3 Dec 2017: 50 years of first human heart transplant…

Superb piece by Marina Joubert of Stellenbosch University. It is amazing how much is written about economic event anniversaries and very little about things which just changed humanity.

Marina takes us through the first human heart transplant 50 years ago by Dr Chris Barnard:

South Africa’s Chris Barnard stands out in medical history as the heart surgeon who became a global household name after transplanting the first human heart on 3 December 1967.

The historic surgery captured the world’s imagination and was hailed by 20th-century historians as socially and scientifically of equal significancecompared to the moon-landing in 1969.

I examined aspects of this landmark surgery in two papers. The one looks at how Barnard fits into the mould of celebrity scientists across the world. The other zooms in on Barnard himself and how the media shaped perceptions of his landmark surgery.

The dramatic events that unfolded 50 years ago in Cape Town on December 2 and 3, 1967 had all the makings of media gold. It was a daring world-first in medicine, performed by a largely unknown surgeon in a hospital far away from leading medical centres around the world where other surgeons were working towards the same goal. Embedded in the drama were real people set to become instantly famous and whose lives would change forever.

Underlying it all, were moral apprehensions about whether doctors were playing God which resulted in fierce criticism of Barnard. The criticism was tempered by public fascination with the idea that one person’s heart could beat in someone else’s chest, as well as by Barnard’s explanations that the heart was nothing more than a pump.

On top of all this, Barnard’s charisma and the increasing competition between news companies fuelled the unprecedented media interest. No other medical milestone has had such a defining effect on the relationship between medicine, media and society.

The historic human heart transplant demonstrates the power of mass media to transform a scientist into a global icon. It highlights how public visibility offers some scientists a path to influence and power, but also illustrates that scientific celebrity comes with considerable reputational and personal risk.

It reminds us that science, morals and politics have always been, and will always be, inextricably interlinked.

A highly welcome read…

Understanding the revision process of Indian GDP data

Nice article by Amey Sapre and Rajeshwari Sengupta. It is based on their paper.

They explain how estimates of GDP are built overtime:

In India, the Central Statistics Office (CSO) releases five estimates of annual GDP for any given year, over a period of two years and 10 months. The initial estimates (or projections) are called the Advance Estimates (AE) and Provisional Estimates (PE). Over time, the initial estimates are revised and are sequentially termed the First (1^st RE), Second (2^nd RE) and Third (3^rd RE) Revised Estimates. Typically, for various stakeholders and for policy formulations, the initial GDP estimates are more relevant as they are available within the financial year. However, the true picture of the economy, in terms of the magnitude and direction of growth, unfolds over the entire revision cycle. It is thus important to study the revision cycle in order to obtain a detailed picture of growth in the economy. Studying revisions helps us to understand the methods, data sources, and the quality of GDP estimates in terms of reliability, credibility, and accuracy.

Hmm…Useful timeline..

Their findings of revisions for the period 2004-05 to 2016-17 show that there is fair bit of uncertainty on the final number:

A primer on the rise of populism and a way forward

Gulzar posts about why rise of populism is closely linked to inequality and gulf between 1% and 99%.

Why is it happening? But this consensus was accompanied by a less benign bipartisan elite convergence (more of it latter) which effectively ended up capturing the economic and political establishment. 

The rapid and fairly inclusive economic progress achieved in the period helped underpin this consensus and paper over fissures that were developing due to forces like trade liberalisation, globalisation, de-unionisation, and skill-biased technological changes. But once growth started slowing, for a variety of factors, these fissures started to show up.

But mainstream political parties, captives as they had become of elite interests, failed to see the breakdown in social consensus. The liberal elites too became caught up in their rhetoric.    

Nothing has been more emblematic of this isolation of elites from the electorate than the staggering levels of economic inequality, which has been widening at a rapid pace since the millennium. As the graphic below shows, in the US, the share of national income going to the top 1% has nearly doubled from 11% in 1980 to 20% in 2014. 

Fair amount of graphs etc to emphasise his point.

What is the way out? Gulzar quoting Prof. Rodrik says “the most promising solution may be to let the house burn down completely!”…

 

 

 

How to Succeed in Business (According to a 15th Century Trade Merchant)

In 1458 a trade merchant Benedetto Cotrugli from Venice (where else?) wrote this book: The Book of the Art of Trade. It has now been translated in English and not surprisingly most of the lessons apply even today.

Julia Hanna in HBSWK writes:

An interdisciplinary model for macroeconomics

Andy Haldane and Arthur Turrell of Bank of England in this paper:

Macroeconomic modelling has been under intense scrutiny since the Great Financial Crisis, when serious shortcomings were exposed in the methodology used to understand the economy as a whole. Criticism has been levelled at the assumptions employed in the dominant models, particularly that economic agents are homogeneous and optimising and that the economy is equilibrating. This paper seeks to explore an interdisciplinary approach to macroeconomic modelling, with techniques drawn from other (natural and social) sciences. Specifically, it discusses agent-based modelling, which is used across a wide range of disciplines, as an example of such a technique. Agent-based models are complementary to existing approaches and are suited to answering macroeconomic questions where complexity, heterogeneity, networks, and heuristics play an important role.

 Lots of stuff to figure in the paper..

As cryptocurrency debates heat up, traditional banknotes are revving up their technology as well

Nice interview of Dr Mang of Louisenthal (HT: J.P. Koning, who else?).

It is a subsidiary of technology company Giesecke & Devrient, is a recognised leading international manufacturer of banknote paper, security paper and security features. We know so little about these firms which are behind the world monetary economics.

Trends and Insights: There are various substrates on the market. Why should central banks choose the Hybrid^TM banknote?
Dr. Thomas Mang: Hybrid^TM banknotes are ideal for challenging conditions. By uniting cotton and polymer banknote technologies, we have succeeded in creating a perfect composition. Hybrid^TM banknotes combine proven security with a considerably longer service life – and the result is a banknote that is slow to soil, does not become limp, and yet still enjoys the trust of the population because of its similarity to the well-known cotton banknotes.

What does the combination of different materials actually look like?

The easiest way to understand the special structure of a Hybrid^TM banknote is to imagine a cross section. The inner cotton core is surrounded by a polymer film to which a special printable layer is applied.

This is how the picture is:

Wow..

How old style chits still work as money: A case from Bangalore Buses..

With all this rise of digital/crypto currencies, the world is increasingly becoming complicated to figure. So stories of simple money forms are always welcome.

Rajagopalan Venkataraman of Times of India writes on how a Bangalore city bus conductor manages the currency show in his/her bus economy:

What the world’s Central Banks really think about bitcoin: A summary

Eric Lam sums the views of quite a few monetary authorities on bitcoin/cryptocurrency. Fair bit of variety in the views..

If central banks cannot provide anonymous payments in digital currency world, they should give up their monopoly

Tyler Cowen recently started this debate recently where he said central banks should mint their own cryptocurrency or not. Cowen said central banks should keep away from the cryptocurrency space as they are conservative bureaucracies which shall kill all innovation.

There was a response from David Andolfatto disagreeing with Cowen and says currency is a central bank game and they will have to eventually play it.

And then there is this post by JP Koning who manages to sum up issues on monetary economics really well. In this new post, he says central banks have been focusing all this while on monetary stability which is obvious. But they came into being monpolising currency function and anonymity was central feature of their issued currency. But this was long ago and central banks neither more remember nor care much for this function as they take it for granted.

Now for the first time in many years they have to rethink on this currency function as cryptocurrencies are providing competition:

Why Brexit should not stop UK cities from competing for European Capital of Culture..

Post-Brexit, UK and its cities are losing out to hosting European  institutions and values. Just recently, European Banking Authority exited from London.

Now, UK cities are barred from bidding  for European Capital of Culture. Wow, what a title. Only in Europe can we consider giving cities such titles and asking for bids for the same.

Beatrice Garcia has a piece  appealing not to bar the UK cities:

The news that UK cities are now barred from bidding to be European Capital of Culture 2023 has taken the nation by storm. The ruling by the European Commission, which cited Brexit as its main reason, came just days before five UK candidates – Belfast, Dundee, Leeds, Milton Keynes and Nottingham – were due to present their bids to the selection panel. The timing is unfortunate, and responses of outrage and disappointmentfrom the bidding cities – and the British public at large – were only to be expected.

I am one of the experts appointed to the selection panel – and an academic expert on the long-term legacy of holding the title of European Capital of Culture (ECOC). I have been documenting the experience of ECOC cities since 2002, starting with the ten-year legacy of Glasgow 1990, and then moving on to Liverpool 2008, a city whose ECOC journey I have researched from 2003 into its 10-year anniversary next year.
……

The fallout from the European Commission’s decision shows how dangerous it is to think of Brexit as a purely legal exercise. Relatively small initiatives (in EU funding terms) such as the ECOC nonetheless have huge symbolic value. Their impact has been felt not just by the cities hosting it, but by the many others inspired by the capacity for change that a year-long celebration of culture – and cultural exchange – can bring.

It is true that, in a globalised world – and with pressure to pursue local regeneration agendas, first and foremost – exploring the European dimension of the initiative has often been challenging. But the incentive to consider what it means to be European, and to reflect this through creative programming, has pushed host cities to explore links and histories which they might otherwise have forgotten. For instance, the Cities on the Edge programme – which came directly out of Liverpool’s City of Culture status in 2008 – linked the port cities of Liverpool, Marseille, Istanbul, Gdansk, Bremen and Napoli in previously unexplored ways.

What’s more, there is increasing support to advance European collaborations, exchange and working together with the other ECOC hosts which, after 30 years, have formed a strong and mutually supportive network. In 2008, Liverpool and Stavanger explored partnership options for the first time, and opened routes for ongoing collaboration in their approach to citizen volunteering, which continues to this day.

Now it is time to look beyond the political posturing and finger-pointing by both UK and EU politicians and consider how to ensure that the hard work already done by the five bidding cities takes them, and the rest of the country, in a fruitful direction.

Easier said than done. Lots of politics is at stake…

The Great Enrichment Was Built on Ideas, Not Capital

Deirdre N. McCloskey writes on how much ideas mattered in history of economic development:

The commercial bourgeoisie — the middle class of traders, inventors, and managers, the entrepreneur and the merchant, the inventor of carbon-fiber materials and the contractor remodeling your bathroom, the improver of automobiles in Toyota City and the supplier of spices in New Delhi — is, on the whole, contrary to the conviction of the “clerisy” of artists and intellectuals, pretty good.

Further, the modern world was made not by material causes, such as coal or thrift or capital or exports or exploitation or imperialism or good property rights or even good science, all of which have been widespread in other cultures and other times. It was made by ideas from and about the bourgeoisie — by an explosion after 1800 in technical ideas and a few institutional concepts, backed by a massive ideological shift toward market-tested betterment, on a large scale at first peculiar to northwestern Europe.

 

100% gold standard vs fractional gold standard

An old piece written by Henry Hazlitt in 1979 who wrote the famous book: Economics in One Lesson.

He says we moved from a pure gold standard where money would be created backed by 100% gold reserves to a fractional one where only 50% or lower gold reserve was needed. This move to full backing to fractional backing sowed seeds for multiple monetary and financial crises:

Research on cash usage…

There are three research pieces looking at cash and other means to make payments.

First is this blogpost by  John Williams (President of San Francisco Fed) and Claire Wang. Second is this paper by ECN economists Henk Esselink and Lola Hernández on cash usage in Euroarea. Third is RBI Memo which looks at how non-cash transactions are rising across the country.

First the San Francisco Fed Blog says cash usage remains high and its death is widely exaggerated:

Industrial policies should be designed to benefit the economy from integrating with global value chains…

Pradeep Mehta of CUTS writes on the topic. It is quite unbelievable how he has the energy to keep writing for so many years now.

He says industrial policy should be designed towards trade. Also points to research which says much of industrial policy talk in Japan and Korea was a myth:

How to get rid of banking supervisors?

Central bankers are increasinly talking about culture, incentives etc. There have been two recent speeches which revisit these topics using bank supervision lens. First by Norman Chan of HKMA and second by Andreas Dombert of ECB.

Norman Chan of HKMA in this speech goes back to banking history when there were no banking supervisors:

What does ‘Orwellian’ mean, anyway?

Nick Bentley, Senior Lecturer in English Literature at Keele University tries to answer the question.

Britain’s colonial crimes deserve a lasting memorial….

Afua Hirsch has a piece in Guardian:

The trouble with the English, remarked Salman Rushdie in typically apt fashion, is that they don’t know their history, because so much of it happened overseas. And so the island status that motivated Britain’s imperial story in the first place has helped us distance ourselves from all aspects of that story.

….

Lost in all this are inconvenient facts too numerous to list in anything other than the most cursory way. There are the centuries of state-sanctioned criminal activity: the remarkable looting by supposed heroes such as Francis Drake, one of the most notorious pirates in history, and Robert Clive, who pillaged Bengal to great personal gain. There are the crimes against humanity: the innovation of concentration camps in the Boer war that inspired the Nazis, for example, and the cultural annihilation of kingdoms and palaces from Ashanti to Beijing.

…..

It may be distasteful to some, but as long as the establishment continues to avoid acknowledging this history, it will flourish underground. That has consequences not just for people like me – Britons personally connected to the events we continue to ignore – it denies all of us an education about the most salient episode in our past. A museum is the least we could do.

Hmm..

How the village feast paved the way to empires and economics

Brian Hayden (professor emeritus of archaeology at Simon Fraser University), brings another dimension to history of empires and economics. He says what we are is a lot due to the village feasts which started earlier. These feasts meant people with surpluses came and lent their surpluses to the families hosting these feasts. This led to a hierarchy where those who lent became creditors and shaped human relations for times to come.

Feasts helped to transform egalitarian hunters and gatherers into the kinds of societies that laid the foundations for early states and even industrial empires. They created hierarchies and inequalities, the advantaged and the disadvantaged. Feasts might well have been the catalyst for the agricultural revolution, some 10,000 years ago. But just how did feasts bring about such dramatic transformations in cultures? In the ethnographic research that my students and I conducted among traditional tribal and chiefdom societies, feasts turned out to be very different kinds of events than your average turkey and cranberry Thanksgiving. 

….

Feasts are often very expensive events, sometimes requiring up to 10 years of work and saving. Those who are paying for them expect to obtain some benefit from all their efforts and expenditures. And this is the important part about traditional feasts: those who are invited, and who often receive gifts, are considered obligated to reciprocate the invitation and gifts within a reasonable amount of time. By accepting invitations to feasts, individuals enter into relationships of alliance with the host. Each of them supports the other in political or social conflicts as well as in economic matters….

…..

The networks and debts that feasting systems created gave great political power to certain individuals. This is how traditional feasting created the first economically based (ie, surplus-based) hierarchies. Ambitious individuals profited from the feasting system by involving others in reciprocal debts. The use of feasts in this fashion is, of course, tied to the ability of hosts to produce food surpluses, and then to convert these surpluses into advantages. This kind of energy-conversion adaptation probably emerged only in the Upper Paleolithic of Europe among the more complex hunter/gatherers, around 30,000 years ago. Feasting became common elsewhere only about 15,000 years ago during the Mesolithic or Epipaleolithic.

Phew..Never really thought about all this.  

 

When do people prefer to use coins and when they prefer to use cards for small payments?

Superb paper (minus all the modelling) in Bank of Canada series by Heng Chen, Kim P. Huynh and Oz Shy.

They look at this simple problem. When do people prefer to pay via notes/coins and when via card? When you expect to get a lot of coins in return you pay via card. If not, then via cash/coins:

Why does Peoria (Illinois) dominate the Processed Pumpkin Market

History, geography and economics in this terrific post by Timothy Taylor.

He points why Peoria in Illinios produces 80% of pumpkins in US:

It’s not really the entire state of Illinois, either, but mainly an area right around Peoria. The University of Illinois extension service writes: “Eighty percent of all the pumpkins produced commercially in the U.S. are produced within a 90-mile radius of Peoria, Illinois. Most of those pumpkins are grown for processing into canned pumpkins. Ninety-five percent of the pumpkins processed in the United States are grown in Illinois. Morton, Illinois just 10 miles southeast of Peoria calls itself the `Pumpkin Capital of the World.'”

Why does this area have such dominance? Weather and soil are part of the advantage, but it seems unlikely that the area around Peoria is dramatically distinctive for those reasons alone. This also seems to be a case where an area got a head-start in a certain industry, established economies of scale and expertise, and has thus continued to keep a lead. The Illinois Farm Bureau writes: “Illinois earns the top rank for several reasons. Pumpkins grow well in its climate and in certain soil types. And in the 1920s, a pumpkin processing industry was established in Illinois, Babadoost [a professor at the University of Illinois] says. Decades of experience and dedicated research help Illinois maintain its edge in pumpkin production.” According to one report, Libby’s Pumpkin is “the supplier of more than 85 percent of the world’s canned pumpkin.”

The farm price of pumpkins varies considerably across states, which suggests that it is costly to ship substantial quantities of pumpkin across moderate distances. For example, the price of pumpkins is lowest in Illinois, where supply is highest, and the Illinois price is consistently below the price for other nearby Midwestern states. This pattern suggests that the processing plants for pumpkins are most cost-effective when located near the actual production.

Finally, although my knowledge of recipes for pumpkin is considerably more extensive than my knowledge of supply chain for processed pumpkin, it seems plausible that demand for pumpkin is neither the most lucrative of farm products, nor is it growing quickly, so it hasn’t been worthwhile for potential competitors in the processed pumpkin market to try to establish an alternative pumpkin-producing hub somewhere else.

Fascinating…