Archive for May, 2019

Nirmala Sitharaman: 29th Finance Minister of Independent India

May 31, 2019

Have been trying to figure the tenure of Finance Ministers since independence. It perhaps look like the following table. (Will be happy to correct if someone can point to corrections, s have used mostly Wikipedia (bad source) to figure the dates):

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Bank of Jamaica’s new reggae video to explain inflation targeting..

May 31, 2019

This blog had pointed how the central bank of Jamaica is using music videos particularly Reggae ones to explain virtues of low inflation.

It has added another one to the list and this one is by Tarrus Riley, a reggae star.

25th Anniversary of the Introduction of the Kuna as the Monetary Unit of the Republic of Croatia

May 31, 2019

The Croatian central bank has issued a commemoration coin to mark 25 years of its currency Kuna:

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Why Americans prefer Socialism? Changing contours of the word..

May 31, 2019

Prof Tim Taylor in his superblog points to a Gallup Poll which asks people their views over Socialism.

In 1942 around 25% said it is a good thing which has risen to 43% in 2019. Having said that, those saying it is a bad thing has also risen from 40% to 51%:

I’ve been coming around to the belief that most modern arguments over “socialism” are a waste of time, because the content of the term has become so nebulous. When you drill down a bit, a lot of “socialists” are really just saying that they would like to have government play a more active role in providing various benefits to workers and the poor, along with additional environmental protection.

Here is some evidence on how Americans perceive “socialism” from a couple of Gallup polls, one published in May 2019 and one in October 2018. The May 2019 survey found that compared to 70 years ago, not long after World War II, both more American favor and oppose socialism–it’s the undecideds that have declined.

But when people say they are in favor of “socialism” or opposed to it, what do they mean? 

He says the traditional idea of socialism was government’s economic control. Now people prefer socialism because of high inequality:

Seventy years ago, the most common answer for a person’s understanding of the term “socialism” was government economic control, but that answer has fallen from 34% to 17% over time. Now, the most common answer for one’s understanding of socialism is that it’s about “Equality – equal standing for everybody, all equal in rights, equal in distribution.” As the Gallup folks point out, this is a broad broad category: “The broad group of responses defining socialism as dealing with `equality’ are quite varied — ranging from views that socialism means controls on incomes and wealth, to a more general conception of equality of opportunity, or equal status as citizens.” The share of those who define “socialism” as “Benefits and services – social services free, medicine for all” has also risen substantially.  There are also 6% who think that “socialism” is “Talking to people, being social, social media, getting along with people.”

The October 2018  survey also asked whether the US already had socialism. Just after World War II, when the US economy had experienced extreme government control over the economy and most people defined “socialism” in those terms, 43% said that the US already had socialism. Now, the share of those who believe we already have socialism has dropped to 38%. One suspects that most of those who think we have socialism are not happy about it, and a substantial share of those who think we don’t have socialism wish it was otherwise. Clearly, they are operating from rather different visions of what is meant by “socialism.”

There’s no denying that the word “socialism” adds a little extra kick to many conversations.  Among the self-professed admirers, “socialism” is sometime pronounced with an air of defiance, as if the speaker was imagining Eugene Debs, five times the Socialist Party candidate for President, voting for himself from a jail cell in the 1920 election. In other cases, “socialism” is pronounced with an air of smiling devotion in the face of expected doubters, reminiscent of the very nice Jehovah’s Witnesses or Mormons who occasionally knock on my door. In still other cases, “socialism” is pronounced like a middle-schooler saying a naughty word, wondering or hoping that poking round with the term will push someone’s buttons, so we can mock them for being uncool. And “socialism” is sometime tossed out with a world-weary tone, in a spirit of I-know-the-problems-but-what-can-I-say.

My own sense is that the terminology of “socialism” has become muddled enough that it’s not  useful in most arguments. For example, say that we’re talking about steps to improve the environment, or to increase government spending to help workers. One could, of course, could have an argument over whether the countries that have bragged most loudly about being “socialist” had a good record in protecting worker rights or the poor or the environment. One side could yelp about Sweden and the flaws that arise in a market-centric economy;  the other side could squawk about the Soviet Union or Venezuela and the flaws of a government-centric economy. (As I’ve argued in the past, I view the Scandinavian countries–and they view themselves–as a variation of capitalism rather than as socialism.)

While those conversations wander along well-trodden paths, they don’t have much to say about–for example–how or if the earned income tax credit should be expanded, or the government should assist with job search, or if the minimum wage should rise in certain areas, or how a carbon tax would affect emissions, or how to increase productivity growth, or how to address the long-run fiscal problems of Social Security. Bringing emotion-laden and ill-defined terms like “socialism” into these kinds of specific policy conversations just derails them.

Thus, my modest proposal is that unless someone wants to advocate government ownership of the means of production, it’s more productive to drop “socialism” from the conversation. Instead, talk about the specific issue and the mixture of market and government actions rules that might address it, based on whatever evidence is available on costs and benefits.

This was like we called it in India: Mixed economy…

IMF @ 75: When Lord Keynes pays a visit to the organisation he created…

May 31, 2019

Nice piece by Atish Ghosh, IMF’s historian in Finance & Development, a quarterly magazine released by IMF.

The piece is written in a conversation style between Keynes and Lagarde. Keynes visits IMF on its 75th anniversary. He is surprised to see a woman at helm of affairs and that too a French! Also surprised how the Great Britain to which he once belonged is not that great anymore:

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How Vadodara Became a Hotbed of Financial Scams & Rackets?

May 30, 2019

Quint.com in this piece:

Vadodara in Gujarat is also called as ‘Sanskaari Nagari’ or the Cultured city, as much of Gujarat’s history and heritage finds its roots here.

But of late, the city is also shaping up to be a hot bed for scamsters who have allegedly resorted to financial fraud, which in some cases are to the tune of thousands of crores of rupees. These cases pertain to bank frauds where companies have duped loan syndicates and misappropriated the funds and rackets carried out in public works and infra development projects.

Incidentally, it is speculated that big ticket economic frauds have links with national-level political parties, while the other rackets are rooted in corruption and apathy at the civic body level.

The Quint lists out a range of such scams that has its roots in Vadodara.

Quite a few frauds and scams.

Here are some related articles: one, two.

30 years of Unforgettable Tiananmen…

May 30, 2019

Chris Patten, last British governor of Hong Kong and a former EU commissioner for external affairs, writes on the tragedy:

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Not just Draghi, but tenure of two more top officials of ECB gets over in 2019..

May 30, 2019

Prof Lucrezia Reichlin of London Business School writes on how change of guard will happen this year at ECB. It is not just Draghi whose term ends on 31-Oct-2019 but Peter Praet whose term ends on 31-May-19 and Benoit Coeuvre whose tenure ends on 31-Dec-19. These three have been key to ECB’s decision making during the European crisis. Under ECB rules, they cannot be reappointed.

Prof Reichlin says the appointments at the central bank are going to be crucial:

A colloquium in honor of Peter Praet, its departing chief economist. Having worked closely with ECB President Mario Draghi through the years after the 2008 financial crisis and subsequent euro crisis, Praet, more than anyone else, has been the one to steer the bank’s governing council toward a common decision in difficult situations. His departure comes after that of Vice President Vítor Constâncio last summer, and he will be followed out by Draghi in October and Benoit Coeuré of the ECB executive board in December.

These important changes in the ECB leadership offer a chance to reflect on the challenges the Bank will face in the coming years. As the eurozone’s only truly federal institution, the ECB has found itself acting as the “institution of last resort” during past crises, picking up the pieces when national governments fail to reach agreement. It has managed this despite its complex governance structure. The ECB governing council comprises 19 national central-bank governors, each representing countries with different interests, as well as the executive board, whose six members are appointed by the European Council following an intense bargaining process

Though Draghi tends to get most of the attention, he made sure to point out at the colloquium that it was Praet whose recommendations have consistently been accepted by the governing council these past eight years. The departing leadership’s success in building a consensus within such a diverse group should not be taken for granted.

The battle over central-bank independence will define the ECB’s next decade. As national governments reflect on Praet’s departure and look ahead to the selection of a new president and executive board, one hopes they will take seriously the task of picking the right women and men for the job.

Hmm..

What is behind the recent global slowdown?

May 30, 2019

Hyun Song Shin, Economic Adviser and Head of Research of the BIS in this speech tries to answer the question. He says the main reason is deep interconnections between trade and finance. With financial sector continuing to bleed, this has affected trade and global growth:

Financing of working capital to sustain manufacturing and trade shines a light on the role of the banking sector. Banks are crucial for the provision of trade financing, and a strong banking sector augments the firms’ own financial resources to meet working capital needs.

Yet the banking sector has been stuck in low gear since the GFC. While post-crisis reforms have increased the resilience of banks by enhancing their loss-absorbing capacity, banks’ lending growth has been disappointingly weak. Above all, the book equity of the banking sector, which serves as the foundation for banks’ lending, has stalled.

Graph 6 shows that book equity growth has slowed drastically since the GFC, reflecting in part the low profitability of the banking sector, as well as continued dividend payouts and share buybacks. As book equity is the foundation for the lending by banks, the slow pace of book equity growth has gone hand in hand with stagnant lending growth.10The sharp break in trend in equity and asset growth since the GFC is a graphic illustration of how, even a full decade after the crisis, the banking sector has not recovered from it. This is not just a story about Europe. The group of 75 large banks depicted in Graph 6 are drawn from around the world.

The weakness of the banking sector shines a light on the unintended side effects of a prolonged period of monetary accommodation that has weighed on bank profitability through negative interest rates and compressed long-term rates. It is commonplace to say that monetary policy is overburdened in the current economic environment, not least from the BIS. But this is a point that is especially relevant for the impact of monetary policy on GVCs and manufacturing activity. Bank lending and corporate balance sheet strength are key to the financial backing underpinning GVCs. While low interest rates in advanced economies have helped bolster consumption and support strong employment growth, the impact on bank lending that bears more directly on GVCs has been arguably less effective. Nor can we say that the impact of monetary policy on corporate leverage has been unambiguously positive. Companies have taken advantage of low long-term interest rates to borrow long-term through capital markets, and have used the proceeds in financial transactions, either in acquisitions or to buy back their own shares. Real investment unrelated to property is more closely tied to the health of the manufacturing sector and has been subdued. More recently, leveraged loans issued by less creditworthy firms have been receiving increasing attention from policymakers as a potential source of financial stress for firms.

Once the growth of manufacturing and trade through more intensive use of GVCs has run its course, relying excessively on manufacturing and goods trade may be setting the global economy up for disappointment. The experience of 2017 serves as a useful lesson. During 2017, manufacturing and trade grew strongly on the back of accommodative credit conditions and a weaker dollar. However, as we have been seeing in more recent months, some of the expansion of activity was vulnerable to a reversal of credit conditions.

These considerations bring us to the importance of the composition of demand and the role of fiscal policy. When the appropriate opportunities for long-term public investment arise, fiscal stimulus – through such investment projects taking advantage of low long-term interest rates – may be one way to reorient the economy towards domestic activity. The important point here is that such a reorientation would aid the rebalancing of the composition of demand as well as its overall size. The issue of fiscal space and long-run sustainability of public debt will then need to be addressed. These issues are beyond the scope of my presentation today, but I am sure they will figure in the discussions at this forum. I look forward to a lively debate.

Hmm..

Bernanke, Paulson and Geithner: Three Musketeers co-author a book on financial crisis

May 29, 2019

Ben Bernanke, Hank Paulson and Tim Geithner were the three musketeers who did the firefighting during the 2008 crisis (some would say they created the crisis as well!).

After writing their own accounts (Courage to Act by Bernanke, On the Brink by Paulson, Stress Test by Geithner) they have co-written a book: Firefighting – The Financial Crisis and its lessons.

Howard Davies not just informs about this new book but also reviews it. In this Churchill’s quote is worth nothing:

After World War II, Winston Churchill confidently asserted that history would treat him kindly because “I propose to write that history.” Now, a decade after the global financial crisis, three of the key players in that episode have co-authored a book that is interesting not so much for its treatment of the past as for its proposals for the future.

What do they say about future?

First, Bernanke, Geithner, and Paulson point out that imposing higher capital requirements on banks caused much credit creation to migrate to the non-bank sector, where US authorities still lack authority to intervene, whether preventively, by requiring higher capital reserves, or by providing financial support to stabilize markets if necessary. They argue for an FDIC-style insurance model for the broader financial system. Quite how that would work is left unclear, but the idea is worth further thought.

Second, they note that the US system of financial regulation has barely been reformed, despite the many weaknesses revealed by the crisis. In their view, “the balkanized financial regulatory system could use reform, to reduce turf battles among redundant agencies with overlapping responsibilities.” They tried to promote change, but only one small agency, the ineffective Office of Thrift Supervision, has been abolished. Even after the Dodd-Frank overhaul, they lament, “there is no single regulator responsible for safeguarding the system as a whole.” That is a damning commentary on the Financial Stability Oversight Council, which was supposed to fulfill that function.

They are a little coy about the identity of those “redundant agencies,” but the Commodity Futures Trading Commission must be on their list. No other country has separate regulators for cash equities on the one hand, and derivatives on the other. Only defensive congressional fiefdoms prevent rational reform in that area.

The third proposal is targeted principally at the Trump administration, though Congress is again also implicated. Bernanke, Geithner, and Paulson believe that current US fiscal policy is deeply misguided. The deficit is too high, at a time when the economy is growing healthily. That is bad economics today, and, more important, the authorities could, as a result, find it difficult to relax fiscal policy to combat a future recession. As they put it, “the use of fiscal adrenaline could be limited just when it is needed most.” There is an urgent need to “restock the emergency arsenal,” particularly when there is relatively little scope to relax monetary policy. The Fed began a process of normalizing monetary policy, but has not completed the job, and President Donald Trump is doing what he can to prevent them from doing so, by heckling from the sidelines.

The Three Musketeers remain positive about some elements of the post-crisis program. Bank capital has been greatly strengthened, and the transparency of the derivatives markets materially enhanced. Those changes make the financial system safer. But their agenda for further reform is substantial, and fundamental.

And, next time, we may not be as fortunate in the quality and resourcefulness of our crisis managers – or in the wisdom of their political masters.

🙂 I think the last line was a pun!

The Irish crisis: Lessons for small central banks

May 29, 2019

Patrick Honohan was the Governor of Central Bank of Ireland (2009-15) during the 2008 crisis which hit the economy badly. He has penned a book on his years at the central bank: Currency, Credit and Crisis Central Banking in Ireland and Europe.

He shares some lessons on voxeu.org:

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Should Central bank issue digital currencies? A perspective from Central Bank of Lithuania

May 29, 2019

Nice speech by Mr Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania.

He discusses the concept of CBDC and points how it is different from physical currency, bank reserves and bitcoin:

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Two grand traditions in financial history: Bank-centered Amsterdam vs market-centered London

May 28, 2019

Fascinating piece by Joakim Book (HT: Prof Rupa Chanda of IIMB):

Before New York acquired its status as the financial center of the world, the honor of that title was reserved for London and, before then, Amsterdam for roughly a century each. The financial markets, instruments, and practices that evolved there are rightly considered to have been the foundation for modern financial capitalism.

Well-developed financial markets, the basis of their trading being regular commercial transactions, have naturally followed in the wake of thriving merchant societies, such as the city-states of 15th-century northern Italy. Scholars of financial history often trace the European arc of financial deepening along the so-called Lotharingian axis, from the early public banks of Genoa, of Venice, of Florence, via Bruges and Antwerp to Amsterdam — and finally to London during the latter half of the 18th century. The sophistication and quality of financial institutions deepened at every step.

But in one sense the routes to financial supremacy taken by Continental centers such as Genoa or Amsterdam were remarkably different from that of London, and actually capture two different traditions in financial history. In jargon, we refer them as “bank-centered” and “market-centered”routes to financial development. The differences between them can help us better understand the challenges of our current financial markets, particularly so regarding credit intermediation in the crypto world.

Though Amsterdam did have market finance but much action was London based:

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Mugur Isarescu: Romanian central bank governor for 28 plus years!

May 28, 2019

National Bank of Romania is quite an old central bank and was found in 1880.

Its current Governor- Mugur Isarescu- has been at the helm for 28 years. He has been the Governor since Sep-1990 and will soon be completing 29 years in Sep-2019. The length of his tenure comes really close to the longest tenure of Mr Erik Hoffmeyer, who was Governor of Danmarks Nationalbank (Denmark central bank) for 30 years . Sir Dwight Verner Governor of Eastern Carribean Central Bank’s tenure at 26 years (1989 to 2015) remains at third position.

Apparently Isarescu is not keen to continue given pressure from who else the Government!:

It’s nearing time for Mugur Isarescu to decide whether he’ll prolong his more than quarter-century tenure as the longest-serving central bank boss in the world right now.

The 69-year-old governor of the National Bank of Romania has lived through everything from hyperinflation and his country being on the brink of bankruptcy to the global financial crisis of 2008. What he does when his current term ends in October could owe a lot to the perilous state of central-bank independence in the age of populism.

Romania, a country of 20 million people, is providing the latest headache for European Union officials already struggling to cope with threats to democratic standards elsewhere in the bloc’s ex-communist east. Hungary and Poland already have interest-rate-setting panels stacked with government allies. Isarescu may be more inclined to leave if there’s a similar threat to Romania’s board, where all members are up for reappointment or replacement.

“If the current leadership is replaced by poorly qualified political loyalists, then yields for Romanian bonds will likely increase and the leu will probably come under renewed pressure,” said Blaise Antin, the Los Angeles-based head of emerging-market sovereign research at TCW Group Inc., a longtime holder of Romanian government debt. “I fear that if it’s not Isarescu, it will be someone less credible and less influential.”
Interesting to see how Central Bank boards are being dragged in discussion in so many places.
Another point of contention is governments’s proposed “greed tax” on banking!

Isarescu also has international clout. He’s collaborated with counterparts from Alan Greenspan to Mario Draghi during his tenure, received 17 honorary university degrees and is a member of the Bilderberg Group, an exclusive global policy club.

But Isarescu’s authority has been challenged. He’s complained that the government failed to consult him on everything from tax cuts to the surprise imposition of a “greed tax” on banks — the first measure stoking inflation and the second triggering the biggest stock selloff in a decade.

While in previous years, a gentleman’s agreement between the main parties in parliament allowed the central bank to maintain a diverse and balanced line-up on its board, the opposition says that this time round, the ruling Social Democrats want full control. The party says it will address the central bank after this month’s European Parliament elections.

Just like Italy, the political parties are eyeing the central bank gold:

Romania’s ruling Social Democratic Party chief, Liviu Dragnea, has submitted a bill to parliament asking the Central Bank to repatriate store 95 per cent of its gold reserves, much of which are held in London.

The move widens the rift between the Social Democrat-led government and the Central Bank over economic policies, raising concerns that the ruling party is pushing to control an institution that has criticised its governance.

Dragnea and Senator Serban Nicolae who co-signed the bill, complain that Romania has been storing its gold in the Bank of England, but that Bucharest has not got any interest from this, and has also been paying storage fees.

“Nothing in Romania’s economic situation justifies keeping such an amount of gold abroad and paying the implicit costs, which are not negligible, while this reserve can be kept and supplemented in storage facilities in the country,” the documents submitted with the bill say.

Romania has about 104 tons of gold reserves stored in three countries – the UK, Romania and Switzerland.

 

Proposed governance changes at Portugal central bank

May 28, 2019

In most countries, governments are undermining central bank autonomy. In some like Portugal. the government has proposed changes in the governance structure of the central bank.

ECB was asked to review the proposed changes and ECB released its response on the website:

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Agricultural productivity shocks and poverty in India: The short- and long-term effects of monsoon rainfall

May 27, 2019

Bjorn Brey (University of Nottingham)  and Matthias S. Hertweck (Deutsche Bundesbank) in this paper:

This paper examines the dynamic effects of monsoon rainfall shocks on yield, wages, and prices in the Indian agricultural sector. We distinguish between positive and negative rainfall shocks and explicitly consider their spatial dimension (local/regional). We find that particularly negative regional shocks exert adverse effects. The enormous drop in agricultural yield is short-lived, but elicits a persistent decline (increase) in wages (food prices). Negative local shocks affect only wages, but not prices. This indicates that, in the food market, intra-regional trading mitigates the impact of local shocks. However, in the labour market, the arbitrage mechanism through migration appears substantially weaker.

Interesting to see Bundesbank researchers interested in monsoon in India.

Modern Monetary Inevitabilities: US has been on the MMT road before

May 27, 2019

Robert Dugger, Managing Partner at Hanover Provident Capital writes a more sensible piece on MMT:

In his book Principles for Navigating Big Debt Crises, Dalio documents the steps that central banks have historically taken when faced with a booming economy that suddenly crumples under the weight of debt. The first step (Monetary Policy 1, or MP1) is to cut overnight official rates to stimulate credit and investment expansion. The second (MP2) is to buy government debt (quantitative easing) to support asset prices and prevent uncontrollable waves of deleveraging. If MP1 and MP2 are insufficient to halt a downturn, central banks take step three (MMT, which Dalio calls MP3) and proceed to finance the spending priorities that political leaders deem most essential. The priorities can range from financing major national projects to “helicopter money” transfers directly to consumers.

Achieving political agreement on what to finance and how is essential for implementing MP3 effectively. In a financial meltdown or other national emergency, political unity and prompt action are essential. Unity requires a strong consensus on what should be financed. Speed requires the existence of a trusted institution to direct the spending.

In the early 1940s, when the US entered World War II and winning the war became the government’s top priority, the Fed entered full MP3 mode. It not only set short- and long-term rates for Treasury bonds, but also bought as much government debt as necessary to finance the war effort. MP3 was possible because the war united the country politically and gave the Roosevelt administration near-authoritarian rule over the economy.

The core weakness of MP3/MMT advocacy is the absence of an explanation of how to achieve political unity on what to finance and how. This absence is inexcusable. Total US debt (as a share of GDP) is approaching levels associated with past financial meltdowns, and that doesn’t even account for the  associated with infrastructure maintenance, rising sea levels, and unfunded pensions. For the reasons Dalio lays out, a US debt crisis requiring some form of MP3 is all but inevitable.

The crucial question that any effort to achieve political unity must answer is what constitutes justifiable spending. Alexander Hamilton, America’s first Secretary of the Treasury, offered an answer in 1781: “A national debt,” he wrote, “if it is not excessive will be to us a national blessing.” A government’s debt is “excessive” if it cannot be repaid because its proceeds were spent in ways that did not increase national wealth enough to do so. Debt resulting from tax cuts that are spent on mega-yachts would almost certainly be excessive; debt incurred to improve educational outcomes, maintain essential infrastructure, or address climate change would probably not be. Accordingly, it will be easier to achieve political unity if MP3 proceeds are spent on priorities such as education, infrastructure, or climate.

The political test for justifying MP3-financed government spending, is clear: Will future generations judge that the borrowing was not “excessive”? Most Americans born well after WWII would say that the debt incurred to win that war was justified, as was the debt that financed the construction of the Interstate Highway System, which literally paved the way for stronger growth.

As the 1930s and 1940s show, MP3 is a natural component of government responses to major debt downturns and the political crises they trigger. We know much more about what contributes to economic growth and sustainability than we did in the first half of the twentieth century. To speed recovery from the next downturn, we need to identify now the types of spending that will contribute most to sustainable recovery and that in hindsight will be viewed as most justified by future Americans. We need also to design the institutions that will direct the spending. These are the keys to building the political unity that MMT requires. To know what to finance and how, future Americans can show us the way; we need only put ourselves in their shoes.

The macroeconomic consequences of impaired money markets

May 27, 2019

Fiorella De Fiore, Marie Hoerova and Harald Uhlig in this article:

The radical plan to change how Harvard teaches economics

May 24, 2019

This Vox piece is being discussed widely:

If Harvard has a most famous course, it’s Economics 10.

The introductory economics class is reliablyone of the most popular courses offered to undergraduates. It’s usually taught in a massive Hogwartsian auditorium, where hundreds of students either dutifully take notes or mess around on laptops as one of the school’s star economists leads them through the basics of supply and demand.

Because Harvard has a tendency to set the pattern for other universities, Ec 10’s textbook is amassive best-seller, used at dozens of other schools, earning its author, professor Greg Mankiw, an estimated $42 million in royalties since it was first released in 1998. Mankiw’s introduction to economics has set the tone not just at Harvard but for how Econ 101 is taught at the country.

Mankiw’s textbook covers the abstract theory that underpins economics as it has been understood for decades. It is about supply and demand, about how prices can be used to match production of a good to its consumption, and about the power of markets as a tool for allocating scarce resources. Students in Ec 10 are asked to plot supply and demand curves, to solve simple word problems about what happens when the mayor of Smalltown, USA, imposes a tax on hotel rooms.

The idea is to impart a basic theory, to lay a foundation for understanding how society works. And that theory strongly implies that markets tend to work without much intervention, and that things like minimum wages might hurt more than help.

But another Harvard economist has a different idea of how to introduce students to economics.

Raj Chetty, a prominent faculty member whom Harvard recently poached back from Stanford, this spring unveiled “Economics 1152: Using Big Data to Solve Economic and Social Problems.” Taught with the help of lecturer Greg Bruich, the class garnered 375 students, including 363 undergrads, in its first term. That’s still behind the 461 in Ec 10 — but not by much.

The courses could hardly be more different. Chetty has made his name as an empirical economist, working with a small army of colleagues and research assistants to try to get real-world findings with relevance to major political questions. And he’s focused on the roots and consequences of economic and racial inequality. He used huge amounts of IRS tax data to map inequality of opportunity in the US down to the neighborhood, and to show that black boys in particular enjoy less upward mobility than white boys.

Ec 1152 is an introduction to that kind of economics. There’s little discussion of supply and demand curves, of producer or consumer surplus, or other elementary concepts introduced in classes like Ec 10. There is no textbook, only a set of empirical papers. The material is relatively cutting-edge. Of the 12 papers students are required to read, 11 were released in 2010 or after. Half of the assigned papers were released in 2017 or 2018. Chetty co-authored a third of them.

Reads a lot like what Core economy team is trying to do.

Getting more women into politics: Evidence from elections in India

May 24, 2019

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