Archive for April 24th, 2019

Understanding the development of contemporary economics through major controversies

April 24, 2019

Really nice post by Beatrice Cherrier, who Undercover Historian:

This Spring I taught a history of recent economics course to undergraduate students majoring in mathematics and economics. The syllabus is here. I have reproduced the reading list with some links to papers and twitter summaries of my lectures below. Here are also a few comments on what I wanted to do with this type of course, what worked and what did not. Comments and suggestions to improve the course and set up new debates are much welcomed.

Though the course is tailored to a specific audience, I believe how the general narrative is conveyed through re-enacting landmark controversies in the history of economics can  appeal to many types of students. My goal was to highlight several characteristics of economics as a discipline:

(1) a contested science: economics is often perceived as contested from the inside (economists constantly arguing with each other)  as well as from the outside ( medias, politicians and civil society criticizing economics for being insular, neoliberal, cut from reality, useless, etc). Presenting how economists themselves have debated the foundations of their current practices (writing mathematical models using simplified behavioral hypotheses and confronting them with data) seemed a more fruitful window than the endless stream of post-crisis attacks and defense op-eds.

(2) a set of practices: students are introduced to what economists do through textbooks. By definition, a textbook presents a linear set of models which, in retrospect, seem obvious, crystal-clear, and deemed to win the battle of ideas. Teaching the history of economics through debates enable them to recover the messiness, the failures, the dissent, the disagreements, the trials and errors and the confusion that are essential characteristics of scientific endeavors.

(3) permanence and change, progress and choices: textbooks also nurture a sense that, because economics is a science, economists’ practices are no social endeavors, not influenced by historical contexts, and that “progress” will eventually help replace shaky practices with better ones (see for instance the current shared hope that better data, more powerful computers and advances in empirical techniques will eventually take ideology out of economics). Interestingly, studying decades-old debate raises awareness both to permanence and change in economics: on the one hand, the rise of mathematical and empirical economics are embedded in specific places, communities and contexts (a World war then a Cold war), policy debates, etc. To me, economic practices are born out of the interaction of contexts and technical affordances and constraints (available data and mathematical tools, for instance.  At the same time, it seems that fundamental questions on induction vs deduction, the use of mathematics, realism and objectivity resurface every 20 years or so, that many debates of the 1950s are being re-enacted in the 2010s, sometimes verbatim. My hope is that comparing 1950s and 2010s debates would help each student decide for her/himself how much permanence and how much change, how much of their future practice will be about harnessing progress and how much about making epistemological choices that no amount of scientific progress will wash away.

Wow. Hope Beatrice puts up her course lectures on Youtube! I mean likes of Richard Thaler tweeted can they attend this?!


Public sector banks (PSBs) are more efficient than private sector peers in labour cost efficiency

April 24, 2019

K. M. Neelima, Radheshyam Verma and Preeti Asthana (research intern) of RBI in this paper (in Apr-19 Bulletin), estimate the labour cost efficiency of Indian banks:

The shift in emphasis from brick-and-mortar operations to digital modes, coupled with increasing per employee output, suggests an improvement in the labour cost efficiency (LCE) of Indian banks.

Using Data Envelopment Analysis (DEA) for the period 2005-2018, the results presented in this article show that LCE has not improved. Public sector banks (PSBs) turn out to be more efficient than private sector peers, reflecting deceleration in employment growth as also cost cutting through innovative techniques. Furthermore, large banks are found to be more efficient than small banks as they can reap economies of scale.

This finding provides an additional rationale for recent mergers of banks, both amongst PSBs and PVBs and suggests that further avenues of consolidation in the banking sphere may be explored.

Quite surprising to read that PSBs have done better than private counterparts on labor costs.


Why do we keep getting wrong in financial regulation: Complicated systems vs complex systems

April 24, 2019

A nice different speech by Brian Johnson of CFPB.

He asks this one question: Why do we keep getting this regulation bit wrong in finance? Why do we keep having crisis despite so much work on regulation? His answer is we have got the whole approach wrong. He brings concept of complicated systems vs complex systems:


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