability…

JP Koning is not just letting us know what economists have written on history of money and monetary system. He is also telling us about what experts from other fields have written about monetary systems. There was an earlier tweet on Copernicus writing about money.

Now there is another tweet which tells us Edison too had a solution for reinventing the US monetary system in 1920s. He suggested that instead of gold backed dollar, dollar should be backed by agri commodities like wheat, oats etc. Edison thought the gold backed dollar mainly favored the Eastern part of US economy. A crop backed Dollar would be beneficial to Southern and Western parts which had significant agri base.

The article says think of this as Bill Gates advocating similar standard and asking to dismantle the Federal Reserve.

The plan was that government would set up 12 warehouses across the country which will store 36 crops grown in the country. The farmers could store their crops and get a certificate against the same. This certificate will be equivalent to cash leading to monetisation of the crop. The farmer will hen take the certificate to a bank and get it exchanged for currency (50% of crop value and so on…).

The plan did not get much support from economists and the quality of responses (harsh language) led Edison to be disappointed and drop the idea. The plan was obviously ahead of its times and if not money, it is just like call option or warehouse financing of today.

There are more details in the article.

Superb stuff..

70 years of John Bate Clarke Medals: How do you define excellence in economics?

Beatrice Cherrier and Andrej Svorenčík research on 70 years of Clark Medal. They analyse the forces behind the medal and the several arguments over what is meant by excellence in economics:

We don’t need no homework: The Revolt against Homework is Spreading in US Schools..

The famous Pink Floyd song “We don’t need no education” could also be sang as “We don’t need no homework”.

Annie Holmquist has a piece on rising angst against homework:

The Fed Ups: New Inflationists in town arguing for a higher inflation target…

Prof Larry White has a scathing piece on continued attempts by economists to push central banks into influencing real economy. Recently, several top US econs signed an open letter asking Fed to raise inflation target.

Prof White says these are the new Fed ups in town:

Explaining the persistence of the gender wage gap in Japan: The ‘glass ceiling’ and the ‘sticky floor’

Prof Hiromi Hara has a piece on gender wage gap in Japan. The research is also quite apt given she works in Japan Women’s University.

She says both glass ceiling and sticky floor exist in Japan. The reason is quite interesting. Most Japanese companies follow this system which incentivises employees to stay beyond office hours. This appeals mainly to men as women leave to work at homes:

Our minds have been hijacked by phones…

From humans making mobile technology as a slave to mobile technology making humans their slave, the journey has come full circle.

Nice piece on how this process of hijacking our minds is being played over and over again.  It is an interview of Tristan Harris who is trying the rescue act:

OK. How do we reform it?

So the first step is to transform our self-awareness. People often believe that other people can be persuaded, but not me. I’m the smart one. It’s only those other people over there that can’t control their thoughts. So it’s essential to understand that we experience the world through a mind and a meat-suit body operating on evolutionary hardware that’s millions of years of old, and that we’re up against thousands of engineers and the most personalized data on exactly how we work on the other end.

 Do you feel that about yourself? I tried to reach you last weekend about something, but you went into the woods and turned off your phone. Don’t you think you have control?

Sure, if you turn everything off. But when we aren’t offline, we have to see that some of the world’s smartest minds are working to undermine the agency we have over our minds.

So step one is awareness. Awareness that people with very high IQs work at Google, and they want to hijack your mind, whether they’re working on doing that deliberately or not. And we don’t realize that?

Yeah. And I don’t mean to be so obtuse about it. YouTube has a hundred engineers who are trying to get the perfect next video to play automatically. And their techniques are only going to get more and more perfect over time, and we will have to resist the perfect. There’s a whole system that’s much more powerful than us, and it’s only going to get stronger. The first step is just understanding that you don’t really get to choose how you react to things.

And where’s that line? I do choose sometimes to use Instagram because it’s immensely valuable to me; I do choose to go on Twitter because it’s a great source of news. I do go to Facebook to connect with my friends. At what point do I stop making the choice? At what point am I being manipulated? At what point is it Nick and at what point is it the machine?

Well I think that’s the million-dollar question. First of all, let’s also say that it’s not necessarily bad to be hijacked, we might be glad if it was time well spent for us. I’m not against technology. And we’re persuaded to do things all the time. It’s just that the premise in the war for attention is that it’s going to get better and better at steering us toward its goals, not ours. We might enjoy the thing it persuades us to do, which makes us feel like we made the choice ourselves. For example, we forget if the next video loaded and we were happy about the video we watched. But, in fact, we were hijacked in that moment. All those people who are working to give you the next perfect thing on YouTube don’t know that it’s 2 am and you might also want to sleep. They’re not on your team. They’re only on the team of what gets you to spend more time on that service.

 So step one is, we need to transform our self-awareness. What’s two?

Step two is transforming design, so that based on this new understanding of ourselves—of how we’re persuaded and hijacked, etc.—that we would want to do a massive find-and-replace of all the ways that we are hijacked in ways that we don’t want, and to replace them with the timeline of how we would have wanted our lives to go. An example of that is today, you look at your phone and you see a Snapchat notification. And it persuades you to think a bunch of things that you wouldn’t have thought. It causes you to get stressed out about whether or not you’ve kept your streak up. It’s filling up your mind. And by responding to that one streak, you get sucked into something else, and it cascades. Twenty minutes later you’re sucked into a YouTube video. And there goes your day.

What we want to do is block those moments that hijack your mind in ways you regret, and replace them with a different timeline—what you would have wanted to have happened instead. The resource we’re conserving is time. Imagine these timelines stretching out in front of people, and right now we’re being tugged and pulled onto these brand-new timelines that are created by technology. Let’s do a massive find-and-replace from the manipulative timeline to the timeline we would’ve wanted to have happened.

Hmm..

Quite a few people have been telling me how smart phones have made them dumb..

ECB continues to warn governments against war on cash…

Not all central banks have joined hands with their respective governments (rather bowed to governments’ pressure) on war on cash. ECB is one such central bank and its unique structure could be a reason for this. It is not answerable to any one country/government and can express itself much freely compared to others on the matter.

I had earlier pointed how it has asked two governments to go slow on war on cash. These were Portugal and Belgium.

Now it asks Bulgaria to go slow as well.  The Bulgarian Govt wants to lower transactions in cash:

The draft law seeks to gradually decrease the maximum limit for cash payments in Bulgaria from the current limit of BGN 10 000 to BGN 1 000 by 2019. The same maximum limit would apply to the payment of instalments in performance of a contractual obligation where the total amount is above
the maximum limit.
1.2 As in the currently applicable law, the maximum limit would apply both to payments in BGN, as well as payments in foreign currencies which are of equivalent amounts.

ECB says:

In particular, the decreasing limits on cash payments proposed by the draft law need to take into
account the advantages of having limits on cash payments in place and the potential
inconvenience thereof for citizens’ regular transactions in certain market segments. Setting the
limitation at these levels may make it difficult to implement the limit in practice. In this regard, it
should be noted that Directive (EU) 2015/849 of the European Parliament and of the Council14,
whilst confirming the vulnerability of large cash payments to money laundering and terrorist
financing, nevertheless applied customer due diligence measures to cash payments of EUR 10 000
or more. This implies that the draft law should establish a proportionate threshold for limits to cash
payments, taking into account the objectives of such limits.

2.11 Against this background, the ECB considers the lowering of the limit on cash payments to BGN
1000 (approximately EUR 500) by the 1st of January 2019 as disproportionate, in the light of the
potentially adverse impact on the cash payment system. In case the legislator wishes to pursue the
proposed cash payment limitations a higher threshold should be chosen and a degree of flexibility
should be introduced in the draft laws by, for example, allowing the delivery and receipt of cash
payments for compelling reasons or for reasons that are outside the individual’s control15, such as
where no payment service provider is available at the place or time of the payment. It might also be
advisable to allow cash transactions above the defined thresholds as long as the parties are able to
ensure that the payment is traceable by identifying the amount, the reason for the transaction and
the parties involved.

More importantly, it is putting all these discussions on its website for all to access. So unlike India, where we are moving from one rumor to another.

 

Flybit Offers Cheapest Flight Tickets in India; Accepts only Bitcoin Payments

Interesting bit of news. As government and policymakers try and thwart digital currency challenge, some companies are trying to offer services accepting payments only in bitcoins.

This portal flybit.in books flights accepting payments only in bitcoins. Why opt for it? Ticket prices are cheaper compared to other portals:

A 4000 year bond

Interesting post/picture by Alex Tabarrok:

Why should historians tweet?

Beatrice Cherrier has a long post (which is also her paper) encouraging historians to tweet:

Bolivia’s President Morales declares ‘Total Independence’ from World Bank and IMF

Interesting development from South America:

Daily Economics: What does it take to run a paan stall in Mumbai?

Interesting video of a how a 40 year old pan shop in Mumbai manages its business.

GST impact: Cheaper to eat sweets at shop counter than seated at table..

Yesterday posted that under GST, simple barfi gets taxed at 5% whereas chocolate ones at 28%.

In another article, we learn that better to eat sweets standing at the counter on a sweet shop rather than sit there:

What is the difference between having a rasmalai standing at the counter of your favourite sweet shop, and ordering it at a table a few steps away? Well, apart from comfort, it’s the GST rate. If you have the sweet at the counter and walk out after paying the bill, many mithaiwalas will charge 5% GST. But if you decide to enjoy it after asking a waiter to get it, the shop may ask you to pay 18%, if it’s air-conditioned. It is the same for dhokla, the favourite Gujarati snack.

If you order at the counter you pay at a rate of 12% GST, but if you prefer to sit down to enjoy the snack you pay a higher rate of 18%.

There are others who are interpreting it differently. For instance, a leading sweet shop in central Delhi, which does not have seating facility but has tables where you can enjoy a snack or a sweet, is charging 5%.

“The higher levy is applicable if you have a large seating area, which we do not have,” explained the owner, who did not wish to be identified.

But the differential tax rate is something that most consumers are unaware of, resulting in many of them getting a surprise when they are presented the bill.

Tax experts say subtle interpretations of GST need to be effectively communicated to consumers. The significant difference in GST rates for the same product may prompt a large number of consumers to have their favourite sweet or snack at the counter or outside the shop, rather than enjoy it at leisure sitting at a table.

GST like demonetisation provides fascinating cases on impact of economic policy on spending behavior…

GST impact on makers of Indian sweets: Hampering or increasing creativity?

As GST is unravelling one thing makes for a curious case. How does one decide which items are going to be taxed under which category? These are the central planning exercises which econs always warn about.

So like this interesting piece on impact of GST on sweet makers says normal barfis are taxed at 5% but chocolate ones are taxed at 28%!

Why corrupt bankers avoid jail?

Patrick Radden Keefe has a long piece but the summary is: Prosecution of white-collar crime is at a twenty-year low.

Fascinating interplay and interdependence of politics and finance…

RBI stops printing Rs 2000 notes and focus printing on Rs 200 note?

The secret wars on banknotes continue in India. It was never clear from the RBI Board meeting when Rs 2000 was issued. Likewise, as news started doing the rounds of launch of Rs 200 note, there was no clarity again on whether and which Board meeting cleared the issue of Rs 200 note.

Both cases of issuance of Rs 2000 and Rs 200 notes, these were new denominations. Section 24 of RBI Act says:

Looking at the Stars while making economic policy…

John K Galbraith famously said: “The only function of economic forecasting is to make astrology look respectable.” 

Least did he know economists would take this seriously!

RBNZ Deputy Governor titles his speech: Looking at stars! Just that these stars are the unobserved variables which economists try along which economists shape the economy:

Our obsession with using survey data for economic research is ruining economics…

Jonathan Newman has a piece saying economic research relies too much on survey data. However, most of surveys are biased and even large samples cannot do away with these biases: