Archive for the ‘Economics – macro, micro etc’ Category

A more effective way to learn about history of economic thought…

January 23, 2017

I came across this website:https://www.exploring-economics.com which is going to be used a lot by this blog in future.

It has this wonderful resource page on history of economic thought with this superb picture summing the core of most schools:

Displaying

This is amazing!

As they say: A picture is worth thousand words and here it is worth much more than just thousand words.

These schools of thought are compared across different questions and issues. THese together should help develop comparative perspectives on these schools.

There are videos and lectures on the site as well. Do take a look..

 

Was US behind India’s demonetsation? Lessons from crisis when US bailed out the RBI in 1940s..

January 23, 2017

Srinath Raghavan has an interesting piece.

He says there are conspiracy theories on whether US was behind demonetisation? He picks lessons from 1940 silver crisis when US bailed out India. He says main thing is credibility of Govt and RBI which was an issue then and will be an issue today:

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Legislating Instability: Adam Smith, Free Banking, and the Financial Crisis of 1772

January 20, 2017

This is the title of a book by Prof Tyler Goodspeed. A brief of the book is here.

The failure of Ayr Bank in 1772 was a turning point in financial history. It led to change in thinking of Adma Smith who till then favored banking free of government regulation. Thus, this event continues to inspire financial historians who look for different viewpoints to explain the crisis.

Prof Hugh Rockoff reviews the book and sums up:

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A dynamic world map showing emigration to the United States from different countries since 1820

January 18, 2017

Superb pointer from Utopia Blog:

What are US economists going to do in Trump era?

January 18, 2017

The world of US economists post Trump can be summed in two words – reality check.

Justin Fox has a nice piece summarising the key thoughts and sessions at the annual American Economic Association meeting:

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Study economics not to be deceived by clever economists..

January 16, 2017

An interesting comment by Dr Manmohan Singh. More so they coming  at launch of a book on history of economic ideas by Vinay Bharat Ram:

Economics should be studied not to find settled answers to unsettled questions but to warn on how not to be deceived by clever economists, former Prime Minister Manmohan Singh said quoting economist Joan Robinson. “When we study economics, what is the purpose of the study of the economics? It is not to find settled answers to unsettled questions but to warn us how not to be deceived by clever economists,” Singh said at launch of the book ‘Evolution of Economic Ideas – Smith to Sen and beyond’ by DCM Limited’s Chairman Vinay Bharat Ram.

“When we study economics, our impulse is not the philosopher’s impulse, knowledge for the sake of knowledge, but for the healing that knowledge may have to bring. It is for the heart to suggest our problems, it is for the intellect to solve them. The only purpose of intellect is to be a servant of social sympathies. That gives you one idea of what economics is all about,” Singh said.

This is superb bit of quoting by Dr Singh from history of economic thought.

As students of economics, these ideas/statements should be really well known to us. But it is a pity (or a shame?) that as none of this is taught, we get to read about them so randomly and then ponder/wonder over the words of wisdom….

The top rich in Europe in the long run of history (1300 to present day)

January 16, 2017

Prof. Guido Alfani of Bocconi university says:

Crises in economies vs Crisis in Economics…

January 16, 2017

Some interesting links on the topic (HT:Economist’s View Blog)

  • Andy Haldane of Bank of England raised concerns on state of economics. His main idea is econs failed to see the crisis
  • David Miles, former Bank of England official responds saying no such crisis. Most economics models confirmed the crisis.
  • Simon Wren Lewis sums up and says problem is to think economics only means macroeconomics and finance. The other areas of economics like micro, public etc did not face any such crisis.  Moreover, even within the two macro and finance, former mostly excluded the latter. So there is no crisis as such but a case of overlooking the data. He says if there was someone who should have spotted risks it was Bank of England!

Then there is another article by Prof Paola Subacchi of University of Bologna. She hits the nail on its head:

Where do we go from here? While we should appreciate Haldane’s candid admission, apologizing for past mistakes is not enough. Economists, especially those involved in policy debates, need to be held explicitly accountable for their professional behavior. Toward that end, they should bind themselves with a voluntary code of conduct.

Above all, this code should recognize that economics is too complex to be reduced to sound bites and rushed conclusions. Economists should pay closer attention to when and where they offer their views, and to the possible implications of doing so. And they should always disclose their interests, so that proprietary analysis is not mistaken for an independent perspective.

Moreover, economic debates would benefit from more voices. Economics is a vast discipline that comprises researchers and practitioners whose work spans macro and micro perspectives and theoretical and applied approaches. Like any other intellectual discipline, it produces excellent, good, and mediocre output.

But the bulk of this research does not filter into policymaking and decision-making circles, such as finance ministries, central banks, or international institutions. At the commanding heights, economic-policy debates remain dominated by a relatively small group of white men from American universities and think tanks, nearly all of them well-versed devotees of mainstream economics.

The views held by this coterie are disproportionately represented in the mass media, through commentaries and interviews. But fishing for ideas in such a small and shallow pond leads to a circular and complacent debate, and it may encourage lesser-known economists to tailor their research to fit in.

The public deserves – and needs – a marketplace of ideas in which mainstream and heterodox views are afforded equal attention and balanced discussion. To be sure, this will take courage, imagination, and dynamism – particularly on the part of journalists. But a fairer, more pluralistic discussion of economic ideas may be just what economists need as well.

Amen to that.

I mean the whole thing is such a close circuit (or a circus?) that all this crisis talk reads like a joke. As the author says the coterie of world economic policy comes from selected certain schools (read Ivy leagures in North East USA). The majority of coterie first rejects a mega event coming (amidst some opposition), then they decide the crisis is on applauding the minority dissenters and then they together look for the solutions! It is that simple.  They are least impacted by any crisis as they are always deciding the big world game.

Unless we see more broad basing of economics and look at economists minus the usual tags we are not going anywhere. It will just keep going in circles. It is funny how a local economics person is never seen as an expert despite spending so much time in the region and sector. Whereas anyone from the coterie is seen as an expert on all the issues across the world.

 

 

Consumers end up paying more to avail Rs 5 LPG discount in Hubballi..

January 12, 2017

Digital transactions are not cheap as we are increasingly realising. Unlike cash which does not involve any transaction cost while paying digital payments require a fee. These payment services are offered by a private firm which has to earn its revenues. So someone has to pay.

People in Hubbali in Karnataka just figured this bit. In order to avail Rs 5 discount on booking a gas cylinder when paid digitially, they ended up paying more via commissions!:

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Should the Riksbank (Sweden central bank) issue e-krona and is this time any different?

January 12, 2017

Came across this really interesting speech by Cecilia Skingsley of Riksbank. It is a pity that the media and experts discuss every word of speeches made by Fed and ECB chiefs much of which is repetitive. In the process, we miss such speeches which give you a panoramic view of the burning issues  by smaller central banks. And this is from the oldest central bank in the world.

Anyways Ms. Skingsley gives you a very nice historic and institutional account of central banks and their currency function. As cash usage in Sweden is one of the lowest in the world, they are talking much more about digital payments and digital currencies.

Given all this, the big question is should the central bank issue its own currency? If yes, how do we think through the changes? She says we need to think about e-krona as a complement to krona.

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Evolution of math teaching over the years (explains economics teaching too)…

January 9, 2017

A really interesting picture popped in my Facebook account showing how math teaching has changed over the years.

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How Zimbabwe sells elephants to pay off old debts…

January 9, 2017

I had no idea that this happens too.How animals are used to pay off debts incurred by humans:

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Policy analysis in a post-truth world..

January 6, 2017

This is an important and timely piece by Prof Charles Manski of Northwestern University.

Looking ahead, I am deeply concerned about the future practice of policy analysis in the Trump administration.  So much has already been written about the tenuous relationship between the president-elect and reality that I shall not attempt to document the phenomenon afresh.  Instead, I will cite the clear and frightening writing of Ruth Marcus, who recently opened her periodic column in the Washington Post as follows (Marcus 2016):

“Welcome to – brace yourself for – the post truth presidency. ‘Facts are stubborn things’, said John Adams in 1770, defending British soldiers accused in the Boston Massacre, ‘and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.’  Or so we thought, until we elected to the presidency a man consistently heedless of truth and impervious to fact checking.”

Marcus went on to comment that Trump had an incentive not to respect truth. She wrote:

“The practice of post truth – untrue assertion piled on untrue assertion – helped get Donald Trump to the White House. The more untruths he told, the more supporters rewarded him for, as they saw it, telling it like it is.”

I have two worries about how the new administration will regard policy analysis.  One is that it will severely cut back funding for the regular data collection that makes possible the publication of official economic statistics.  The other is that the analysts who staff federal agencies, who have had a strong reputation for political neutrality and integrity, will be pressured to cook findings to suit whatever the president believes. Coherent policy discussion, which has already become difficult in an increasingly partisan governing environment, may become impossible when the White House considers even basic facts to be malleable.

A constructive way to mitigate the potential damage may be to establish research centres and statistical agencies outside the executive branch of the federal government that can provide honest and well-informed predictions of policy outcomes and estimates of the state of the economy.  Perhaps the Federal Reserve Board and Congress can provide part of what is necessary, but I expect that part will have to come from non-governmental entities.  The US presently does not have the requisite institutions.  A suitable exemplar may be the Institute for Fiscal Studies in the UK.

However we strive to provide honest and well-informed policy analysis, I continue to believe that our society would be better off we were to face up to uncertainty.  Many of our contentious policy debates stem in part from our failure to admit what we do not know.  We would do better to acknowledge that we have much to learn than to act as if we already know the truth or can infinitely manipulate it.

Applies to India as well. It is shocking to see how polarised and politicised our policymakers have become in recent years. We need a lot of independent and non-partisan research and writing. It is appalling to see the stands people have taken during the recent cash withdrawal exercise just based on their political leaning.

Chuck Norris vs. communism

January 6, 2017

A superb post in MR Blog (via Emily Skarbek).

It talks about a documentary which shows how smuggled Chuck Norris movies created impacts in minds of Romanians:

Chuck Norris Versus Communism is a great documentary about art, the power of heroes, and the end of communism in Romania. After the communist regime was established in 1948, travel was restricted, the media were censored and the secret police watched everyone. Romania was cut off from the rest of the world. In the mid-1980s, however, smuggled VHS tapes of American movies began to circulate. Underground groups would gather together to watch samizdat movies like Rocky and Lone Wolf McQuade.

For many of the young boys (now men) featured in the documentary the West’s action heroes became role models of endurance, independence and fortitude. I too remember running home filled with enthusiasm after seeing Rocky but in Romania the message was all the more powerful because there was so little else to compete with Hollywood’s images and watching was itself a kind of heroic snubbing of the regime.

The action was exciting but perhaps even more revealing were the ordinary scenes of supermarkets stocked with food, at a time when Romania was racked with severe rationing. City lights, beautiful cars, and the ordinary freedoms of worship and belief casually portrayed, all impressed on the Romanian viewers the starkness of their own situation.

Almost all of the movies were dubbed (technically voice over translated) into Romanian by one woman who took on all the roles. Few people knew her name but her voice became entwined with that of the heroes she translated and she became a national symbol of freedom. Irina Nistor is revealed as a real hero who despite great personal risk continued to translate hundreds of movies because that is when she felt most free.

There’s also a mystery that the documentary discusses but does not fully answer. How did the mastermind of the smuggling operation, Teodor Zamfir, get away with it? At least some of the authorities had some idea of what he was doing but perhaps due to bribery, perhaps because there were no longer any true believers, perhaps because the authorities thought the movies would provide an escape valve from the harshness of Romanian life, they allowed the operation to continue. Zamfir also appears to have had immense personal charisma, so much so that he somehow turned an undercover operative to his side. It’s a remarkable story.

Indeed.

We too in India saw some of these movies as kids and were equally awed..

Economics of the world’s most expensive handbag – Hermès Birkin

January 2, 2017

Superb piece by Brooke Unger on the topic (HT: who else but MR Blog).

One has always wondered how marketers create these different products/brands for men and women and how they manage to keep prices of latter category goods so much higher.

I had no idea about the Birkin handbag (which I learnt is based on surname of an actress) and its unheard of price:

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Argentina’s continued love affair with inflation…

December 23, 2016

Prof Martin Feldstein points to recent valiant efforts by Argentina to lower inflation:

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Demonetization on Five Continents..

December 23, 2016

Prof Jeffry Frankel says demonetisation is the new trend in world economics.

Around the world, several countries are currently undergoing “demonetization,” or currency reforms in which the government removes banknotes of a certain denomination from circulation and replaces them with new notes. Governments pursue demonetization for a variety of reasons, and some of the recent initiatives are going better than others.

He says there are three kinds of demons:

  1. To tackle hyperinflation like in Venezuela
  2. To decommission and replace bills for more benign, technical reasons, such as to remove unpopular notes; introduce new counterfeit-proof bills; switch national currencies (like Euro).
  3. To crack down on illegal activities as India did.

The experience of India shows that too much boldness also backfires:

Western leaders could probably be bolder when they phase out big bills as slowly as they do. But Modi has been too bold.

 

Is US becoming a banana republic?

December 19, 2016

Scott Sumner has an interesting piece titled as Banana Republic watch:

How do you know when your country is becoming a banana republic?  Let’s call our imaginary banana republic “Costaguava”.

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Israel Kirzner Presents the Foundations of Austrian Economics

December 15, 2016

There is so much to learn and figure about economics.

Steven Horowitz points to lectures of Prof Israel Kirzner on Austrian economics.

When people ask me to describe what kind of economist I want to be when I am in my 70s or 80s, I tell them a story about Israel Kirzner. For a number of years, I watched Professor Kirzner give the opening lecture at the Advanced Austrian Economics summer seminar for graduate students at the Foundation for Economic Education. The basic content of the lecture was the same each year, but each one was different in important details. You could tell that Kirzner was, to some degree, unsatisfied with his own presentation the previous year and had tinkered with it to try to make it clearer and more persuasive this time around. The fact that such a brilliant scholar was perpetually self-critical in this way, and that it mattered to him to make it better and get it right, makes him a role model for scholars of all backgrounds.

Just as important, however, was the passion he brought to that talk each year. I knew watching those lectures that he had given a version of this talk hundreds of times over the years to both his own students and audiences across the world. Yet every year, I felt like he was giving it for the first time, mostly because he spoke with such passion and urgency, as if understanding the basics of economics was a task that bore the weight of civilization on its shoulders. And, as he has argued, it in fact does. We should all aspire to the level of intellectual humility and passion that he demonstrated in those lectures.

This should be interesting stuff…

Have Trump tweets replaced Fed speak?

December 14, 2016

Tho Bishop has a nice post, He points how US President-elect Donald Trump’s tweet handle has become the place for market players.

His Tweet handle has been actively dishing out fodder for players to speculate:

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