Archive for October 16th, 2018

NSE RH Patil Memorial Lecture 2018: Robert Merton

October 16, 2018

NSE organised RH Patil Memorial lecture yesterday and the video of the lecture is here.

Prof Merton has been talking about the need to design a bond for retirement needs which is becoming a huge issue for advanced countries today and for developing world later. He calls these bonds as Selfies: Standard of-Living Indexed, Forward-starting, Income-only Securities. These bonds will only give you payment on your retirement year like the pensions. This will help those who are not covered under pension markets.

Slides of earlier lecture on the same topic are here.

The lecture is followed by a firechat with Prof Jayant Varma of IIMA which is equally interesting.

Teaching mathematics as a history of ideas and thought…

October 16, 2018

Mordechai Levy-Eichel writes this wonderful and much needed article in Aeon. He appeals to make maths more human and teach it as evolution of ideas and thoughts:

Perhaps the most impassioned remonstration against our bifurcated view of mathematics is the pamphlet A Mathematician’s Lament (2009) by the American private-school teacher Paul Lockhart. Written in 2002 and circulated for years among mathematicians and educators, Lockhart’s essay ruthlessly criticised the simplistic nature of most mandatory mathematics education. Mathematics, Lockhart wrote, is almost always taught in a way to obscure the actual insights and reasoning, the grandeur and insight, the excitement and frustration, that drive mathematicians. ‘At no time are students let in on the secret that mathematics, like any literature, is created by human beings for their own amusement,’ Lockhart writes, attempting to humanise the subject.

Continuing with his literature analogy, Lockhart emphasises that: ‘A piece of mathematics is like a poem, and we can ask if it satisfies our aesthetic criteria: is this argument sound? Does it make sense? Is it simple and elegant? Does it get me closer to the heart of the matter?’ And like most pieces of art, truly appreciating it is not a rote exercise: ‘works of mathematics are subject to critical appraisal; that one can have and develop mathematical taste’. By teaching mathematics as a series of techniques, the appeal and nature of mathematics is masked: ‘Of course there’s no criticism going on in school – there’s no art being done to criticise!’ The notable English mathematician G H Hardy also compared mathematics to poetry in his own work A Mathematician’s Apology (1940): ‘A mathematician, like a painter or a poet, is a maker of patterns. If his patterns are more permanent than theirs, it is because they are made with ideas.’

🙂 These words ” mathematics, like any literature, is created by human beings for their own amusement” just takes the cake.

In the end:

The history of ideas can, should and, historically, has often been precisely about the limitations of politics and the rewards of other ideas; it need not primarily be the study of thinkers who, more often than not, never even directly held power. The ideas that most deeply shape us, and our societies, are just as often not part of the history of political thought, but come from many other areas. This is not an argument for a neo-Platonic worshipful examination of ideas, or for a move away from considerations of politics. It is rather a call to recognise the ways in which humans actually encounter ideas, and the unique vitality of mathematical ideas in the world.

I wish all subjects were taught in this manner. There is a mad rush to make all subjects scientific and mathematical in approach not realising both were created by humans for amusement!

Economic growth is not an entitlement…

October 16, 2018

Anantha in this piece says it is assumed that we are entitled to higher and higher economic growth (via his blog). It is a mistake to think so and lower economic growth though a bitter pill will do us some good:

What is the good news about the World Economic Outlook (October 2018) that the International Monetary Fund (IMF) had released this past week? The good news is that it has lowered the forecast for global economic growth from 3.9% to 3.7% this year and the next. Why is it good news? Unsustainable economic growth in the years leading up to 2008 was one of the causes of the crisis. It was sustained by fickle and debt-based capital flows into the developing world. That is one of the reasons why developing countries had not been able to shake off the effects of the crisis until now. Indeed, India and China are no longer the same economies they were before 2008. They will continue to suffer from its after-effects for quite some time to come. They are yet to figure out and admit that their growth was simply too fast for their own good.


The same goes for India. The debate over whether the rupee’s recent weakness is good or bad for the country misses the point. It is neither good nor bad. It is inevitable. India’s dependence on foreign capital flows and its higher inflation rate (despite the recent low outturn) make the medium-term case for a weaker rupee. Advocates and proponents of a strong rupee should note that the Federal Reserve could make the dollar stronger in the early 1980s with sky-high interest rates, but at the cost of inducing a recession.

India cannot replicate that. Other strong currencies around the world earned their spurs over a long time and the ingredients included not just low and stable inflation but also economic, financial and political stability and soundness. India needs an adult-like conversation on the economy. However, it lacks a quorum.

In 2012, a chart in The Economist showed that the global economy had packed so much economic growth in the decade up to 2010 (we now know how) that a prolonged period of mean reversion was not only overdue but also desirable. Only a prolonged period of low and stagnant economic growth—unfortunately with all its costs—will get us back to the table to discuss our goals and methods for the world economy and society. The World Economic Outlook (October 2018) growth downgrade marks a rather tentative beginning of a return to such a discussion. The world needs another Bretton Woods like conference, not just on exchange rate regimes but on economic growth regimes.

Keep the engine going even at the cost of total break down and stagnation thereafter….



The role of culture and values in finance and how it shows up during financial crises…

October 16, 2018

My recent article in Moneycontrol.

Finance has risen from being a controversial field and even hated field of work to being one of the most sought after careers. The early philosophers had long warned about how finance is this immoral activity one should not get into. Religions such as Christianity and Islam not just considered lending against usury as a sin but even looked down on those who dealt with money matters. They understood compared to other economic activity, it is in finance where one can make more money over other’s misery.

Yet, no one can deny that finance has been crucial to human progress. Any new idea or invention needs finance to back it and access of finance is seen as a vital ingredient to progress. How does one figure this dilemma?

In the piece, I show how we have not really figured this dilemma. In earlier times, we were concerned more with morality and traded off progress. Now we care much about progress and not much about morality.

This is important as one clear concern which emerged post global financial crisis is how lack of culture and ethics has become so central to financial sector. There have been inquiries about financial sector conduct in US, UK, Ireland, Australia etc and all show how financial market participants have been cheating  customers, manipulating their own markets as seen in Libor, high bonuses and so on. Even worse is how all this was being done with so much panache.

In India, we were patting our backs that first we avoided the crisis and the financial excesses were not seen here. But what was a global trend, was bound to happen here too given our integration with the world. Integration is not just about liberalisation and globalisation of goods and services but cultural exchange too! Eventually we are seeing all this coming out in mess in private banks and non-banks such as IL&FS. We are seeing similar stories of overpaid executives, compromised credit ratings and equity analysts’ scorecard, sleeping independent high-profile directors and so on. Travelling to Mumbai and seeing the glitzy offices of financial-sector companies, one is obviously asking “Where are the customer’s yachts”? So far, our responses to these problems have been usual. We need to probe deeper like other economies and try figure the “missing culture” in Indian finance as well.

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