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

The role of industrial policy in South Korea’s industrialisation

December 15, 2017

Nathaniel Lane, Post doc student at MIT looks at the topic:



The changing geography of US manufacturing during the 20th century

December 13, 2017

Fascinating research by Profs Nicholas Crafts and Alex Klein.

They look at how economic geography has changed in US manufacturing from 1880-1997:

Religious faith can help people to build better cities?

December 12, 2017

Prof. Chris Ives and and PhD candidate Andre Van Eymeren think so and here is how.


Does finance lead to economic growth? Summary of literature…

December 12, 2017

Alexander Popov of ECB looks at the biggest question on finance: does it lead to economic growth and if yes how?

He sums up the literature so far:

This paper reviews and appraises the body of empirical research on the association between financial markets and economic growth that has accumulated over the past quarter-century. The bulk of the historical evidence suggests that financial development affects economic growth in a positive, monotonic way, yet recent research endeavors have provided useful and important qualifications of this conventional wisdom. Moreover, the proliferation of micro-level datasets has enabled researchers to study more precise links between theory and measurement. The paper highlights the mechanisms through which financial markets benefit society, as well as the channels through which finance can slow down long-term growth. 

Nice bit..

How Haiti helps us think differently about history

December 7, 2017

Prof Malik Gaechlem of MIT in this piece:

Back in the 18th century, Haiti was the most lucrative sugar-growing territory in the world, a key hub in the transatlantic economy, and, like the United States and France, the site of a democratic revolution. Battles over modern rights, slavery, and global commerce all figure prominently in Haiti’s history, though relatively few people know it. 

To MIT historian Malick Ghachem, this is both an oversight and an opportunity. Ghachem, a Haiti expert, thinks we too often treat the country as a blank spot on the historical map. Then again, his teaching and writing help fill this void by connecting Haiti to the larger historical currents that have shaped our world.

“The fundamental responsibility of the historian is to uncover a story, put it in a new perspective, and show why it was important,” Ghachem says.

Indeed, Haiti, once a French colony called Saint-Domingue, became the first country with universal legal equality, after its slave rebellion. But its path toward this breakthrough was complex. As Ghachem chronicled in his first book, the French feared such a possibility for years and instituted a legal regime that sought to keep slavery intact by controlling manumission — the freeing of slaves by their owners — while only occasionally punishing planters for their brutality.

And there was both planter and slave unrest during the 1720s in Haiti, as Ghachem chronicles in a second book he is now completing. Back then the colony, like others in the Atlantic, was controlled by a monopoly trading company — in this case, the French Indies Company — and it was a white rebellion against the company’s slave-trading monopoly that helped produce Haiti’s large-scale sugar plantations. Studying Haiti as an integral part of this transatlantic world adds depth and nuance to our knowledge about democracy and globalization — for readers and MIT undergraduates alike.

“Our students want to learn something that’s going to make them think differently,” Ghachem says. “And Haiti is good for that. It’s an unfamiliar place to a lot of people, a place that doesn’t figure in the calculus of a lot of disciplines. If you want to think about economic history or international law or human rights and you bring Haiti into the picture, it disturbs the conversation and upsets the terms of the debate.”

Hmm..History/Economic history of countries is mostly interesting.

Here is his interview held earlier where he talks about How history helps solve today’s issues..

The 1% vs 99% problem in US has been existing for much longer than thought…

December 7, 2017

John Mervin of BBC has a list of quotes of chairpersons of Federal Reserve.

Marriner Eccles (1934-48) quote remains as relevant as ever:

Marriner Eccles (in office, 1934-48) was a banker in Utah, whose testimony to Congress calling for government action to solve the US’s financial and economic woes brought him to the attention of President Roosevelt, and eventually the job of transforming the US’s central bank.

Mr Eccles once said: “The United States economy is like a poker game where the chips have become concentrated in fewer and fewer hands, and where the other fellows can stay in the game only by borrowing. When their credit runs out, the game will stop.”

US has been having this concentration of wealth in 1% and overborrowing for rest 99% for a much longer time than imagined….

The Principle of Comparative Advantage 200 years on: Introducing a new eBook

December 6, 2017

Prof. Simon Evenett of University of St. Gallen has edited an e-book to celebrate and debate Ricardo’s comparative advantage idea which completes 200 years in 2107.

He says the idea is to figure its relevance today:


Primer on European Banking Union..

December 6, 2017

Riksbank economists – Markus Ehrenpil and Mattias Hector- have a short primer on the EBU:

The Banking Union is the result of the work within the EU on improving regulation and supervision of the financial sector that began after the financial crisis. The purpose of the Banking Union is to create a structure for the joint supervision and management of banks in crisis, together with a joint system for deposit insurance. Large parts of the Banking Union are now in place, but some work remains to be done before the European Banking Union is fully up and running.

Just like anything European, it is quite complicated. We see both forces of making things European yet keeping them local remaining…

South Indian bank uses blockchain for remittances…

December 5, 2017

One can say blockchain is like an operating system on which several apps cab be made. Bitcoin is one such app. Banks and governments have mostly opposed bitcoin as it takes away enormous monetary powers from them.

However, authorities are warming up to using other apps on the blockchain . Singapore central bank chief highlighted how AP govt can use blockchain technology.

Thrissur-based South Indian Bank recently tested blockchain for remittances:


Uncovering drinking habits of 16th century Ireland..

December 1, 2017

Fascinating research by Dr Susan Flavin:

You spend years “burrowing away on dusty documents”, then a line in your research – admittedly attention-grabbing – about workers in Ireland in the 16th century quaffing rations of 14 pints of beer a day, gets noticed, and suddenly historian Dr Susan Flavin is getting calls from all over the place. Images of burly stone masons lurching around drunkenly wielding medieval hammers and chisels come to mind.

Flavin, a lecturer in early modern history at Anglia Ruskin University, has been researching 16th century social and economic history for years, and says today that people have “jumped on” the beer angle. She’s had an offer from someone who wants to recreate a 16th century oat brew and send her bottles, and a well-known craft brewery has also offered help in recreating the methods, for which she’s hoping for research funding.

So, if people routinely quaffed large quantities of beer daily, were most people going about their daily business three sheets to the wind? Flavin’s research shows beer was a vital source of calories and nutrition for workers. For example records from January 1565 show stone masons working at a quarry in Clontarf, Dublin, were provided with an allowance of 14 pints of ale per day by the proctor of Christ Church Cathedral. Gives a whole new meaning to plastered.

“People drank beer because it was a source of calories, as well as for thirst and social reasons,” says Flavin. “It was seen as good for energy and health, and was thought to have restorative properties.” She calculates that 16th century beer may had a high calorific value, providing between 400-500 calories per pint, compared to 180-200 calories in a pint today.

Stone masons were engaged in hard physical labour all day and people thought that beer made hardworking men sweat, which was regarded as good, she says. It may also have been sweeter and nourishing.


Her work on food habits:


A primer on the rise of populism and a way forward

November 30, 2017

Gulzar posts about why rise of populism is closely linked to inequality and gulf between 1% and 99%.

Why is it happening? But this consensus was accompanied by a less benign bipartisan elite convergence (more of it latter) which effectively ended up capturing the economic and political establishment. 
The rapid and fairly inclusive economic progress achieved in the period helped underpin this consensus and paper over fissures that were developing due to forces like trade liberalisation, globalisation, de-unionisation, and skill-biased technological changes. But once growth started slowing, for a variety of factors, these fissures started to show up.
But mainstream political parties, captives as they had become of elite interests, failed to see the breakdown in social consensus. The liberal elites too became caught up in their rhetoric.    
Nothing has been more emblematic of this isolation of elites from the electorate than the staggering levels of economic inequality, which has been widening at a rapid pace since the millennium. As the graphic below shows, in the US, the share of national income going to the top 1% has nearly doubled from 11% in 1980 to 20% in 2014. 
Fair amount of graphs etc to emphasise his point.
What is the way out? Gulzar quoting Prof. Rodrik says “the most promising solution may be to let the house burn down completely!”…




How to Succeed in Business (According to a 15th Century Trade Merchant)

November 30, 2017

In 1458 a trade merchant Benedetto Cotrugli from Venice (where else?) wrote this book: The Book of the Art of Trade. It has now been translated in English and not surprisingly most of the lessons apply even today.

Julia Hanna in HBSWK writes:


An interdisciplinary model for macroeconomics

November 29, 2017

Andy Haldane and Arthur Turrell of Bank of England in this paper:

Macroeconomic modelling has been under intense scrutiny since the Great Financial Crisis, when serious shortcomings were exposed in the methodology used to understand the economy as a whole. Criticism has been levelled at the assumptions employed in the dominant models, particularly that economic agents are homogeneous and optimising and that the economy is equilibrating. This paper seeks to explore an interdisciplinary approach to macroeconomic modelling, with techniques drawn from other (natural and social) sciences. Specifically, it discusses agent-based modelling, which is used across a wide range of disciplines, as an example of such a technique. Agent-based models are complementary to existing approaches and are suited to answering macroeconomic questions where complexity, heterogeneity, networks, and heuristics play an important role.

 Lots of stuff to figure in the paper..

How old style chits still work as money: A case from Bangalore Buses..

November 28, 2017

With all this rise of digital/crypto currencies, the world is increasingly becoming complicated to figure. So stories of simple money forms are always welcome.

Rajagopalan Venkataraman of Times of India writes on how a Bangalore city bus conductor manages the currency show in his/her bus economy:


Why Brexit should not stop UK cities from competing for European Capital of Culture..

November 27, 2017

Post-Brexit, UK and its cities are losing out to hosting European  institutions and values. Just recently, European Banking Authority exited from London.

Now, UK cities are barred from bidding  for European Capital of Culture. Wow, what a title. Only in Europe can we consider giving cities such titles and asking for bids for the same.

Beatrice Garcia has a piece  appealing not to bar the UK cities:

The news that UK cities are now barred from bidding to be European Capital of Culture 2023 has taken the nation by storm. The ruling by the European Commission, which cited Brexit as its main reason, came just days before five UK candidates – Belfast, Dundee, Leeds, Milton Keynes and Nottingham – were due to present their bids to the selection panel. The timing is unfortunate, and responses of outrage and disappointmentfrom the bidding cities – and the British public at large – were only to be expected.

I am one of the experts appointed to the selection panel – and an academic expert on the long-term legacy of holding the title of European Capital of Culture (ECOC). I have been documenting the experience of ECOC cities since 2002, starting with the ten-year legacy of Glasgow 1990, and then moving on to Liverpool 2008, a city whose ECOC journey I have researched from 2003 into its 10-year anniversary next year.

The fallout from the European Commission’s decision shows how dangerous it is to think of Brexit as a purely legal exercise. Relatively small initiatives (in EU funding terms) such as the ECOC nonetheless have huge symbolic value. Their impact has been felt not just by the cities hosting it, but by the many others inspired by the capacity for change that a year-long celebration of culture – and cultural exchange – can bring.

It is true that, in a globalised world – and with pressure to pursue local regeneration agendas, first and foremost – exploring the European dimension of the initiative has often been challenging. But the incentive to consider what it means to be European, and to reflect this through creative programming, has pushed host cities to explore links and histories which they might otherwise have forgotten. For instance, the Cities on the Edge programme – which came directly out of Liverpool’s City of Culture status in 2008 – linked the port cities of Liverpool, Marseille, Istanbul, Gdansk, Bremen and Napoli in previously unexplored ways.

What’s more, there is increasing support to advance European collaborations, exchange and working together with the other ECOC hosts which, after 30 years, have formed a strong and mutually supportive network. In 2008, Liverpool and Stavanger explored partnership options for the first time, and opened routes for ongoing collaboration in their approach to citizen volunteering, which continues to this day.

Now it is time to look beyond the political posturing and finger-pointing by both UK and EU politicians and consider how to ensure that the hard work already done by the five bidding cities takes them, and the rest of the country, in a fruitful direction.

Easier said than done. Lots of politics is at stake…

Industrial policies should be designed to benefit the economy from integrating with global value chains…

November 27, 2017

Pradeep Mehta of CUTS writes on the topic. It is quite unbelievable how he has the energy to keep writing for so many years now.

He says industrial policy should be designed towards trade. Also points to research which says much of industrial policy talk in Japan and Korea was a myth:


How to get rid of banking supervisors?

November 24, 2017

Central bankers are increasinly talking about culture, incentives etc. There have been two recent speeches which revisit these topics using bank supervision lens. First by Norman Chan of HKMA and second by Andreas Dombert of ECB.

Norman Chan of HKMA in this speech goes back to banking history when there were no banking supervisors:


How the village feast paved the way to empires and economics

November 23, 2017

Brian Hayden (professor emeritus of archaeology at Simon Fraser University), brings another dimension to history of empires and economics. He says what we are is a lot due to the village feasts which started earlier. These feasts meant people with surpluses came and lent their surpluses to the families hosting these feasts. This led to a hierarchy where those who lent became creditors and shaped human relations for times to come.

Feasts helped to transform egalitarian hunters and gatherers into the kinds of societies that laid the foundations for early states and even industrial empires. They created hierarchies and inequalities, the advantaged and the disadvantaged. Feasts might well have been the catalyst for the agricultural revolution, some 10,000 years ago. But just how did feasts bring about such dramatic transformations in cultures? In the ethnographic research that my students and I conducted among traditional tribal and chiefdom societies, feasts turned out to be very different kinds of events than your average turkey and cranberry Thanksgiving. 


Feasts are often very expensive events, sometimes requiring up to 10 years of work and saving. Those who are paying for them expect to obtain some benefit from all their efforts and expenditures. And this is the important part about traditional feasts: those who are invited, and who often receive gifts, are considered obligated to reciprocate the invitation and gifts within a reasonable amount of time. By accepting invitations to feasts, individuals enter into relationships of alliance with the host. Each of them supports the other in political or social conflicts as well as in economic matters….


The networks and debts that feasting systems created gave great political power to certain individuals. This is how traditional feasting created the first economically based (ie, surplus-based) hierarchies. Ambitious individuals profited from the feasting system by involving others in reciprocal debts. The use of feasts in this fashion is, of course, tied to the ability of hosts to produce food surpluses, and then to convert these surpluses into advantages. This kind of energy-conversion adaptation probably emerged only in the Upper Paleolithic of Europe among the more complex hunter/gatherers, around 30,000 years ago. Feasting became common elsewhere only about 15,000 years ago during the Mesolithic or Epipaleolithic.

Phew..Never really thought about all this.  


When do people prefer to use coins and when they prefer to use cards for small payments?

November 23, 2017

Superb paper (minus all the modelling) in Bank of Canada series by Heng Chen, Kim P. Huynh and Oz Shy.

They look at this simple problem. When do people prefer to pay via notes/coins and when via card? When you expect to get a lot of coins in return you pay via card. If not, then via cash/coins:


Why does Peoria (Illinois) dominate the Processed Pumpkin Market

November 23, 2017

History, geography and economics in this terrific post by Timothy Taylor.

He points why Peoria in Illinios produces 80% of pumpkins in US:

It’s not really the entire state of Illinois, either, but mainly an area right around Peoria. The University of Illinois extension service writes: “Eighty percent of all the pumpkins produced commercially in the U.S. are produced within a 90-mile radius of Peoria, Illinois. Most of those pumpkins are grown for processing into canned pumpkins. Ninety-five percent of the pumpkins processed in the United States are grown in Illinois. Morton, Illinois just 10 miles southeast of Peoria calls itself the `Pumpkin Capital of the World.'”

Why does this area have such dominance? Weather and soil are part of the advantage, but it seems unlikely that the area around Peoria is dramatically distinctive for those reasons alone. This also seems to be a case where an area got a head-start in a certain industry, established economies of scale and expertise, and has thus continued to keep a lead. The Illinois Farm Bureau writes: “Illinois earns the top rank for several reasons. Pumpkins grow well in its climate and in certain soil types. And in the 1920s, a pumpkin processing industry was established in Illinois, Babadoost [a professor at the University of Illinois] says. Decades of experience and dedicated research help Illinois maintain its edge in pumpkin production.” According to one report, Libby’s Pumpkin is “the supplier of more than 85 percent of the world’s canned pumpkin.”

The farm price of pumpkins varies considerably across states, which suggests that it is costly to ship substantial quantities of pumpkin across moderate distances. For example, the price of pumpkins is lowest in Illinois, where supply is highest, and the Illinois price is consistently below the price for other nearby Midwestern states. This pattern suggests that the processing plants for pumpkins are most cost-effective when located near the actual production.

While all States see year-to-year changes in price, New York stands out because prices have declined every year since 2011. Illinois growers consistently receive the lowest price because the majority of their pumpkins are sold for processing.

Finally, although my knowledge of recipes for pumpkin is considerably more extensive than my knowledge of supply chain for processed pumpkin, it seems plausible that demand for pumpkin is neither the most lucrative of farm products, nor is it growing quickly, so it hasn’t been worthwhile for potential competitors in the processed pumpkin market to try to establish an alternative pumpkin-producing hub somewhere else.


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