Archive for July 20th, 2017

RBI skipped releasing its weekly balance sheet for 30 June 2017!

July 20, 2017

Apologies for waking up really late to this development (HT: Amit Varma)

As per RBI Act Section 53: (more…)

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Why Government ‘Nudges’ motivate good citizen behavior..

July 20, 2017

Article in HBSWK on Governments nudging:

Most governments aren’t subtle when they want citizens to do something. The United States spends close to $1 billion annually on advertising–trying to convince citizens to do everything from taking flu prevention shots to reporting unattended suitcases at the airport. But now agencies are finding that subtle “nudges” can motivate behavior much better than ads, fines, or deadlines.

Nudges, or small changes to the context in which decisions are made, are the subject of a new analysis by Harvard Business School Associate Professor John Beshears and colleagues, recently published in the journal Psychological Science. The paper, Should Governments Invest More in Nudges? answers its own question with a resounding “Yes.”

“We suspected that nudges on an impact-per-cost basis would be superior to traditional approaches such as a financial incentive or an educational campaign,” says Beshears. “But we were surprised to see the extent to which it is true.”

According to behavioral scientists, nudges are dollar for dollar a hugely cost-effective way of causing people to change behavior and do the kinds of things that government wants them to do, like save for retirement—which are both for the good of society and for their own good.

The idea is to make nudges complementary to existing incentives and try motivate System1 thinking:

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The slow rise of P2P lending: Moneylenders are back in business..

July 20, 2017

How things keep coming in circles especially in finance. The terms/names can change but in the end it is just some old wine in a new bottle.

Here is an interesting story of i2ifunding.com which is a Peer to Peer lending portal. It is not a classic moneylender which lent from its own capital but more an intermediary between lenders and borrowers:

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How do Venture capitalists make decisions?

July 20, 2017

Nice piece by Antoine Buteau.

Even though only 0.25% of companies receive venture financing, venture capital is an important source of financing that result in an outsized impact on the economy. Some studies estimate that 50% of U.S. IPOs are VC-backed and that these companies account for 20% of the U.S. market capitalization and 44% of R&D spending.

Although VCs fill a gap in the market by connecting entrepreneurs with good ideas but no money with investors, they are sometimes seen as a black box with little information on how they make decisions about their investments and portfolios. The authors of this paper wanted to answer these questions and they did so by surveying almost 900 VCs on multiple areas: deal sourcing, investment selection, valuation tools, deal structure, post-investment value add, exits, internal organization of the firms and relationships with limited partners. This summary will be focused on worldwide VC firms across stage (early/late) and on the information technology/software sector blended with the healthcare sector.

 

British Imperialism and the Making of Colonial Currency Systems

July 20, 2017

A fascinating question to think about is British were on Gold Standard for a long time but its colonies were kept on silver. Why were the imperial powers doing this considering a similar currency would have been more imperialistic? Likewise there are several questions on colonial currency systems imposed by other imperial powers. However, most monetary history accounts barely discuss the colonial currency systems.

In this aspect, this book by Wadan Narsey is a breath of fresh air as it discusses British currency policy in its various colonies. The author questions many a standard ideas around currency policy calling them a myth.

Here is a review by Kurt Schuler:

There must be few cases of a publication by an active scholar so long delayed as this book. Wadan Narsey wrote the bulk of it as his dissertation at Sussex University (England), completing it in 1988. That was at the beginning of his career as a university professor in his native Fiji. His retirement, hastened by the military dictatorship of which he was an outspoken critic, gave him the leisure to revisit and revise the dissertation for publication. The result is a work that has at least as much interest as when it was first written. There were many critics of the world monetary system then; there are at least as many now. It is all the more important, then, to know whether previous incarnations of the world monetary system worked better than the present one, or whether they had hitherto neglected disadvantages that should weigh against them.

The central argument of the book is that the British government arranged colonial monetary systems much more for its benefit than for that of the colonies. The British government’s ability to commandeer colonial financial reserves in London was crucial to enabling the Bank of England and the London financial market to avoid a number of crises. Among Britain’s colonies, those with a white majority or a large white minority received more advantageous treatment than majority nonwhite colonies, contributing to their faster economic development.

A must read as it discusses case of India as well. This blog had also reviewed the British currency note policy in this post. As students of Indian economics, these aspects are rarely taught and discussed..

 

 


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