Video Clips of Economists Explaining for Intro Econ Classes

Superb Timothy Taylor on his super blog links to these intro econ videos:

I know a number of economics faculty who have been incorporating video clips into their classes. Sometimes it’s part of a lecture presentation. Sometimes it’s for students to watch before class. For intro students in particular, it can be a useful practice because it gives them a sense that they are being introduced to a universe of economists, not just to one professor and a textbook. The faculty member can also react to the video clip, and in this way offer students some encouragement to react and to comment as well–in a way that students might not feel comfortable reacting if they need to confront their own professor.

Amanda Bayer and Judy Chevalier have been compiling a list of video clips that may be useful for the standard intro econ class. It’s available at the Diversifying Economic Quality (“Div.E.Q”) website.  Most are in the range of 3-6 minutes, although a few are longer or shorter. The economists are often talking about their own research, but in a way that the evidence can easily be incorporated into an intro presentation.

For a few examples grabbed from lectures on micro topics. Kathryn Graddy talks about her work studying the Fulton Fish Market in New York City, and how even in a highly competitive and open environment, buyers sometimes pay different prices. (Graddy also wrote an article on this topic in the Spring 2006 issue of the Journal of Economic Perspectives.)

Petra Moser discusses her work showing that “copyright protection for 19th century Italian operas led to more and better operas being written, but the evidence also suggests that intellectual property rights may do more harm than good if they are too broad or too long-term.”

Heidi Williams describes new data and empirical methodogies to study and advance technological change in health care markets.

Kerwin Kofi Charles looks at his empirical research on how the extent to which prejudice leads to discrimination in the labor market and  how it may affect wages of black workers. 1

Cecilia Rouse talks about her research on how change in to blind procedures for the musicians auditioning for symphony orchestras led to more women being selected.

In short, the presenters in the video clips are top-quality economists describing their own research, in ways that spark interest among students. In addition, economics has an ongoing issue with attracting women and minorities. This list is heavily tilted toward presentations by economists from those groups, and there’s some evidence that when intro students see economists who look more like them, they may feel more comfortable expressing interest in economics moving forward. 

Should look them up..

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Call for Papers: Conference on Money Power in Politics (Jan 9-10, 2020)

Foundation for Democratic Reforms, in association with the Indian School of Business (Bharti Institute of Public Policy) and University of Hyderabad (Department of Political Science) is organising a conference:

Foundation for Democratic Reforms, in association with the Indian School of Business (Bharti Institute of Public Policy) and University of Hyderabad (Department of Political Science) introduces “Indian Democracy at Work”, a series of annual conferences aimed at facilitating dialogue between all stakeholders, encouraging public deliberation on key issues of Indian democracy and furthering democratic reform. The focus of this year’s conference would be “Money Power in Politics”.

Research papers relating to the conference sub-themes (Party Maintenance, Candidate Selection, Political Campaign Expenditure and Vote Buying) which underpin the core purpose of working towards a better democracy are invited from scholars and researchers. The description for each of these sub-themes can be found in the Concept Note. A panel of experts will review the abstracts and assess their importance and relevance. The submissions will be judged on their pertinence to the themes and adherence to the guidelines mentioned. 

Submission Timelines

Submissions open: 11:59PM, September 28, 2019
Submissions close:  11:59PM, October 30, 2019
Acceptance notification: 11:59PM, November 6, 2019
Full papers due: 11:59PM, December 22, 2019

Pass on the word…

What holds back female economists from making a career in central banking: the gender promotion gap

Luc Laeven and Ana Lamo of ECB in this article:

The underrepresentation of women in economics is perhaps nowhere as visible as in central banks. This Research Bulletin article uses anonymised personnel data to analyse the career progression of men and women at the European Central Bank (ECB). Women were less likely to be promoted up until 2010, when the ECB issued a statement supporting diversity and took measures to support gender balance. Following this change, the promotion gap disappeared. This masked a lower probability of women applying for promotion, which is partially explained by an aversion to competing, combined with a higher probability of being selected after having applied. Following promotion, women performed better in terms of salary progression, suggesting that the higher probability of being selected is based on merit, not positive discrimination. Thus, organisations such as the ECB should provide training and services that target the competition-related reasons that discourage women from applying for promotion.

Hmm..

From Madhavpura Mercantile to PMC Bank: why little has changed In cooperative banking

My New piece in Bloomberg Quint.

The piece traces the history of coop banking since Madhavpura Mercantile Coop Bank crisis in 2001 to PMC Bank today.

Modern monetary theory and its critics

Lots of recent research on MMT:

The new edition of Real World Economics Review has several papers.

Cato Journal has few papers.

The financial development of London in the 17th century revisited

Fascinating research by Nathan Sussman of Graduate Institute of Geneva.

The history of London as a Financial centre is always an interesting area of research:

Most research on the development of English financial markets begins with the Glorious Revolution of 1688. 

An overlooked episode of financial development in England during the 17th century, when financial development was still in its infancy,¹ leads me to argue that significant financial development and growth occurred before the Glorious Revolution (Sussman 2019). 

The Corporation of London was a chartered corporation that governed the City of London. It originated in the 12th century, and its governance structure included the Lord Mayor, the Court of Aldermen (executive branch), and the Court of Common Council (a deliberative institution). I have been able to extract individual debt contracts from the accounts of the Corporation of London, and so construct a continuous time series of interest rates paid by the Corporation to its lenders from 1638 to 1683. 

He shows how the Corporation benefited from lower interest rates in the period.

These contracts show that significant financial development occurred in the 17th century, in particular after the Restoration in 1660. Figure 1 shows that, from the 1630s to the 1680s, interest rates in London co-moved with those in Amsterdam, the most developed financial centre at that time. The correlation coefficient between the two financial centres is 0.8. Less than a decade before the Glorious Revolution, the spread between them had declined to zero when London borrowing rates reached 4% in 1680.

Figure 1 Borrowing cost of the Corporation of London and Province of Holland, 1638-1683

Hmmm..

Financial conditions and purchasing managers’ indices: exploring the links

Purchasing Managers’ Indices (PMI) is becoming increasingly popular with analysts.

In the BIS quarterly review (Sep-19), Burcu Erik, Marco Jacopo Lombardi, Dubravko Mihaljek and Hyun Song Shin explore links between PMI and Financial conditions:

Purchasing managers’ indices (PMIs) have found a place in global conjunctural analysis and quarterly GDP nowcasting, serving as reliable concurrent indicators of real economic activity. They also closely mirror changes in equity prices and corporate bond spreads. More surprisingly, PMIs react to changes in the dollar index, and do so in a way that runs counter to a trade competitiveness explanation. We show that the financial variables help predict PMIs and explain a significant proportion of their variation. The two seem to be linked through shifts in macroeconomic sentiment and global financing conditions.

 

Impact of Foreign Trade Agreements on India’s trade (some history too)

Rekha Misra and Sonam Choudhry of RBI in this paper (in RBI’s Sep-2019 Bulletin) research India’s foreign trade agreements.

The impact of trade agreements (TA) is more on imports than exports:

Are Trump’s tweets undermining Federal Reserve’s independence?

Reinhart and Reinhart in a Proj Syndicate Piece wrote how Federal Reserve’s easy monetary policy will basically lead to Trump reelection:

Probably to Powell’s deep and never-to-be-expressed frustration, the Fed is setting monetary policy in a way that increases the likelihood that Trump will be reelected next year. That instruction is not contained in the Federal Reserve Act, of course, but the Fed is supposed to deliver maximum employment and stable prices. Its mandate of sustainable economic growth thus requires Powell to attempt to offset the effects of policy uncertainty under Trump.

Fed officials are not thinking of intentionally letting the economy stumble between now and the 2020 election. Thus, if Powell succeeds, Trump will not bear the cost of his words and actions. This will invite more of the same.

There is a reason that Powell often has a haunted look, and not just at Jackson Hole.

In a new NBER paper, authors actually show how Trump’s tweetstorm (hatestorm?) leads to lower Federal Funds rate:

This paper presents market-based evidence that President Trump influences expectations about monetary policy. The main estimates use tick-by-tick fed funds futures data and a large collection of Trump tweets criticizing the conduct of monetary policy. These collected tweets consistently advocate that the Fed lowers interest rates.

Identification in our high-frequency event study exploits a small time window around the precise time stamp for each tweet.

The average effect of these tweets on the expected fed funds rate is strongly statistically significant and negative, with a cumulative effect of around negative 10 bps. Therefore, we provide evidence that market participants believe that the Fed will succumb to the political pressure from the President, which poses a significant threat to central bank independence.

Interesting times!

How advent of pension policy led to lower education in children: Case of Indonesia and Ghana

Prof Natalie Bau of UCLA in this voxeu piece point to really interesting findings from her new research.

She says that families funded children’s education so that latter could take care of former during old age. However, as pension policy was introduced, this old age care was not needed which led to decline in education!

In the paper, I examine whether the introduction of government pension plans changed cultural practices in Indonesia and Ghana. I study a set of cultural traditions that determine whether daughters (matrilocal), sons (patrilocal), or neither gender (neolocal) continue to live with parents after marriage and care for them in their old age. In matrilocal ethnic groups, daughters stay with parents, while in patrilocal ethnic groups, sons stay with them. Traditionally, both practices are widespread, and therefore potentially important determinants of economic behaviour. In anthropological data on 1,265 ethnic groups around the world, 69% are traditionally patrilocal and 16% are traditionally matrilocal (Morduck 1967). Studying these practices provides me with an unusual opportunity to measure how cultural practices change in response to new policies. This is because, unlike the practice of many other customs, whether households practice matrilocality or patrilocality can be directly observed in most census or survey data.

I hypothesise that when households belong to matrilocal ethnic groups, parents are relatively more likely to invest in their daughters’ education. This is because they will share in the returns from that educational investment when their daughter supports them in their old age. Similarly, parents from patrilocal ethnic groups will be relatively more likely to invest in a son’s education. I further hypothesise that when governments introduce pension policies, parents – who no longer need as much old-age support – will be less likely to transmit matrilocal and patrilocal traditions to their children. As a result, both the educational investment incentivised by these traditions and the practice of these traditions themselves will decline. So, the new social policies that often accompany economic growth may lead to the decline of traditional cultural practices. 

…..

To establish whether the Indonesia results apply in another, very different, context, I then turn to Ghana. Like Indonesia, Ghana instituted a pension plan in the 1970s. However, Ghana and Indonesia have very different cultural and religious make-ups. Indonesia is predominantly Muslim, and Ghana is predominantly Christian. While in Indonesia I compare traditionally matrilocal and non-matrilocal females, in Ghana the variation is between traditionally patrilocal and non-patrilocal males. Therefore, studying different genders and cultural traits in these very different countries provides further evidence that the results in Indonesia are not driven by an unobserved variable correlated specifically with matrilocality.

In Ghana, sons in traditionally patrilocal ethnic groups receive more educational investment (relative to their sisters) than sons in non-patrilocal groups, resulting in approximately 0.18 more years of schooling. The timing of the pension plan, which was introduced in 1972, allows me to evaluate whether traditionally patrilocal males who were more exposed to the plan as children behave differently. Indeed, these males were less likely to complete primary school and are less likely to practice patrilocality as adults. 

Altogether, the results from Indonesia and Ghana are symmetric. Matrilocality incentivises educational investment in females, while patrilocality incentivises it in males. The introduction of pension plans crowds out these educational investments and reduces traditional practices. So, though culture is often persistent, the introduction of new laws and policies can cause cultural change. 

Talk about unintended consequences of policy!

Let hundred Dwijendra Tripathis (business historians) bloom

This post reviews the proceedings of ‘The International Conference on Indian Business and Economic History’ held at IIM Ahmedabad on 29-31 Aug 2019. The conference was held in the memory of Prof Dwijendra Tripathi, who taught business history in IIMA for four decades. Prof Tripathi passed away last year on Teacher’s day!

It was a tragedy that the course was not taught for next 25 years before Chinmay Tumbe started teaching it once again in IIMA. This conference was organised by a team led by Chinmay which wanted to take the legacy of Prof Dwijendra Tripathi forward. No words are enough for the team which put a stellar effort to make this event a reality.

Conference Proceedings:

Liquidity and funding for banks under resolution

Should the central bank provide liquidity to banks under resolution? A bank needs both capital and liquidity to survive. A bank fails if it has either of the two.

Torbjørn Hægeland, Executive Director of Norges Bank Financial Stability, in this speech discusses the policy options:

resolved or not, a bank not only needs sufficient capital, but also needs sufficient liquidity. Payment intermediation is a vital core function of banks. Being a bank means participating in the settlement of payments, which means the bank must be liquid. How liquid is a bank that opens on a Monday morning after being resolved over the weekend? A newly resolved bank is not necessarily liquid for various reasons.

One reason is that prior to resolution, the bank will probably have depleted almost its entire stock of liquid assets, including securities eligible as collateral for Norges Bank’s standing liquidity facilities.

Moreover, immediately after resolution, other money market participants may have doubts about the bank’s viability, despite the recapitalisation that has taken place following the decision of the resolution authority. This may be the case particularly if a long time has passed since a bank has been resolved. The market will then be unfamiliar with the bank resolution process and the profile of a resolved bank. The result may be that the bank will have difficulty borrowing in the money market.

In this situation, the bank will need liquidity assistance and will turn to the central bank as an obvious source of support. Liquidity assistance to resolved banks is an issue under consideration by a number of central banks. The ECB is currently working on this issue, as we at Norges Bank are also doing. 

The question I will focus on here today is:

How should Norges Bank react when a bank under resolution applies for emergency liquidity assistance (ELA)?

Hmm..

 

History of GDP goes beyond the usual narrative

Jacob Assa in this paper says GDP is more of a political construct and symbol of power:

Histories of Gross Domestic Product (GDP) – both critical and favorable – have become somewhat of a cottage-industry since the global financial crisis of 2008. Following the Stiglitz Commission, numerous general-audience books have appeared, describing the rise of GDP, analyzing its limitations, and offering reforms or alternatives. These histories, however, suffer from three key problems. First, nearly all begin in the 1930s, following the Great Depression and the lead-up to World War II. Very little if anything is said of the 250 preceding years, a period implicitly thought of as a pre-history of GDP. Second, and as a result of this limited chronological lens, GDP is considered to be a statistical measure, the shortcomings and merits of which are presented as technical and ascribed to the narrow objectives facing its 20th century architects. Third, the proposed reforms are meant to improve on GDP’s statistical limitations (e.g. using dashboards, accounting for unpaid care-work or environmental costs etc.).

These three problems are related, and this paper presents an alternative history of national accounting, considering geo-political and political-economy contexts going back to the 17th century. This longer and broader view reveals the exercise of estimating national income or wealth as a form of numerical rhetoric. Rather than a statistical measure, GDP is an indicator of power (for countries, classes and industries) as well as an instrument for advocating specific policies. Therefore, any critique must go beyond technical issues and fixes, and look at the political context and consequences of various historical versions of GDP, and any possible democratic reform of it.

Must read..

How Do Private Digital Currencies Affect Government Policy?

Max Raskin, Fahad Saleh, and David Yermack in this paper show support for digital currencies:

This paper provides a systematic evaluation of the different types of digital currencies. We express skepticism regarding centralized digital currencies and therefore focus our economic analysis on private digital currencies. Specifically, we highlight the potential for private digital currencies to improve welfare within an emerging market with a selfish government. In that setting, we demonstrate that a private digital currency not only improves citizen welfare but also encourages local investment and enhances government welfare.

 

The Well-meaning Economist: Choosing an appropriate “mean” matters..

Adam Gorajek of RBA in this paper writes why choosing “mean” matters:

Economists usually inform policymakers with conclusions that come from studying the conditional expectation, i.e. arithmetic mean, of some potential outcome. But there are other means to study, from the same ‘quasilinear’ family. And they can support very different conclusions. In trade research, for instance, studying other means can transform the perceived roles of colonial history, geography, and trade wars. In wages research, studying other means can reverse perceived earnings differentials between groups. Similar scenarios will be common in other tasks of policy evaluation and forecasting. To choose means well I propose selection criteria, which also consider options that are outside of the quasilinear family, such as quantiles. Optimal choices are application-specific and ideally accommodate the preferences of the relevant policymaker. In the wages case, policymaker aversion to inequality makes it sensible to reject the arithmetic mean for another quasilinear one.

Example:

Suppose we discover today that in 1990 a random subset of Australian schoolchildren were given a badly misprinted version of the standard mathematical textbook. Its answers were wrong and the explanations were nonsense. Suppose also that today we can survey these and the unaffected schoolchildren (all now adults) about their incomes. Besides objecting to the injustice of the misprint, an economic researcher might see this as a unique opportunity to assess the value of effective educational materials for career outcomes.

Conducting the survey, our hypothetical researcher records that half of the affected students now have annual incomes of $40k and half have $100k. For the unaffected students, half have annual incomes of $60k and half have $80k. For reasons that I leave to the paper, the standard strategy in this simplified situation would be to summarise the salaries of each group with their so-called ‘arithmetic mean’, which is a basic type of average. Since both groups have arithmetic mean incomes of $70k, the headline conclusion for the policymaker is that the misprint was unimportant. Even in complex research situations, summarising outcomes with numbers akin to these arithmetic means is a standard strategy.

But what if we choose a different summary measure, like a ‘geometric mean’, or any other mean in the ‘quasilinear’ family? Leaving an explanation of these concepts aside, the point is that often the conclusions will change. For instance, in the textbook misprint case, the geometric mean income for the affected students is $63k and for the unaffected students is $69k. Hence the headline conclusion for the policymaker is that the misprint was detrimental. The reason for the change is that the geometric mean penalises inequality, which is higher among the affected students. The penalty is an attractive feature here, because in western democracies it is evident from tax and social security systems that policymakers view income inequality as undesirable. The question is only what amount of penalty is appropriate.

Hmm..

Switching costs in the Finnish retail deposit market

Tuomas Takalo of Bank of Finland in this paper:

I calibrate switching cost for the Finnish retail deposit market by using the approach developed by Oz Shy (2002). It turns out that switching costs faced by deposit customers of the main banks are high, ranging from 200 euros to nearly 1,400 euros. Over the past 20 years, switching costs have increased by roughly 50% in real terms, but in relation to average account balance, switching costs have not essentially changed. I conjecture that differences in the switching costs among the Finnish banks might be explained by differences in their loyalty programs.

Switching costs look really high for Indian depositors too and need to be worked out…

Jihadi attacks, media, and local anti-Muslim hate crime

Ria Ivandic, Tom Kirchmaier and Stephen Machin in this piece reflect on the role of media in hate crime:

The attacks on mosques in Oslo and Christchurch have again called attention to the rise in anti-Muslim sentiment that is increasingly becoming normalised in media and on social platforms. This column studies the role the media plays in local increases in Islamophobic hate crime following jihadi terror attacks. Data from Greater Manchester Police reveal a spike in Islamophobic hate crime and incidents following ten international jihadi attacks. Other jihadi attacks that were much less prominent in the UK media, but no less lethal, did not generate the same spikes, suggesting that anti-Muslim hate crime is magnified by media coverage. 

…..

That anti-Muslim hate crime is magnified by the way that media coverage is structured and presented is very serious and worrying when considered in terms of these negative economic impacts. A big challenge, which should be a priority to policymakers and regulators, is the extent to which sensationalist, exaggerated, and downright inaccurate reporting needs to be more carefully monitored and where necessary regulated. This applies to conventional modes of media coverage and more broadly to online and social media coverage.

 

British stock markets from 1829-1929

Interesting piece by Gareth Campbell, Richard Grossman and John Turner:

Although long-run stock market data are an important indicator, obtaining them is challenging. This column constructs new long-run broad-based indices of equities traded on British securities markets for the period 1829-1929 and combines them with a more recent index to examine the timing of British business cycles and compare returns on home and foreign UK investment. One finding is that the capital gains index of blue-chip companies appears to be a good bellwether of macroeconomic behaviour.

Can we use these stock market indices to understand British macroeconomic fluctuations over the long run? We use Chadha et al.’s (2000) catalogue of business cycle peaks and troughs from 1857 to 1954, and the OECD indicators on reference turning points from 1955 to 2018.  We construct business cycle diagrams in the style of Burns and Mitchell (1946). For each of the business cycles, we rebase the blue-chip index to be 100 at the cycle peak and then focus on the four-year period around this point. We then take the average value of the rebased index each month across all of the business cycles (Figure 4).

Figure 4 Blue-chip index performance over the business cycle, 1857-2018

The capital gains index of blue-chip companies appears to be a good bellwether of macroeconomic behaviour. During the two years prior to the business cycle peak, the index increases by an average of 10.7%. The index peaks one month before the peak of the business cycle, and then declines steadily thereafter. The index bottoms out 20 months following the cyclical peak, losing an average of about 7.0% from its peak value.

Superb bit of history…

 

Is China Fudging Its GDP Figures? Evidence from Trading Partner Data

John G. Fernald, Eric Hsu, and Mark M. Spiegel in this FRBSF paper:

We propose using imports, measured as reported exports of trading partners, as an alternative benchmark to gauge the accuracy of alternative Chinese indicators (including GDP) of fluctuations in economic activity. Externally-reported imports are likely to be relatively well measured, as well as free from domestic manipulation. Using principal components, we derive activity indices from a wide range of indicators and examine their fit to (trading-partner reported) imports. We choose a preferred index of eight non-GDP indicators (which we call the China Cyclical Activity Tracker, or C-CAT). Comparison with that index and others indicate that Chinese statistics have broadly become more reliable in measuring cyclical fluctuations over time. However, GDP adds little information relative to combinations of other indicators. Moreover, since 2013, Chinese GDP growth has shown little volatility around a gradually slowing trend. Other measures, including the C-CAT and imports, do not show this reduction in volatility. Since 2017, the C-CAT slowed from well above trend to close to trend. As of mid- 2019, it was giving the same cyclical signal as GDP.

Why imports?

The challenge in assessing the reliability of different economic indicators is that we need a benchmark that is highly correlated with true activity but is not, itself, subject to manipulation.

In this section, we document that a country’s imports fit that bill: Import growth moves closely with GDP growth for countries with relatively reliable statistical systems. Why would we expect imports to be one of the best measured components of the national accounts?

First, the number of importers (and import locations) is typically modest, which makes measurement more manageable. Second, countries have an incentive to measure imports accurately for tariff purposes. Third, data on imports are available from external sources, reported as trading partner’s bilateral exports to the country in question. 

In countries with less-advanced statistical systems, we would expect the relationship between imports and measured GDP to deteriorate simply because measured GDP becomes less accurate.

The reduced accuracy of measured GDP should then reduce its correlation with imports. In contrast, for the reasons noted above (including the external verification), there is little reason to think that the correlation between imports and true economic activity deteriorates.

Hmm..

Maestro Khayyam and the Raaga Pahadi

Siraj Khan pays a tribute to Music maestro Khayyam who passed away recently.

Khayyam saab composed quite a few his songs based on Raaga Pahadi and converted it into soulful music..

There is no parallel to his music..