Archive for the ‘Discussion’ Category

How the Archives of India are actually destroying History

May 25, 2017

This is a very depressing piece. For someone who has been closely associated with Archives business in India, state of Archives here is just plain pathetic. The kind of importance the higher authorities give to the state of these places speaks volumes.

The piece is on National Archives but applies to most other Archives in India:

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Mainstreaming behavioral economics…

May 25, 2017

Profs. Beryl Chang and Fabrizio Ghisellin say we need to simplify behavioral economics:

At the moment, behavioural economics suffers from confusing definitions, unanswered questions and conceptual gaps that need to be filled. It is reminiscent of a person who needs a diet both for a detox and a weight loss.

We need a ‘vertical’ streamlining process that will:

  • Clarify core issues: What is the ‘correct’ definition of rationality? When an alleged bias, such as loss aversion, is found to be part of human nature as designed by evolutionary processes, can it still be considered a ‘distortion’?
  • Fill existing conceptual gaps: behavioural economics deals abundantly with biases, but how are expectations formed? Are expectations ‘rational’?
  • And most importantly, generate a tractable reduced form for behavioural economics models. Today we have hundreds of different behavioural factors. They should eventually be translated into a smaller set of primitive factors.

In order to establish behavioural economics’ status, we hardly need the ‘discovery’ of yet another behavioural bias. At this stage, we need parsimony and an effort to synthesise what already exists into a general mainstream model as an alternative to conventional models.

They cite an example from Mullainathan and Thaler:

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Church of England fund becomes top world performer

May 25, 2017

Always fascinating to see connections between religion and finance.

Came across this bit of news:

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At proposed ‘Sholay’ park in Ramnagara, the fight is between movie memories and vulnerable vultures..

May 23, 2017

Superb piece from Archana Nathan of Scroll. One was excited to read earlier of an upcoming Sholay Park in Ramnagara, a town about 50 kms from Bangalore. This place was the iconic Ramgarh where the iconic Hindi movie Sholay was shot and made history.

However, the Park has run into difficulties with environment authorities:

Off the highway between Bengaluru and Mysuru, a patch of land surrounded by hills comes alive when Ramesh Sippy’s Sholay is mentioned. The 1975 blockbuster was shot there and curious tourists, especially from outside Karnataka, continue to visit the area to search for markers of the vendetta drama. There are none, but there soon might be. Early this year, the state government’s tourism department proposed a Sholay inspired theme park at Ramanagara, which is depicted as Ramgarh in the movie.

The theme park will include virtual reality recreations of key moments from the movie, adventure games and a crafts hub over a 120-acre stretch. The location seems perfect: packed with giant yet scaleable boulders and hills, Ramanagara is an ideal pit stop between the cities. But the proposal has been opposed by the state Forest Department, which has pointed out that it is illegal to construct a tourist hub in a reserved forest area. The parts of Sholay that fans remember – Gabbar Singh’s lair, Thakur Baldev Singh’s house, and the sequence in which Gabbar chops off Thakur’s hands – are part of the Ramadevara Betta vulture sanctuary at Ramanagara.

A case which makes for the eternal debate on growth vs environment..

Impacts of an online English learning programme among Japanese high school students

May 23, 2017

Interesting paper by Yuki Higuchi, Miyuki Sasaki, Makiko Nakamuro.

They evaluate whether Japanese students can learn English using online programmes. They show students do make progress but also procrastinate learning:

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Will Indian Railways charge more for lower berths?

May 23, 2017

Missed this news which came  a few days ago.

Apparently, the Indian Railways is mulling charging an extra Rs 50 for the lower berths:

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Why any modern banking system is necessarily uncompetitive?

May 23, 2017

Interesting post by Cameron Murray, a professional economist on Naked Capitalism blog.

He argues why banks are uncompetitive in today’s system.

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Why India needs another statistical revolution..

May 22, 2017

Recently a trio of economists had deplored the decline in Indian statistical system.

Pramit Bhattacharya in this superb piece writes more on the issue:

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Who should create jobs in India? Government or private sector?

May 22, 2017

I am quite amazed by recent debates on 3 year anniversary of the Indian government. On one hand ,our experts want Government to get out of most economic activities. But on the other hand, they hold government responsible for every economic activity under the sun.

The Government has got a thumbs up for most such economic activities barring one: jobs. Lack of job creation is seen as a major deficiency of the current government. So much so, the experts say this one deficiency does away with whatever good work the current government has done.

This leaves one to question: How is it that Government can create jobs?

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How the cold war led CIA to promote government financed human capital theory..

May 18, 2017

Fascinating piece by Prof. Peter Fleming of Cass Business School.

We in economics rarely figure how the guys at the top push certain ideas onto us. He says human capital is one such idea. The idea emerged as Profs. Theodore ‘Teddy’ Schultz and Milton Friedman debated how to beat USSR in the ideas battle during Cold War.

USSR announced how it will smash capitalist system by pushing state driven growth in agri and industry. The question was how should US respond?

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When silver ended as a unit of account…

May 18, 2017

Superb note by Ricardo Fernholz, Kris Mitchener, Marc Weidenmier. It is based on a bigger paper here.

They show how silver declined and ended as a unit of account. Moreover, it had sharp mpact on agricultural commodities:

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Meet David Pearce: The 15 year old boy who designed the New 1 Pound Coin

May 17, 2017

I had blogged about the new 1 Pound coin which is being touted as the safest coin the world.

Here is interview of David Pearce who was merely 15 years old when he sent in his deign and won the contest.

In the last few weeks many of us will have noticed a significant change to our ‘change’ – a new £1 coin. Although it’s entering circulation now, in 2017, the journey of the new £1 coin actually began in 2014, when the new 12-sided coin was first announced. And, in 2014, the public were given a rare opportunity to play a part in bringing the coin into the nation’s pockets with an invitation to submit designs that represented Britain. Heraldic designs, regional landmarks and cultural interpretations of the UK such as fish and chips and cups of tea were among over 6,000 entries submitted by the public, and in the end David Pearce’s design was chosen to symbolise the United Kingdom on the new one pound coin.

David, of Queen Mary’s Grammar School, was just 15 years old when he won the competition. His winning design features the floral emblems of the nations of the United Kingdom – the English rose, the Welsh leek, the Scottish thistle and the Northern Irish shamrock – emerging from one stem within a royal coronet. Now, as the #newpoundcoin starts to appear in our change, we speak to David to find out a little more about his design.

How did the thing come up?

How did your journey with The Royal Mint begin?

Well, my Design Technology teacher in school found out about the public design competition for the new one pound coin and recommended that I entered the competition to widen my portfolio for university admissions. 

What inspired you to enter?

I thought it would be a good opportunity to widen my portfolio, I didn’t really expect to win so I just took my teacher’s advice that it would be a good thing to do; I didn’t expect anything to come from it.

How did you find the process of designing the coin?

OK, I guess. I started with the template, and used the internet to research previous one pound coin designs to see what had been and gone. Because the brief was to design something that represented the UK, I researched symbols of the UK to find elements of heraldry that people would easily recognise as part of the United Kingdom. From there I came up with a few rough ideas and emerged with the one I liked the most. I compiled a few images into a mood-board, which had things such as royal crests, things that were synonymous with the UK, things that tourists would associate with the UK (which were very London-centric) and then flora – it was very diverse but very obvious at the same time. The main idea behind it, because it was the United Kingdom, was to unite the individual nations with a common element, the crown; so the four individual nations are represented by the flora and then united by the crown.

🙂

FBI History: With great power comes great scandal.

May 17, 2017

It is fascinating to know that Prof Douglas M. Charles of Penn State University is a FBI historian.

In this piece, he looks at brief history and key people behind the institution:

Drama at the FBI is nothing new. Given its 109-year history, the FBI has seen many scandals and numerous directors come and go.

Its directors, in fact, have always been the face and driving force of the FBI. Most have retired or moved on to other work, four were forced to offer resignations, but only two, including most recently James Comey, have been fired outright.

While FBI directors always served at the pleasure of presidents, they differed in their closeness to the chief executive. Most notably, FBI Director J. Edgar Hoover (1924-1972) worked to satisfy the political interests of some presidents and secretly undermine others. Since his death in 1972 and revelations of abuses, the federal government has treated the FBI director as independent from the White House.

As a historian who has long studied the FBI and its work, I believe knowing the agency’s past is crucial to understanding the firing of FBI Director James Comey and what may come of it.

Interesting stuff..

Denmark issues a tender to outsource printing of banknotes…

May 17, 2017

This blog had earlier pointed how Denmark has outsourced minting of its coins to Finland. The post also mentioned that Denmark will also be outsourcing printing of banknotes.

No agreement has yet been concluded with a supplier of banknotes. Danmarks Nationalbank has just published a timeline for the forthcoming tender for banknotes, and a supplier is expected to be found in early 2018.

Now Denmark Central Bank has issued a tender and a timeline for the same:

Danmarks Nationalbank has decided to discontinue internal printing/production of banknotes by the end of 2016. Like a number of other central banks, Danmarks Nationalbank will outsource this function to an external supplier. Danmarks Nationalbank will still be the issuing authority of banknotes in Denmark and will retain its expertise within banknote design and quality.

It is with great pleasure to announce that today, Monday 15 May 2017, Danmarks Nationalbank has initiated a competitive procedure with negotiation by sending a Contract Notice to the Tenders Electronics Daily (TED).

Danmarks Nationalbank expects the Contract Notice providing access to the procurement documents to be published within the next few days.  

Expected timeframe:

Dispatch of contract notice:                                                                                15 May 2017
Timelimit for request for participation:                                                              15 June 2017
Invitation to tender:                                                                                             1 September 2017
Timelimit for first indicative offer:                                                                       3 October 2017
Timelimit for best and final offer:                                                                        8 January 2018
Signing of contract:                                                                                            16 February 2018
Expected delivery of the first final batch of banknotes (one denomination): mid-2019

Interested banknote suppliers are invited to sign up for Danmarks Nationalbank’s news service for further news.

Will be interesting to see who gets the tender..

Should Walmart be allowed to get into banking?

May 17, 2017

Prof Lawrence White of Stern School has a piece on Walmart entry into banking. He says we should actually ask the following question: Why shouldn’t Walmart get into banking?

By the way I also learnt from the article that the retail giant entered banking in Canada and Mexico. In Mexico it sold off its banking business in 2014. The one in Canada continues. The issue is whether it should be allowed in America as well.

Prof White says:

One question to ask might be, “Why should Walmart be allowed to enter banking?” But a more relevant question would be, “Why shouldn’t Walmart be allowed to enter banking?” 

After all, the U.S. economy is generally market-oriented, and entry is generally recognized as potentially beneficial for consumers, as entrants can bring new ideas, innovations, and efficiencies to the market. Of course, incumbents usually don’t like the idea of entrants’ disrupting the status quo; and often those incumbents lobby for regulation and/or legislation that creates barriers to entry. But, for most markets, the presumption in broad U.S. economic policy is that entry should be encouraged—or at least, that policy should be neutral between incumbents and entrants—so that the benefits of entry can be enjoyed by consumers.

Of course, banking is special—as the regular readers of this blog are well aware. And how the specialness of banking and the presence of Walmart in banking can be reconciled must be addressed, and will be addressed below.

But first, consider what the entry of Walmart into banking might well achieve: Walmart is well known for providing reasonably priced goods to low- and moderate-income households. Its position as the largest company in the United States—as measured by sales and by employment—is a testament to that reputation.

But it is exactly this demographic group—low- and moderate-income households—that is most in need of reasonably priced financial services. The percentage of U.S. households that are unbanked (i.e., do not have a bank account) or underbanked (i.e., have an account but rely on non-bank providers for some financial services and products) has been a longstanding policy concern. The most recent data (from a FDIC report that covers 2015) in this regard—based on a survey of more than 36,000 households nationwide—show that 7% of all households were unbanked and an additional 20% of all households were underbanked. Unsurprisingly, the percentages are substantially larger for low- and moderate-income households (see table)

Hmmm.

The post also has a interesting discussion on the complex financial regulation setup in US:

So, how would the entry of Walmart—and, presumably, other non-financial companies that are interested in entering banking—fit into that system of prudential regulation?

The crucial concept is that the “Walmart Bank” that would provide banking services to the public would be organized as a separate subsidiary of the parent Walmart company. In essence, the parent Walmart company would be a bank holding company (BHC), which is a common ownership structure for U.S. banks. The Walmart Bank subsidiary would be expected to abide by all prudential regulations—including adequate net worth (capital) requirements—that apply to banks.

…..

However, because it is relatively easy for the owners (including BHCs) of a bank to drain the bank of its assets—for example, by paying excessive dividends to its owners, or by making loans to the owners that are not repaid, or even by paying excessive prices for any materials that it buys from the owners—it is essential that any transactions between the bank and its owners be on arm’s-length terms. U.S. bank regulators have long been aware of this danger of the draining of a bank by its owners and have rules in place (which are embodied in Sections 23A and 23B of the Federal Reserve Act) that insist on this arm’s-length standard.

Current U.S. banking policy has much of this story right.  But where policy has gone “off the rails” is the insistence that a BHC cannot be engaged in commerce—that is, in non-financial services activities. This restriction on scope was embodied in the Bank Holding Company Acts of 1956 and 1970 and remains established policy for banks and banking in 2017. Its persistence as policy is more a testament to the lobbying strength of the incumbent bankers (who clearly prefer less competition) rather than to a concern about the economic welfare of consumers. It also yields the economically absurd result that it is okay for a local car dealer to own a bank (so long as the dealer doesn’t form a BHC that involves the car dealership); but it is not okay for AutoNation (a publicly traded company that operates hundreds of car dealerships) to own a bank.

Until 1999 there was a potential way around this no-commerce restriction on the activities of a holding company: the holding company of a savings and loan (S&L or thrift) institution faced no such restriction, and at various times companies such as the Ford Motor Company, Fuqua Industries, Weyerhaeuser, ITT, Gulf & Western, Household International, and Sears, Roebuck have owned S&Ls via the formation of thrift holding companies.

In the middle of the 1990s, Walmart decided to try to enter banking by becoming a thrift holding company. However, before Walmart was able to become a thrift holding company, the Gramm-Leach-Bliley Act of 1999 (which was primarily focused on allowing commercial banks—via BHCs—to enter investment banking) forbade the creation of any new thrift holding companies that could engage in commerce. It also restricted the sale of an existing thrift holding company to a non-financial company, such as Walmart.

There was a second, more limited way around the “no commercial owner” restriction: a few states—most notably Utah—offered “industrial loan company” (ILC) charters that allowed a commercial firm to own a financial institution that could issue deposits and make loans and thus could function as a bank. But in order to operate, the ILC would need to obtain deposit insurance from the FDIC.

Walmart duly obtained a Utah ILC charter and in 2005 applied for FDIC deposit insurance. In 2007 Walmart withdrew its application after it was clear that the FDIC would not grant it deposit insurance. Further, the Dodd-Frank Act of 2010 placed a three-year moratorium on the granting of deposit insurance to any new (or newly acquired) ILC. Although the moratorium expired in 2013, bank regulators appear to have “gotten the message” that the commerce-finance barrier should remain intact.

Another example of how despite best intentions, regulations leave many gaps to be filled.

But overall a good discussion about many aspects of economics and finance..

The Economic School you’ve barely heard of : Austrian School

May 16, 2017

The author of this article titles it as “The Economic School You’ve Never Heard Of”. I have been kinder and replaced never with barely. But yes the author could be just right. It is highly unlikely that today’s economists have never heard about the Austrian School of Economic thought. I just wrote about reading dead economists but we have case for many important things being just dead in economic teaching.

Valentin Schmid of Epoch times writes a nice piece about the forgotten yet highly important teachings from Austrian School (HT: Cafe Hayek blog).

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Reading and Listening to Dead Economists…

May 16, 2017

Good friend Niranjan once told me how at a conference on so called new economics. To his shock and amusement,  none of what they were saying was new but old economics!

In the same spirit, Jeff Deist of Mises Institute says we should read and listen to dead economists:

We don’t revere dead economists to maintain their place in some academic hierarchy, or to satisfy an atavistic desire for an unchanging intellectual order. We revere them because their ideas still have purchase, because their work yields knowledge that is sorely needed today. We read them and promote them in order to understand the world as it is, filled with billions of purposeful but often irrational human actors. We need dead economists to save us from ourselves and to refute the stubborn myths of collectivism. We need them most of all because their work and their insights are far superior to those of most economists alive today. There is no “New Economics,” only new academic work that painstakingly advances the the knowledge bequeathed to us.

Totally agree!

Why does it cost more to cross platforms in railway stations compared to crossing the city by taxi?

May 16, 2017

There have been some appreciable changes in Indian railways especially its immediate responses to complaints sent via twitter while traveling. However, somethings have not changed at all.

One of them is the luggage transportation system within the station. It is highly ironical that one pays more to just cross a few meters of platforms compared to a taxi which travels many a kilometres within the city.

This is all because there is just no alternate to the porter/coolie system which charges all kinds of prices. The services are hopelessly monopolised with no other alternate but to pay crazy fares. One can only negotiate so much. There is also a kind of cartel which means if you reject someone’s services, other will not pick it up. So you have little choice.

It is even more ironical that you pay more to hire those trolleys which are available for free at airports (though in west they charge you for trolleys as well). I remember how one asked for hefty price just to cross one platform on Mumbai Central Station saying after all we are moving your luggage on the trolley.

Compare this to the taxi system. There was a time when taxis would cost as much well as it was all unionised. But thanks to introduction of competition and multiple players, inter-city taxi prices have come down. One is now travelling from and to various places at a fraction of a price compared to a few years. If one is lucky and there is less traffic, the fare could be less than half of what one paid when there was no competition. With many discount etc offers, the trip could be free as well.

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Why does financial media give such weird posing pictures of economic advisers/policymakers?

May 15, 2017

As rightly said: A picture is worth 100 or more words.

I have been noticing this for a while. Though while writing the previous post and seeing a full related articles, I decided to wrote this post finally.

Why does financial media give such weird pictures of economic advisers/policymakers? It has become habit of our media to report some lecture/comment from economic advisers/policymakers as if they are issuing some kind of sermon. The reporting usually comes with that person’s picture with expressions which are just so dumbfounding.

This has been especially true of portrayal of current Chief Economic Adviser. See his pictures here, here, here (who in the right mind will give a picture like this?), here, here. here and so on. It is not just the current CEA, but previous ones as well (see this,this for previous advisers).

I hope you get the point. If the comment is especially hinted against government the picture could put our Lord Nataraja to shame.

Why is this being done? It is obviously the portrayal of “the economic adviser” as “the pope/priest” who knows it all. The idea is to over glorify the role of the economic adviser as this person whose wisdom and advise will make all of us “developed” in one magic wand. So you put up pictures which back this theme.

Nothing could be more contrarian than this image portrayal…

ECB member admits to lobbying for abolishing cash…

May 9, 2017

It does not get clearer than this. Yves Mersh who just a few days ago argued why cash still matters in Europe. makes another speech.

He makes a case for how various players are lobbying for abolition of cash:

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