Archive for the ‘Discussion’ Category

What happened to Macrinomics in Argentina?

August 19, 2019

When Mauricio Macri was elected as President, lot was written on how Macrinomics will change the fate of Argentina.

However, nothing much could change. Argentina continues to be a royal mess. People have voted for return of left, leading to concerns for the investors.


Does 2019 look lot like 1929?

August 19, 2019

Wharton dean Geoff Garrett in this piece fears 2019 looking lot like 1929:

In my darkest moments, I fear that 2019 is looking more like 1929. Ninety years ago, economic inequality was at an all-time high in America and Europe. The seeds of authoritarian nationalism were sprouting in Asia, Europe and Latin America. World War I had destabilized the old global order without creating a new one. Against this backdrop, the stock market crash of October 1929 then ignited the horrendous cascade of depression, fascism and World War II—arguably the worst 15 years in history.

The notion that we could even remotely be near such a global paroxysm may seem unthinkable today. But I bet that is how everybody living the life of The Great Gatsbyand Downton Abbey in the late 1920s felt, too.

The good news today is that while a market correction and a potential recession seem likely sometime, the chances of a crash on the scale of 1929 appear remote. This gives us some time—time to do all we can to reverse the big trends, time to make sure the 2020s are not a replay of the 1930s.

Part of what we must do no doubt requires demanding more of our political leaders—to be more open about the challenges we face and more creative about the potential solutions. But I implored our students to embrace the real difference they can make: that bottom-up actions by the many can change the world as much as, or more than, the actions of even the most effective leaders.

So, my suggestions for change are part policy wonkism, part personal wisdom. 


Project to create digital history of tea plantations in Nilgiris

August 16, 2019

Fascinating initiative by the British Library and the Government of France:

Tea plantations in the Nilgiris and Coimbatore districts now have the opportunity to get their historic documents preserved for posterity free of cost, thanks to a special project supported by the British Library and the Government of France.

“The project aims to create digital documentary resources in the Nilgiris and Coimbatore districts covering the period from 1850 to 1970,” coordinator of the project K Rameshkumar, who is Head of Photo Archives of French Institute of Pondicherry (IFP), told Business Line.

The IFP is under the French Ministry of Foreign Affairs.

“This project coming under Endangered Archives Programme is supported by the British Library Arcadia,” he said. “We will help planters possessing old documents preserve them forever through high quality digitalisation and save them permanently from loss.”

“Our intention is to work on the site of the plantations itself. We will not take any documents with us; instead, we will return the original documents along with a digital copy of high resolution images to the owners.

The digital copies will be preserved at the British Library archives as well,” Rameshkumar noted.

“The historic documents can be of any type – land and property records, photographs, old maps, route sketches, pencil or other drawings, printed materials, books or manuscripts,” the project’s Research Assistant Noel Francis said. “We can document the lifestyle of planters of yesteryears in terms of their working conditions, bungalows, medical facilities, schools, churches, labour quarters, workers’ wages and other registers, planters’ clubs, dresses horse rides and transportation,” he said. “Collectively, we aim to create a digital version for the history of the Nilgiris and Coimbatore districts which will be a treasure for posterity.

Those interested can contact us through e-mail: or over phone (0) 9363156400.”

The Nilgiri Planters’ Association is 128 years old.

“Besides, the small scale tea sector is in the possession of Badaga, the predominant community of the Nilgiris, whose ancestral family property holding records as also photographs and handwritten documents should be nearly a century old.

We have come across some of them during our initial survey,” said Rameshkumar, who had digitised some other aspects of the historic lifestyle in The Nilgiris in his earlier projects.


Monetary transmission in Australia: Fairly efficient even at lower interest rates

August 16, 2019

Australian central bank has cut policy rates in June and July meetings by 25 bps. The policy rate is at 1% currently.

In this speech, Christopher Kent, Assistant Governor (Financial Markets) speaks about how interest rates are being lowered everywhere including Australia. The transmission in Aus has been quite efficient with most %age of rate cuts passed on to people:


Turkey central bank fires its chief economist and other departmental heads

August 13, 2019

Central bankers continue to be under pressure and be ousted from their job. An Indian parliamentarian openly says he had asked the Finance Minister to sack RBI Governor without naming the person. He says the “RBI Governor was no good and should be sacked outright.”

However, the government anger on central bank is not limited to Governor or Deputy Governor. It could be hit at the central bank staff too. After all the staff was advising the senior team.

This is what we are learning from Turkey.

They just fired the the Governor, but were not happy. They have even dismissed its chief economist and several other departmental heads:


Locating Equality: Real estate the main driver of rising inequality?

August 9, 2019

Harold James has a fascinating piece:

For years, wealth and income inequalities have been rising within industrialized countries, kicking off a broader debate about technology and globalization. But at the heart of the issue is a fundamental good that has been driving social and economic inequality for centuries: real estate.

Inequality is the leading political and economic issue of the current era, yet debates about it have long suffered from a degree of imprecision. For example, the standard measure of inequality, the Gini coefficient, reduces a country’s entire income distribution to a single number between zero and one, and is thus highly abstract. Similarly, while inequality is rising in many parts of the world, there is no simple correlation between that trend and social discontent or unrest. France is much less unequal than the United States, and yet it has similar or even greater levels of social polarization.

Today’s inequality debate effectively began in 2013 with the publication of French economist Thomas Piketty’s Capital in the Twenty-First Century, which found that the rate of return on capital tends to outpace the rate of growth, thereby causing inequality to increase over time. Specifically, appreciating real-estate values seem to be a fundamental driver of rising inequality. But here, too, one encounters a degree of imprecision. Real estate, after all, is not a homogenous good, because its value famously depends on “location, location, location.” There are elegant castles and palaces that now cost less than small apartments in major cities.

Wealth stirs the most controversy where it is most tangible, such as when physical spaces become status goods: the corner office is desirable precisely because others cannot have it. More broadly, as major cities have become magnets for a global elite, they have become increasingly unaffordable for office workers, policemen, teachers, nurses, and the like. While the latter must endure long, tiresome commutes, elites use global cities as they see fit, often hopping around from place to place. Large swaths of Paris and London are eerily shuttered at night. Manhattan now has nearly a quarter-million vacant apartments.

Whenever violence and revolution have  unequal societies, real estate has been a focus of discontent. 


Can ethics be taught: Doing a RCT to figure?

August 8, 2019

Pert Singer in this piece wonders whether teaching ethics can shape behavior:

In The Righteous Mind, Haidt draws support for his views from research by the philosopher Eric Schwitzgebel of the University of California, Riverside, and Joshua Rust of Stetson University. On a range of ethical issues, Schwitzgebel and Rust show, philosophy professors specializing in ethics behave no better than professors working in other areas of philosophy; nor are they more ethical than professors who don’t work in philosophy at all. If even professors working in ethics are no more ethical than their peers in other disciplines, doesn’t that support the belief that ethical reasoning is powerless to make people behave more ethically?

Perhaps. Yet, despite the evidence, I am not entirely convinced. I have had a lot of anecdotal evidence that my classes in practical ethics changed the lives of at least some students, and in quite fundamental ways. Some became vegetarian or vegan. Others began donating to help people in extreme poverty in low-income countries, and a few changed their career plans so that they could do more to make the world a better place.

How to figure this? Do a RCT!:

Two years ago, Schwitzgebel offered me an opportunity to test, more rigorously than had ever been done before, whether a class on the ethics of eating meat could change what students eat. Together with Brad Cokelet, a philosophy professor at the University of Kansas, we ran a study involving 1,143 students at the University of California, Riverside. Half the students were required to read a philosophical article defending vegetarianism, followed by a small group discussion with the option of watching a video advocating avoiding meat. The other half were a control group. They received similar materials and discussion on donating to help people in poverty.

We used information from campus dining cards to find out what food purchases the students in the two groups made before and after these classes. We had data on nearly 6,000 food purchases from 476 students. The purchases were identified with students who had, or had not, read and discussed the ethics of eating meat, but the data we received were made anonymous so that we could not identify any named student’s purchases.

The result was a decline, from 52% to 45%, in meat purchases among students in the meat ethics group, and the lower rate of meat purchases was maintained for a few weeks after the class. There was no change in the level of meat purchases in the charitable giving group (and we had no way of discovering whether these students gave more to charity).

Our results are, at this stage, preliminary and have not yet undergone peer review. We are seeking further data on the significance of watching the video – which may have appealed to students’ emotions more than their reason. Nevertheless, to our knowledge, this is the first properly controlled study, in the real world and not in a laboratory setting, of the impact of university-level philosophy classes on student behavior. The decline in meat-eating is not dramatic, but it is statistically significant, and suggests that in some contexts, ethical reasoning in the classroom can change behavior.



How private prisons affect sentencing?

August 6, 2019

Christian Dippel and Michael Poyker in this voxeu piece:

Speaking Truth to Power..

August 6, 2019

A huge responsibility for those who advise the governments esp in today’s times. Speaking truth to power is like who will bell the cat.

Joseph Nye writes on appointment of Director of National Defense:

Many partisans accused President George W. Bush of lying and pressuring the intelligence community to produce intelligence to justify a war that Bush had already chosen. But the situation was complicated, and to understand the problems of speaking truth to power, we must clear away the myths.

Political leaders cannot be blamed for the analytical failures of intelligence, but they can be held accountable when they go beyond the intelligence and exaggerate to the public what it says. US Vice President Dick Cheney said there was “no doubt” that Saddam had WMD, and Bush stated flatly that the evidence indicated that Iraq was reconstituting its nuclear programs. Such statements ignored the doubts and caveats that were expressed in the main bodies of the intelligence reports.
Trust in intelligence runs in cycles in our democracy. During the Cold War, intelligence officials were often seen as heroes. After Vietnam, they became villains. September 11 restored public recognition that good intelligence is more important than ever, but the failure to find WMD in Iraq renewed suspicion again, and Trump has used it to obscure the problem of Russian interference in American elections.
The lessons for the next American DNI are clear. In addition to the bureaucratic tasks of coordinating budgets and agencies, he (or she) will have to monitor tradecraft in collection of intelligence, defend rigorous use of alternative techniques for analyzing it, and ensure careful presentation to political leaders and the public. Above all, the DNI has a duty to speak truth to power.

The situation in the (Slovenian) banking system remains good, while risks have increased?

August 5, 2019

One is increasingly seeing how central bankers are saying both things at the same time:

The situation in the banking system remains good, while risks have increased

The Bank of Slovenia finds that the situation in the banking system remains good, according to the latest information, even as risks have increased. The profitability of the Slovenian banking system increased again, while this year has also seen growth in the balance sheet total and bank lending activity. The quality of the credit portfolio is continuing to improve, most evidently in the corporate segment. The capital adequacy of the Slovenian banking system remains comparable to the euro area average. The Bank of Slovenia draws attention to increased risks: while economic growth gradually slows, the key challenge for the banking system remains generating stable income in the low interest rate environment.

Call it Economists’ English!

It also suffers from these behavioral biases. You ask a fund manager and she always says we are doing well and risks have increased but they lie elsewhere. Now it cannot be the case that everyone is doing well and yet risks are rising.

Sweden’s march towards a cashless economy got a slight jolt

August 5, 2019

As one thought Sweden will go cashless in just a few years, there has been some fightback from cashusers.

John Detrixhe reports that notes and coins in circulation has gone up by 7% for the first time in 10 years:

Sweden is at the vanguard of countries embracing digital payments, so much so that the Scandinavian country could go effectively cashless in less than four years. In 2018, however, the amount of banknotes and coins in circulation increased for the first time in more than a decade.

Swedish banknotes and coins in circulation rose 7% last year, to 62.2 billion krona ($6.5 billion), according to the European Central Bank. It was the first yearly increase since 2007; the value of cash in circulation has dropped by around 45% over that period.

Are Swedes falling back in love with cash? Probably not. Groups that represent seniors and other vulnerable people have pushed backagainst the country’s rapid shift to digital payments, but last year’s uptick in cash circulation is due, in part, to technical factors. Namely, there was a currency overhaul in which old banknotes and coins could be exchanged for new ones (pdf).

Some Swedes may also have boosted their personal holdings of banknotes and coins in case of a crisis. The Swedish Civil Contingencies Agency recently recommended that Swedes put aside some cash in case of an emergency, such as a data center glitch that causes payments systems to go offline, or terrorism or a cyber attack.

However, at best this has halted the march a bit:

These factors are probably one-off instances, as Swedes continue to switch to card payments and mobile payment apps like Swish. This puts government officials in a tough position, as not everyone is ready for digital transactions. Poorer people and the elderly tend to rely on cash. As more and more payments take place through smartphones (even going to the toilet in Sweden can require an app), it can be difficult for people who aren’t digitally savvy to keep up. Others want to preserve their privacy, or simply want to keep their payment options open.

All eyes on Sweden..

How Market Design Emerged from Game Theory: A Mutual Interview

August 2, 2019

Fascinating mutual interview of Al Roth and Robert Wilson in the new edition of Journal of Eco Perspectives.

To jog our memories about the history and development of game theory and how it shaped and was reshaped by market design, we interviewed each other over coffee during Fall 2018. We also touched on what we think has been learned about markets and marketplaces by trying to design them.

What emerged from our discussion is that, when we learned game theory, games were modeled either in terms of the strategies available to the players (“noncooperative game theory”) or in terms of the outcomes that could be attained by coalitions of players (“cooperative game theory”), and these were viewed as models appropriate for different kinds of games. In either case, the particular model was viewed as a mathematical object that could be viewed in its entirety by the theorist.

Market design, however, has come to view these models as complementary approaches for examining different ways in which marketplaces operate within their economic environment. And, because that environment can be complex, there will be aspects of the game that are not entirely observable.

Mathematical models themselves play a less heroic, stand-alone role in market design than in the theoretical mechanism design literature. A lot of other kinds of investigation, communication, and persuasion play a role in crafting a workable design and in helping it to be adopted and implemented, and then maintained and adapted.

As good as it can get…

Constitution of South Africa includes mandate for its central bank..

August 1, 2019

Mr Lesetja Kganyago, Governor of the South African Reserve Bank was recently reappointed as Governor of South Africa Reserve Bank. The central bank has been under pressure as it is one of the few banks which is held privately.

In a recent speech, Kganyago talks about the mandate of the central bank. It is interesting to note that it is mentioned in South Africa’s constitution (Like Swiss):


How did the world’s two most venerable and influential democracies – UK and US – end up with Donald Trump and Boris Johnson at the helm?

July 30, 2019

Jeffry Sachs ponders over the question:

There is an obvious answer to the question of how two venerable democracies installed disordered minds in power and enabled them to pursue unpopular policies. But there is also a deeper one.

The obvious answer is that both Trump and Johnson won support among older voters who have felt left behind in recent decades. Trump appeals especially to older white male conservatives displaced by trade and technology, and, in the view of some, by America’s movements for civil rights, women’s rights, and sexual rights. Johnson appeals to older voters hit hard by deindustrialization and to those who pine for Britain’s glory days of global power.

Yet this is not a sufficient explanation. The rise of Trump and Johnson also reflects a deeper political failure. The parties that opposed them, the Democrats and Labour respectively, failed to address the needs of workers displaced by globalization, who then migrated to the right. Yet Trump and Johnson pursue policies – tax cuts for the rich in the US, a no-deal Brexit in the UK – that run counter to the interests of their base.2

The common political flaw lies in the mechanics of political representation, notably both countries’ first-past-the-post voting systems. Electing representatives by a simple plurality in single-member districts has fostered the emergence of two dominant parties in both countries, rather than the multiplicity of parties elected in the proportional representation systems of Western Europe. The two-party system, which then leads to a winner-take-all politics, fails to represent voter interests as well as coalition governments, which must negotiate and formulate policies that are acceptable to two or more parties.

Consider the US situation. Trump dominates the Republican Party, but only 29% of Americans identify themselves as Republicans, with 27% identifying as Democrats and 38% as independents, not comfortable with either party but unrepresented by an alternative. By winning power within the Republican Party, Trump scraped into office with fewer votes than rival Hillary Clinton but with more Electoral College delegates. Given that only 56% of eligible Americans voted in 2016 (partly owing to deliberate Republican efforts to make voting difficult), Trump received the support of just 27% of eligible voters.

Trump controls a party that represents less than one-third of the electorate, and governs mostly by decree. In the case of Johnson, fewer than 100,000 Conservative Party members elected him as their leader, thus making him prime minister, despite his approval rating of just 31% (compared to 47% who disapprove).

Political scientists predict that a two-party system will represent the “median voter,” because each party moves to the political center in order to capture half the votes plus one. In practice, campaign financing has dominated US party calculations in recent decades, so the parties and candidates have gravitated to the right to curry favor with rich donors. (Senator Bernie Sanders is trying to break the chokehold of big money by raising large sums from small donors).

In the UK, neither major party represents the majority who oppose Brexit. Yet the UK political system may nonetheless enable one faction of one party to make historic and lasting choices for the country that most voters oppose. Most ominously, winner-take-all politics has enabled two dangerous personalities to win national power despite widespread public opposition to them.

No political system can perfectly translate the public will into policy, and the public will is often confused, misinformed, or swayed by dangerous passions. The design of political institutions is an ever-evolving challenge. Yet today, owing to their antiquated winner-take-all-rules, the world’s two oldest and most venerated democracies are performing poorly – dangerously so.


Explaining Unusual Cash Patterns in Canada in 2018

July 30, 2019

In an earlier post, one had pointed how cash usage had declined suddenly in Canada which was attributed to legalisation of cannabis.

Walter Engert, Ben S. C. Fung, Jozsef Molnar and Gradon Nicholls of Bank of Canada in this note do not agree. The decline of cash was in Toronto and not across other regions. Even in Toronto it was due to a specific event:


Who are you going to believe, experts or the evidence of your own eyes?

July 29, 2019

What happens when experts such as Joseph Stiglitz begin doubt experts?

He along with Martine Durand and Jean-Paul Fitoussi write in

Autumn of the matriarch: Women in their 90s and 100s are scripting stories of resilience and cheer in Kerala

July 29, 2019

One keeps hearing terrible stories regarding State of women and girl child in the country. There has to be zero tolerance towards this ongoing nonsense.

Given the doom there are some bloom stories as well. P. Anima has a piece in Hindu which raises goose-pimples and makes one so proud. It tells the stories of these women in 90s and 100s which will give today’s millennials a run for money:

From leading a political party at the age of 100 to learning to write at 97, Kerala’s nonagenarian and centenarian women are scripting plucky stories by doggedly keep pace with life despite crushing personal losses

Read the whole piece and say wow, Cheers to their spirit.
This story in particular of Karthiyayani Amma wanting to study at 97 is quite something:


Storm clouds are gathering at Central Bank of Ukraine: What a way to defend its autonomy

July 25, 2019

National Bank of Ukraine, their central bank has put up a website to show storm clouds are gathering over the central bank since 18 April 2019. The central bank is being attacked from several fronts…

After the Revolution of Dignity, Ukraine went through the perfect storm of three-way crisis, economic, banking and currency. It looked as though this was a thing of the past for Ukraine, but today we are hearing the thunder of politicians’ populism and pressure from the oligarchs again, we are seeing flashes of lightning in the form of groundless lawsuits and decisions.
Storm clouds are gathering around the National Bank, which is at risk of losing its independence under pressure, and with it – and the ability to ensure price and financial stability. This is not a private storm affecting one institution, just like the National Bank is not a private bank, but an institution working for the prosperity of every Ukrainian.
Amazing to note how the government has not asked to close this website!

From third world to first in class (and Who coined the term “third world”?)

July 25, 2019

Jonathan Woetzel writes a nice piece on how third world has risen over the years (HT: Conversable Economist blog):

When historians in the distant future look back at our era, the name Alfred Sauvy may appear in a footnote somewhere. Sauvy was a French demographer who coined the term “third world” in a magazine article in 1952, just as the Cold War was heating up. His point was that there were countries not aligned with the United States or the Soviet Union that had pressing economic needs, but whose voices were not being heard.

Sauvy deliberately categorized these countries as inferior: “tiers monde” (or third world) was an explicit play on “tiers état” (third estate), the ragged assembly of peasants and bourgeoisie under France’s ancien régime that was subservient to the monarchy (the first estate) and the nobility (the second). “The third world is ignored, exploited and mistrusted, just like the third estate,” Sauvy wrote. “The millennial cycle of life and death has become a cycle of misery.”

As a piece of editorial rhetoric based on the fetid geopolitical atmosphere of the time, Sauvy’s essay was on the mark. As prophecy about the course of economic progress, he could hardly have been more wrong.

“Third world” today is politically incorrect as a phrase and economically incorrect as a concept, for it fails to take into account one of the biggest stories of the past half-century: the spectacular economic development that has taken place across the globe. Since Sauvy’s essay, some (but not all) of the countries he referred to have enjoyed very rapid growth and huge leaps in living standards, including in health and education.

To cite just one metric: the number of people living in extreme poverty has fallen from more than half the global population in the 1950s, when his magazine piece was published, to just over 10 percent today, even as the total population of the world has tripled.

The changes have been so striking that we have reached a point where the very distinctions among “developing,” “emerging” and “advanced” countries have become blurred. Singapore is now the second most competitive economy in the world, according to the World Economic Forum’s 2018 Global Competitiveness Index, which also ranks Hong Kong, South Korea and Malaysia well ahead of Italy, a founding member of the G-7 club of “rich” countries. China has more billionaires than the United States and almost twice as many as the whole of Europe. Bombay’s stock exchange has a larger market capitalization than Frankfurt’s.


How these terms have outgrown themselves.  World Bank economist Antoine Van Agtmael coined the term emerging markets in 1981 which also does not make sense for some of the countries. It gives a feeling of continued emergence…

Uttkarsh: RBI’s Medium Term Strategy framework

July 24, 2019

Uttkarsh, a hind word means rising to something better/ pull something upwards.

RBI has used the word for its medium term strategy framework:

Shri Shaktikanta Das, Governor today launched ‘Utkarsh 2022’, the Reserve Bank of India’s Medium-term Strategy Framework, in line with the evolving macroeconomic environment, to achieve excellence in the performance of RBI’s mandates and strengthening the trust of citizens and other institutions.

A formal strategic management framework was launched in April 2015 to rearticulate the core purpose, values and vision statement of the Reserve Bank so as to delineate its strategic objectives in contemporary terms, to provide a framework and backdrop within and against which its policies would be formulated. These core purposes (reflecting the RBI’s commitments to the nation) and values (Public Interest, Integrity and Independence, Responsiveness and Innovation, Diversity and Inclusiveness, and Introspection and Pursuit of Excellence) still remain relevant and valid; however, a need has been felt to have a medium-term dynamic Vision statement reflecting our responses to emerging challenges and dynamics of the economic, social and technological environment in which we operate.

The strategic framework contains, inter alia, the Bank’s Mission, Core Purpose, Values and Vision Statements, reiterating the Bank’s commitment to the Nation. The Medium-term Vision Statements set out the following:

    • Excellence in performance of statutory and other functions;
    • Strengthened trust of citizens and other Institutions in the RBI;
    • Enhanced relevance and significance in national and global roles;
    • Transparent, accountable and ethics-driven internal governance;
    • Best-in-class and environment friendly digital as well as physical infrastructure; and
    • Innovative, dynamic and skilled human resources

These vision statements are mutually reinforcing and will guide the RBI during the medium-term period (2019-22) through various strategies. The strategies are essentially well thought-out actions to capitalise on the emerging opportunities and meet challenges of the future. The desired outputs are proposed to be realised in terms of achievement of strategic goals through one or more tangible and time-bound milestones.

The Management of the Reserve Bank attaches high importance to ‘Utkarsh 2022’ and will periodically monitor its implementation and progress through a Sub-committee of the Central Board.

I was just going through the presentation/document and reads more like a consultant’s report with all kinds of management jargons. I mean there is RBI’s core purpose, mission and values feeding into 6 vision statements!

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