Archive for the ‘Economist’ Category

Rest in Peace: John Williamson who coined the phrase Washington Consensus

April 19, 2021

John Williamson of Peterson Institute who worked and coined the term Washington Consensus passed away on 11 Apr 2021.

The Peterson Institute for International Economics mourns the passing of John Williamson, a renowned international economist, and a founding senior fellow at the Institute, who died April 11 at his home in Chevy Chase, MD, at the age of 83. Williamson’s pioneering work on development economics, exchange rate regimes, international monetary reform, and many other subjects influenced the entire field of international economics. He was a prolific author and treasured mentor to many generations of scholars and policymakers, especially during his 32 years at PIIE.

John’s career included service at the UK Treasury, the International Monetary Fund (IMF), the World Bank, the University of Warwick (UK), the University of York (UK), Pontifícia Universidade Católica do Rio de Janeiro (Brazil), the Massachusetts Institute of Technology, and Princeton University. Beyond his career, he was a legendary and lifelong birdwatcher and conservationist, who observed and recorded more than four thousand species of birds throughout the world. His scholarship and policy leadership were matched by his unflinching integrity, infused with wit, kindness, and humility. The Peterson Institute is profoundly grateful for the many condolences it has received.

Lots of tributes highlighting how his career was much more than Washington Consensus.

The Man Who Discovered Capitalism: A Documentary on Schumpeter for Use in the Classroom

April 9, 2021

John T. Dalton and Andrew Logan of Wake Forest University in this paper review the documentary on Schumpeter:

We describe how the 2016 documentary The Man Who Discovered Capitalism can be used in the classroom to provide an entry point to the life and economics of Joseph A. Schumpeter, whose work on innovation, entrepreneurship, and creative destruction remains relevant for students today.

We summarize the key ideas conveyed in the documentary and offer four criticisms: its failure to capture the role of fin-de-siecle Vienna on Schumpeter’s intellectual development, its incomplete understanding of Schumpeter’s theory of innovation, its overstatement of Keynes’s influence relative to Schumpeter, and the overly generous credit it gives to government for spurring innovation.

We show how the documentary can be used in the classroom, complete with sample discussion questions grounded in the criticisms we identify. We argue The Man Who Discovered Capitalism is an effective teaching tool suitable for a variety of courses, including those on economic growth, intermediate macroeconomics, and the history of economic thought, among others.

Superb. We need more such efforts of making documentaries on key economists and then build material to discuss the ideas. One good way to promote and make history of economic thought exciting!!

The Individual Failings of Economics

April 2, 2021

Prof Ricardo Hausmann in Proj Syndicate:

In recent decades, economics has gone from defining itself as a set of questions to defining itself as a set of methods, all based on individuals making decisions. By doing so, it has undermined its own ability to make progress.

Sequencing the Post-COVID Recovery: Lessons from Keynes

March 17, 2021

Robert Skidelsky in Proj Synd:

As countries emerge from the COVID-19 pandemic, John Maynard Keynes’s emphasis on the need to implement post-crisis economic policies in the right order is highly relevant. But sustainability considerations mean that the distinction between recovery and reform is less clear cut than it seemed in the 1930s.

……

For starters, full-employment policy is now obviously linked to employability, which was simply not the case in the 1930s. The reason so many people were out of work back then was not that they lacked the skills required by industry, but rather that aggregate demand was insufficient.

Keynes thus wrote in December 1934 that the purpose of the government spending a “small sum of money” was to get “private individuals and corporations to spend a much larger sum.” What they spent it on was of no further concern to policymakers.

But in today’s age of automation, no government can afford to take such a cavalier attitude to the sustainability of employment. As early as 1930, in fact, Keynes foresaw technological unemployment as a problem that would be outside the scope of demand management.

Since then, the accelerating threat of job redundancy has enlarged what Keynes called the “agenda” of government. In particular, the state must be centrally concerned with the speed of technological innovation, the choice of technologies, and the distribution of the productivity gains that technology enables.

 

Charles Goodhart’s contribution to monetary economics and central banking

March 17, 2021

CentralBanking.com has given life-time achievement award to Charles Goodhart.

The website has a profile of Goodhart’s works and Goodhart’s Law:

Goodhart’s influence on central banking has stemmed from his ability to link creative ideas to immediate practical decisions. He is characterised by colleagues and peers as a brilliant and generous person with a formidable ability to process complex concepts, smoothly linking theory with practice, and explaining it all in terms understandable by non-experts. He has forged long-standing relationships (and friendships) with countless central bankers, economists and financiers all over the world – often well beyond his official engagements. Goodhart’s influence is related to the intellectual challenge, and frequently in the background. He does not appear to have a hidden agenda, and makes little effort to seek attention. Some officials say their respect for Goodhart has only risen the longer they have known him.

He is also renowned for patiently giving his time to train younger generations of officials interested in central banking, financial stability and the financial system, including work with Central Banking’s training and other services over many years. Goodhart played an important role in the rediscovery of monetary policy (which had largely disappeared due to adherence to Keynesian philosophies) in the UK, the creation of Hong Kong’s peg and the establishment of the ‘New Zealand model’, where operationally independent central banks work to meet a specified monetary target set by government – something that would spread to Australia, Canada, Sweden and ultimately back to the UK. His research into FX markets highlighted the failings of traditional theory, and has contributed to policy-makers having a firmer grasp of their influence and impact when it comes to communication and intervention.

Profile of America’s first Black economist: Dr. Sadie T.M. Alexander

February 22, 2021

NY Fed has a profile of Dr. Sadie T.M. Alexander. She earned her PhD from University of Pennsylvania in 1921.

PhD thesis title was “The Standard of Living Among One Hundred Negro Migrant Families in Philadelphia“.

Open Letter to Economic Advisers to the Government: Convey the economics and not the politics

February 18, 2021

Jason Furman, former Chair of the Council of Economic Advisers to US President writes an open letter to the current chair: Cecilia Rouse. However the letter applies to all such economic advisory positions across the world:

Dear Council of Economic Advisers Chair,

Congratulations! You now have a prestigious job, a wonderful title, and a beautiful office. What you do not have is any statutory powers or responsibilities (okay, you have one responsibility: issuing the annual Economic Report of the President). No one needs to check anything with you or listen to you, let alone do what you say.

You do have one power: the opportunity to persuade. If people think you have some useful insights or inputs, might be right in what you say, and are generally a helpful member of the team, then you just might be able to shape some of the most important decisions the President will make and help to make positive policy happen. But nothing about this power is automatic or happens by virtue of the nice office you now have. It depends on how you use it. These five tips might help:

 

 

Why Central Bankers Should Read Economic History

February 9, 2021

Prof Eric Monnet of Paris School of Economics in this long piece writes why central bankers should read economic history:

How can economic policy-makers use economic history as a guide for their deliberations and decisions? Focusing on the case of central banking, this essay argues that the virtue of history is not only to improve economic models and quantitative studies, but to provide a perspective distinct from standard economic reasoning.

 

 

UK Treasury looking to appoint head of monetary policy

January 18, 2021

Interesting bit from UK Treasury (UK’s Finance Ministry). It is looking for Head of Monetary Policy to be part of its Fiscal Group!

The Treasury is the United Kingdom’s economics and finance ministry. It is responsible for formulating and implementing the government’s financial and economic policy. Its aim is to raise the rate of sustainable growth, and achieve rising prosperity and a better quality of life with economic and employment opportunities for all.

The Fiscal group is responsible for ensuring the sustainability of the public finances, over both the medium term and the long term, and for setting short-term fiscal policy so that it meets the government’s economic objectives for stability and growth. Operationally, it ensures that government’s financing needs are met, over both the short and medium term.

About the Team
The recently established Macroeconomic Policy (MP) team is responsible for developing the department’s thinking and advising ministers on macroeconomic policy. This includes short-term fiscal policy and monetary policy strategy. We work across Fiscal and Economics groups.

Key Accountabilities
This post offers an excellent opportunity for candidates looking to work on an exciting range of topics and develop a broad range of skills. The post holder will be joining an energetic community of analysts and policy advisers.

Key responsibilities include:
1. Advising the Chancellor, Special Advisers and the Treasury’s Executive Management Board (EMB) on the evolution of the UK’s monetary policy framework. Explore policy options for the remit of the Monetary Policy Committee (MPC) to support the delivery of the government’s economic objectives, and the implications of trends, such as low structural interest rates.
2. Advising the Chancellor and EMB on UK monetary policy developments. Including changes in the stance of monetary policy (including unconventional monetary policy such as Quantitative Easing) and the consequences for the government’s economic and fiscal objectives.
3. Ensuring the coordination of monetary and fiscal policy by supporting the Chief Economic Advisor in their role as Treasury representative to the MPC and the Chancellor’s discussions with the Governor of the Bank of England.
4. Leading the branch’s analysis on the economic and operational implications of monetary policy decisions, and potential future monetary policy tools.
5. Supporting the Treasury’s Chief Economic Advisor in appointing external members to the MPC. This involves designing and running a fair, open and competitive recruitment process.
6. Developing and maintaining engagement with the Bank of England staff.
7. Line managing one Range D – providing leadership, support and stretching opportunities.

Interesting. Monetary policy is getting increasingly complex and the Treasury wishes to be informed on how MOn Policy is evolving in UK and its future.
Eve this bit is super cool:
If you wish to discuss the post in more detail, the line manager (Matt Richmond, matthew.richmond@hmtreasury.gov.uk) would be delighted to chat with you!
🙂

A Brief History of the Editions of the Theory of Moral Sentiments

January 5, 2021

Erik Matson of George Mason University in this new paper:

This essay provides a short sketch of the changes in the editions of Adam Smith’s ‘Theory of Moral Sentiments.’ I begin with a treatment of the first five editions, focusing on Smith’s responses to comments from David Hume and Gilbert Elliot and the addition of the “Languages” essay to edition 3. I then dwell on edition 6 of TMS, as it was the last thing Smith published during his lifetime and features a significant set of changes. I conclude with some comments on the arc of Smith’s development and what I take to be his shifting focus away from moral anatomy towards moral painting.

 

The non-Scorsese version of being an investment bank economist

January 4, 2021

Aurodeep Nandi of an economist at Nomura India writes an account of his work profile. He calls it non-Scorsese version as Hollywood director Martin Scorsese presented a very different account of what it means to work in an i-bank.

There’s an old joke that economic forecasters assume everything except for responsibility. Clearly, they weren’t talking about investment bank economists. Because your credibility depends tenuously on how accurately you manage to forecast. Traders will harangue you on whether your next inflation reading is 5.9% or 6% or 6.2%. And you could be a seasoned economist with decades of experience under your belt…but in the market, you’re ultimately only as good as your latest forecasts turn out to be.

Inherent in all of this is the great scam of it all – economists have no special crystal ball that makes them exceptional forecasters. There is nothing Nostradamic that’s taught to us in economics courses in universities – most formal forecasting tools will struggle to discern any difference between a 5% or a 6% number. Or tell you if a crisis is right ahead. I was a student at the London School of Economics during the year of the Global Financial Crisis, and Queen Elizabeth II had come to visit. She ended up embarrassing the high and mighty there by asking why none of them could see the crisis coming. There is actually a long, panicky letter available on the internet that was sent to Buckingham Palace to placate her!

Unfortunately for investment bank economists, financial market investors are less understanding than the Queen. Economists get ranked like race horses on the accuracy of their forecasts. And the truth is that beyond the fences of conventional theory and number crunching, finally deciding on your forecast is a little bit like being a character on Sopranos who’s wondering if he’s next on the mafia hit list – it’s a gut feel! And so, like crossing a busy road, we look left and right at what the ‘consensus’ is forecasting, which is industry jargon of checking what majority are saying.

Much more in the article…

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2020: Paul Milgrom and Robert Wilson for auction theory

October 12, 2020

The announcement just came in:

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2020 was awarded jointly to Paul R. Milgrom and Robert B. Wilson “for improvements to auction theory and inventions of new auction formats.”

People have always sold things to the highest bidder, or bought them from whoever makes the cheapest offer. Nowadays, objects worth astronomical sums of money change hands every day in auctions, not only household objects, art and antiquities, but also securities, minerals and energy. Public procurements can also be conducted as auctions.

Using auction theory, researchers try to understand the outcomes of different rules for bidding and final prices, the auction format. The analysis is difficult, because bidders behave strategically, based on the available information. They take into consideration both what they know themselves and what they believe other bidders to know.

Robert Wilson developed the theory for auctions of objects with a common value – a value which is uncertain beforehand but, in the end, is the same for everyone. Examples include the future value of radio frequencies or the volume of minerals in a particular area. Wilson showed why rational bidders tend to place bids below their own best estimate of the common value: they are worried about the winner’s curse – that is, about paying too much and losing out.

Paul Milgrom formulated a more general theory of auctions that not only allows common values, but also private values that vary from bidder to bidder. He analysed the bidding strategies in a number of well-known auction formats, demonstrating that a format will give the seller higher expected revenue when bidders learn more about each other’s estimated values during bidding.

 

Oliver Williamson: The Man Who Reduced the Transaction Cost of Economics

September 24, 2020

Nice tribute to Prof Oliver Williamson by Ranjan Kumar Ghosh and Yugank Goyal:

On May 21st, one of the most cited economists of all time and a key contributor to organizational studies, Professor Oliver E. Williamson passed away. Despite being ubiquitous across economics, management, law and social sciences, he remains underappreciated in mainstream development and policy discourse in developing countries. In this article, we demonstrate his ideas; and their tenacity, versatility and simplicity. We show that his intellectual apparatus of transaction cost economics is indeed a powerful tool to explain a range of real-life phenomena across a variety of disciplines with impeccable practical implications. We also examine his methodological approach and integrity that will guide substantive and pragmatic inquiry for generations to come.

 

Piero Sraffa and Raffaello Piccoli, two Italian Scholars in Cambridge in 1929-1932

September 8, 2020

Interesting paper by Lucia Morra:

Sraffa’s diaries report that from June 1929 until late 1932 he often met with the literary scholar, poet and philosopher Raffaello Piccoli, Serena Professor of Italian at the University of Cambridge. After a sketchy biography of Piccoli, the essay reconstructs the story of their friendship, thus contributing to the reconstruction of Sraffa’s biography in 1929-1932; it pauses along the way on their meetings with Carlo Rosselli in 1929-1931 and on their common friendship with Ludwig Wittgenstein.

 

Profile of Prof Mariana Mazzucato: Tireless proponent of government-led innovation

September 4, 2020

IMF’s Sep-2020 Finance and Development Magazine profiles Mariana Mazzucato:

Outside the home, Mazzucato has been stirring the pot in economics and public policy for nearly a decade. Her main message is that governments around the world need to seize their power to lead innovation for the betterment of humanity. Just now she’s immersed in applying her ideas to the COVID-19 crisis as a member of various task forces as well as in her customary role of economics agitator.

“We can’t get out of the COVID problem,” she says, “unless we actually rethink the role of the state. Literally, what is it for?”

Her controversial answer: Government is for setting big goals, defining the missions necessary for achieving them, encouraging and investing in innovation, and governing the process so that the public benefits. This contradicts the modern conventional wisdom that government is there to clean up after disasters and fix egregious market imbalances, but it should otherwise get out of the way so that private enterprise can lead innovation.

That kind of thinking led to the 2007–08 financial crisis and the damaging wave of government austerity that followed, especially in Europe, Mazzucato says.

 

Are We All Keynesians Again?

August 26, 2020

Andres Velasco in this Proj Synd piece:

Governments can and should serve as the insurer of last resort in the face of a catastrophic aggregate shock. But they can perform that crucial function only if we ensure that they have the necessary resources today. This is especially true in emerging and developing economies, where limits on public borrowing are anything but loose.

common refrain nowadays is that after COVID-19, Milton Friedman is out and John Maynard Keynes is in. But if, as the famous quote often attributed to Richard Nixon puts it, “we are all Keynesians now,” we must remember what Keynes taught: fiscal policy should be tightened during good times, precisely so that it can be expansionary during bad times.

Interview with Amartya Sen: Economics with a Moral Compass?

August 6, 2020

Timothy Taylor in his blog points to this interview of Amartya Sen where he discusses some really interesting anecdotes (HT: Good friend Niranjan). There was a time when there were all kinds of characters in economics.

On Maurice Dobb and Dennis Robertson: 

When he [Maurice Dobb] first moved to Trinity College, he was a member of the British Communist Party already. Dennis Robertson—who always described himself as a liberal, but in fact was a conservative—offered Dobb this job on behalf of Trinity. Maurice accepted it immediately. He was then a research student at Pembroke College. He went home, and being a good Englishman, he wondered, “Shouldn’t I have mentioned that I’m a member of the Communist Party?” Then he wrote a letter of apology to Robertson—a very English letter: “When you offered me this job, I was so overwhelmed with the prospect of becoming a teacher in Trinity that I overlooked to tell you, for which I apologize, that I’m a member of the British Communist Party, and if after knowing that, you decide that you want to withdraw your offer, I would like you to know that I would not hold that against you.”Dennis Robertson replied, “Dear Dobb, So long as you give us a fortnight’s notice before blowing up the chapel, it would be all right.”

🙂

How would black economists change economics?

July 20, 2020

Project Syndicate has a podcast with Prof Lisa Cook of Michigan State University

Just 3% of US economics PhDs were awarded to black people in 2017 – a share that has been trending downward since the mid-1990s. This week, we examine the effects of this lack of black representation on economic policy and outcomes.

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The covid pandemic ought to shake up the field of economics

June 26, 2020

Kaushik Basu in this Project Syndicate piece (republished in Mint) writes on the need for change in field of economics. He says the crisis has exposed the notion of central role of markets in efficient functioning of the economy

…..a disruption such as the one caused by covid-19 reminds us how much we take for granted. I realized this during the nearly three months I spent in Mumbai during the lockdown, when family and friends told me of conflicts, showdowns and frayed nerves in the city.

Whereas some residents were castigated for not wearing face masks or for violating social-distancing norms, others were criticized for overdoing the lockdown. Some residents’ associations photographed anyone who stepped out of their home, even if they were alone and far away from anyone else, arguing that such behaviour was irresponsible. Because the behavioural requirements brought about by the pandemic are novel and have yet to stabilize, we are more aware of them than we are of longer-established social norms.

Markets also rely on such norms, most of which, having evolved over time and become routine, lie beyond economists’ explicit assumptions. As Karl Polanyi, Mark Granovetter, and others have argued, the economy cannot be understood as though it stands apart from society. Certain social and institutional preconditions must be present for an economy to function effectively. But the economics profession widely overlooked these important reminders, or, at best, put them aside with a nod.

In my book Beyond the Invisible Hand, I argued that trade and exchange depend not only on technical assumptions of which all economists are aware, such as the law of diminishing marginal utility, but also on other conditions that we take for granted. These include being able to trust one another and our ability to communicate, which allows us to negotiate and conclude deals. But no economist writes down “can talk” as an assumption. It is regarded as a given.

So many such pieces were written post-2008 crisis as well. But little changed. Will the current crisis lead to the changes?

Rest in Peace: Prof A Vaidyanathan

June 17, 2020

I should have blogged this a few days ago. But there is so much chaos and such news all around.

Prof Vaidyanathan passed away. Nice to see few people paying homage to the great agricultural economist:


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