Archive for June 26th, 2018

Muslin: The finest ancient fabric

June 26, 2018

Another Superb piece in Madras Courier on Muslin fabric.

Have economists changed since the 2008 crash?

June 26, 2018

Cédric Durand Prof of economics at the University of Paris says some progress has been made but long way to go: 

Economists are not innocent people. The 2007-08 financial crisis that almost sent the world economy into a great depression was, to a large extent, a consequence of the designs dreamt up by leading economists. This raises three concerns about the economics profession. The first is a basic moral failure resulting from a lack of integrity in some of its prominent representatives; the second is the idiotic collective fascination with the technicalities of the discipline, reinforced by an inclination for group-thinking; the third is a deeper, intellectual challenge that questions the very role economics ought to play in society.

In 1971, neoliberal icon Milton Friedman was paid by the Chicago Mercantile Exchange for a report that decisively tilted the balance in favour of opening a market that allowed betting on the variation of currency values – a kind of financial product that was illegal under the strict regulation imposed in the post-war era. Ever since, studies by economists have played a legitimating role in each phase of finance’s liberalization. This close connection was not without its ethical problems. Take the lesson learned from Charles Ferguson’s documentary Inside Job (2010). This notes that Larry Summers – former Harvard president, Treasury Secretary in the Clinton administration and an adviser to President Obama – untiringly defended financial liberalization throughout the 2000s, a period in which his ties with the industry brought him more than $20 million. In the wake of the financial crisis, a study of 19 eminent financial economic specialists showed that, in addition to their university posts, most had affiliations with the private sector that were not publicly disclosed.

On this front, some progress has been made. The American Economic Association has set up a new disclosure policy stating that authors submitting papers to academic journals should identify each interested party from whom they have received at least $10,000 in the past three years. Moreover, it calls for disclosure during media appearances. Professor Gerald Epstein, who was at the forefront of this battle, calls the change ‘a very big step forward’. He particularly stresses that disclosure in non-academic work could help ‘set norms of behavior that colleagues, the press, students and citizens can help make economists accountable to’.

Another, more mildly positive, evolution concerns the content of economic curriculain universities. Academic thought influences political decisions; or, as JM Keynes memorably put it: ‘Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.’ In the realm of university teaching there has, during the past few decades, been a growing fascination with the technical sophistication of analyzing abstract dynamics of markets at the expense of thinking about economic history and institutions. This created an intellectual climate favorable to opening a Pandora’s box of financial ‘innovation’ during the neoliberal era. It supported the comforting view that by spreading the risk, complex products – like the subprime mortgages that were sold to low-income Americans and then bundled up to be sold to institutional investors like pensions funds – were reducing financial instability. Of course, as it should be clear now, it was the exact opposite.

In 2014, the International Student Initiative for Pluralism in Economics sounded the alarm: ‘A lack of intellectual diversity,’ they claimed, ‘does not only restrain education and research. It limits our ability to contend with the multidimensional challenges of the 21st century – from financial stability, to food security and climate change.’ They call for bringing the real world into the classroom through paying greater attention to economic history and developing a deeper dialogue with other social sciences. They also demand a greater diversity of theoretical perspectives by adding post-Keynesian, ecological, feminist, Marxist and other economic traditions to the commonly taught ‘neoclassical’ approach. Thanks to student pressure, some openings have been made. For example, CORE, a new open-access online syllabus funded by the Institute for New Economic Thinking, is introducing some elements of intellectual variety into the economics departments of tens of leading universities.


More in the piece..

Axis Bank opens a branch in Kargil: Old strategy to restore faith in banking

June 26, 2018

I had written this Mint piece: What’s in a name? Ask banks.

I document this history of bank names in India over a 200 year period. The bankers choose names pretty wisely looking at broad sentiments and economic trends. So the names are based on founder family names, locations, nationalistic sentiments, catering to religious sentiments and so on. You see a particular pattern when certain names are chosen by most new banks during that time. And these sentiments keep coming back. Read the piece for more details.

Thus, it was interesting to read that Axis Bank is opening a branch in Kargil.


As Sweden goes cashless, it also worries about banknote supplier..

June 26, 2018

Interesting bit of news from Sweden:

The Riksbank has today, 19 June, given notice of termination of its contract with Crane AB, the company that prints Swedish banknotes. The reason for the termination is that Crane has announced that it will be closing its banknote printing operations in Tumba at the end of this year and moving them to its plant on Malta. As the agreement with Crane states that they will print Swedish banknotes at the printing works in Tumba, the Riksbank is now giving notice of termination of the contract. The Riksbank is now working on finding a new supplier to manufacture Swedish banknotes.

The Riksbank had its own production of both coins and banknotes until the early 2000s. In 2001, the Swedish Mint was sold to Mint of Finland and in 2002 Tumba Bruk was sold to the American company Crane. Since then, the Riksbank has procured the manufacture of both banknotes and coins on the international market. Banknotes have continued to be printed in Tumba, while coins have been manufactured abroad since 2008. The Riksbank is now working on finding a new supplier to manufacture Swedish banknotes. The Riksbank has very stringent requirements of both quality and security in its public procurements. As the Riksbank observes the Public Procurement Act, Swedish banknotes could also be manufactured abroad.

Recently Denmark outsourced both coinage and printing notes to countries abroad.

Does India need a financial policy committee?

June 26, 2018

New Mint piece by Yours Truly.

The idea comes from this interesting speech from Prof Anil Kashyap of University of Chicago. He is also a member of Bank of England’s Financial Markets Committee and shares his views on how FPC came into being and its utility in the broader scheme of macroeconomic policy.


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