Archive for the ‘Economist’ Category

Have economists changed since the 2008 crash?

June 26, 2018

Cédric Durand Prof of economics at the University of Paris says some progress has been made but long way to go: 

Economists are not innocent people. The 2007-08 financial crisis that almost sent the world economy into a great depression was, to a large extent, a consequence of the designs dreamt up by leading economists. This raises three concerns about the economics profession. The first is a basic moral failure resulting from a lack of integrity in some of its prominent representatives; the second is the idiotic collective fascination with the technicalities of the discipline, reinforced by an inclination for group-thinking; the third is a deeper, intellectual challenge that questions the very role economics ought to play in society.

In 1971, neoliberal icon Milton Friedman was paid by the Chicago Mercantile Exchange for a report that decisively tilted the balance in favour of opening a market that allowed betting on the variation of currency values – a kind of financial product that was illegal under the strict regulation imposed in the post-war era. Ever since, studies by economists have played a legitimating role in each phase of finance’s liberalization. This close connection was not without its ethical problems. Take the lesson learned from Charles Ferguson’s documentary Inside Job (2010). This notes that Larry Summers – former Harvard president, Treasury Secretary in the Clinton administration and an adviser to President Obama – untiringly defended financial liberalization throughout the 2000s, a period in which his ties with the industry brought him more than $20 million. In the wake of the financial crisis, a study of 19 eminent financial economic specialists showed that, in addition to their university posts, most had affiliations with the private sector that were not publicly disclosed.

On this front, some progress has been made. The American Economic Association has set up a new disclosure policy stating that authors submitting papers to academic journals should identify each interested party from whom they have received at least $10,000 in the past three years. Moreover, it calls for disclosure during media appearances. Professor Gerald Epstein, who was at the forefront of this battle, calls the change ‘a very big step forward’. He particularly stresses that disclosure in non-academic work could help ‘set norms of behavior that colleagues, the press, students and citizens can help make economists accountable to’.

Another, more mildly positive, evolution concerns the content of economic curriculain universities. Academic thought influences political decisions; or, as JM Keynes memorably put it: ‘Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.’ In the realm of university teaching there has, during the past few decades, been a growing fascination with the technical sophistication of analyzing abstract dynamics of markets at the expense of thinking about economic history and institutions. This created an intellectual climate favorable to opening a Pandora’s box of financial ‘innovation’ during the neoliberal era. It supported the comforting view that by spreading the risk, complex products – like the subprime mortgages that were sold to low-income Americans and then bundled up to be sold to institutional investors like pensions funds – were reducing financial instability. Of course, as it should be clear now, it was the exact opposite.

In 2014, the International Student Initiative for Pluralism in Economics sounded the alarm: ‘A lack of intellectual diversity,’ they claimed, ‘does not only restrain education and research. It limits our ability to contend with the multidimensional challenges of the 21st century – from financial stability, to food security and climate change.’ They call for bringing the real world into the classroom through paying greater attention to economic history and developing a deeper dialogue with other social sciences. They also demand a greater diversity of theoretical perspectives by adding post-Keynesian, ecological, feminist, Marxist and other economic traditions to the commonly taught ‘neoclassical’ approach. Thanks to student pressure, some openings have been made. For example, CORE, a new open-access online syllabus funded by the Institute for New Economic Thinking, is introducing some elements of intellectual variety into the economics departments of tens of leading universities.

Hmmm..

More in the piece..

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A Brazilian Adam Smith: José da Silva Lisboa as the Founding Father of Political Economy in Brazil

June 22, 2018

Interesting paper on how ideas transcend borders.

Paulo Roberto de Almeida (Brazilian Ministry of Foreign Relations; Centro Universitário de Brasília (UniCEUB)) points to works of José da Silva Lisboa> He brought Adam Smith teachings to Brazil:

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How Keynes took over the world (and Robertson lost it)?

June 14, 2018

Murray Rothbard in this long piece:

Keynes used tactics in the selling of The Genera Theory other than reliance on his charisma and on systematic deception. He curried favor with his students by praising them extravagantly, and he set them deliberately against non-Keynesians on the Cambridge faculty by ridiculing his colleagues in front of these students and by encouraging them to harass his faculty colleagues. For example, Keynes incited his students with particular viciousness against Dennis Robertson, his former close friend.

As Keynes knew all too well, Robertson was painfully and extraordinarily shy, even to the point of communicating with his faithful, longtime secretary, whose office was next to his own, only by written memoranda. Robertson’s lectures were completely written out in advance, and because of his shyness he refused to answer any questions or engage in any discussion with either his students or his colleagues. And so it was a particularly diabolic torture for Keynes’s radical disciples, led by Joan Robinson and Richard Kahn, to have baited and taunted Robertson, harassing him with spiteful questions and challenging him to debate.

 

The Many, Diverse ‘Main Points’ of Adam Smith’s the Wealth of Nations

June 14, 2018

Prof Barry Weingast of Stanford Univ in this paper:

The purpose of this short paper is to demonstrate that in the modern era Adam Smith scholars make a surprising variety of claims about the “main point” of the Wealth of Nations. In these notes, I collect a range of statements asserting the main point and arrange them by categories. Most statements focus on economic topics (60%), though some entries clearly fall under politics (40%). Nearly half of the statements in the literature argue that Wealth of Nations’s main purpose was to provide a theory of economic development. Other categories include the idea that self-interested individuals can support gains from cooperation; ideas about justice, morals, and liberty; and finally, contributions to economic theory.

The diversity of points is striking, indicating not only the work’s richness, but the many different topics to which it made substantive contributions. An obvious interpretation of these results is that no single, over-arching theme can be said to be the purpose or main point of the Wealth of Nations. This work made so many fundamental or foundational contributions to economics, government, history, law, politics, sociology, and normative political theory that it is difficult to say that any one contribution dominates.

It is a nice summary of different perspectives on Adam Smith’s work.

Profile of Donald Davidson: Sherlock of Trade

June 7, 2018

IMF’s Finance and Development profiles Donald Davidson and his etrrific research on impact of railroads from a historic lens:

Trading gold for salt is clearly a thing of the past. But studying the market for salt in 19th century India and the effects on trade of building a railroad led the prize-winning economist Dave Donaldson to important new findings that are relevant today.

“Whether it be by the construction of a railroad a hundred years ago or by opening up to trade with the global economy, I’m fundamentally a big believer in the gains from trade,” says Donaldson, a professor at the Massachusetts Institute of Technology (MIT) in Cambridge, Massachusetts. “Trading between pairs of people, whether it’s between two people who happen to live in the same household, the same village, the same country, or the same planet, is the basic source of economic development. It’s the reason that we no longer live like cavemen.”

How he got into studying economics? He moved from Physics to Economics:

Donaldson did not set out to become an economist or to study trade. Raised in Toronto, he initially focused on physics, completing a master’s degree at the University of Oxford. He was following in the footsteps of his British scientist parents—a father with a degree in physics and a mother who taught chemistry.

While he was still studying physics at Oxford in 1999, the anti-globalization movement came into prominence. Demonstrators hit the streets outside the World Trade Organization’s conference in Seattle and the IMF headquarters in Washington to protest the increasing unification of the world economic order that they maintained was leaving too many people behind.

Donaldson’s then-girlfriend—now wife—was studying economics at the time. The couple talked a lot about the economic issues behind the discontent. Donaldson says he supposes he “fell prey—prior to learning the basic logic of formal economics—to the trap of thinking that international things like trade, development, and FDI [foreign direct investment] might have a strong zero-sum-game feature to them whereby rich countries might get rich at the expense of their interactions with lower-income countries.” It inspired him to pursue a PhD at the London School of Economics (LSE).

“I got hooked on the idea that economics was the physics of the social sciences, or physics for public policy,” Donaldson says, “using theory and evidence to come up with answers to those policy questions that were being raised by the anti-globalization movement—and I wanted to learn how to do that.”

How the study on impact of railways in India shaped:

He spent two years digging into the archives of the British government’s India Office, poring over salt reports and ledgers from 124 districts dating back as far as 1861. He was trying to determine the extent to which India’s colonial railway system might have raised real incomes by reducing trade costs. After collecting data on trade flows among 45 regions in India and more than a hundred thousand observations, Donaldson was able to put a value on the role of trade.

“That number turned out to be about 16 percent of GDP,” Donaldson says from his book-lined office at MIT. The study made the case that the benefit of the railways was indeed the result of increased trade.

He published his findings originally in a 2010 working paper, then in the American Economic Review in 2018 under the title “Railroads of the Raj: Estimating the Impact of Transportation Infrastructure.” His extensive use of data made the work stand out and led to his winning the John Bates Clark Medal last year.

“Donaldson’s work on railroads brought a whole new approach to 19th century history, particularly in India,” says Nobel laureate Angus Deaton.

The “Railroads of the Raj” study was not driven by a particular interest in railways but by the desire to better understand the true value of large transportation infrastructure projects, Donaldson says. More World Bank lending in 2007, for example, went toward transportation infrastructure than to education, health, and social services combined, he says, without a rigorous empirical understanding of just how much transportation infrastructure projects actually reduce the costs of trade, and how those cost reductions affect welfare.

In the India study, Donaldson learned of one of the world’s truly unusual trade barriers. To enforce a tax on salt in the early 19th century, the colonial British authorities built a thorny, 12-foot-high thicket stretching 2,300 miles down the middle of India. The Salt Hedge blocked hundreds of millions of people in India’s interior from getting tax-free salt from the seacoasts as the British administration’s appetite for tax revenue grew. The wildly unpopular salt tax eventually spurred Mahatma Gandhi’s campaign against British rule. In the end, it was found that the Salt Hedge was too much of an impediment to trade and was abandoned.

“I read about all this history and found it fascinating but quickly realized that salt had a completely auxiliary benefit for me,” Donaldson says. “They collected a lot of data about salt.” Because salt production was confined to a very small region and everyone needed it, Donaldson says, it was the perfect product for measuring the impact on trade of the railroad system that was built during the same period.

Donaldson found that the railroads brought significant welfare gains to India because they reduced the cost of trading and enabled India’s diverse districts to enjoy unprecedented gains from trade.

 

How economists became so timid: From a visionary field to a dull one..

May 9, 2018

Eric Posner and Glen Weyl lament the decline of the profession from a visionary one to a specialised technocrat:

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Dilip José Abreu: an elegant and creative economist

May 3, 2018

Prof Rohit Lamba of Penn State Univ profiles work of Prof. Dilip Abreu, game theorist at Princeton Univ:

In the small but growing pantheon of economic legends from India, history will arguably place Dilip José Abreu front and centre. You may not have heard of him yet, but that is because like many classical academics he does not seek the limelight. The depth of his work, though, inspires awe among students, Nobel whispers among peers, and if we are lucky, eventually a Bollywood incarnation.

What makes people cooperate with others against their own immediate interests? Which institutions encourage cooperation or reinforce conflict? How do societies with diverse goals implement acceptable policies? Why does a financial bubble sustain even when everyone may know there is a bubble? These questions, their elegant answers, and more crown the Abreuvian legacy.

He grew up in South Bombay/Mumbai and questioned everything:

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Remembering Eric Hobsbawm…

April 3, 2018

Nice tribute by Ashok Desai:

Aristotle is a famous philosopher. He had an even better known pupil – Alexander. But Alexander did not get much time to study, for when he was 16 in 340 BC, his father Philip was assassinated, and he had to take over the kingship of Macedon. Seven years later he invaded the Achaemenid Empire, defeated Darius III, and took over the entire region stretching from today’s Turkey to the Indus; the central part of it, which is in Iraq today, came to be called Macedonia. He then rushed east and defeated Porus, the king of Punjab. Impressed by his courage, he made Porus governor of his Indian empire and rushed back west.

Before going home, he made a detour across Syria to Egypt and founded a port, which is called Alexandria till today. When I went there in 1960, it was an elegant version of south Bombay, with beautiful colonial buildings and a promenade along the sea.

That is where Percy Hobsbawm, son of a London cabinet-maker, ran into Nelly Grün, daughter of a Viennese jeweller, in 1913 and fell in love with her. Percy wanted his children to be British, but soon after they met, Britain went to war with Germany and Austria, which made it unsafe to sail back to Britain. So they took a boat to Naples and thence a train to Zurich, where they got their marriage registered in the British embassy. They went back to Alexandria; after the war ended, they went to Vienna, where Nelly had her extended family, and lived in one room of Nelly’s father’s huge house.

Those were the days of hyperinflation in Germany and Austria; savings in money soon became valueless. Percy earned a precarious living as a travelling salesman. Then one day in 1929, he collapsed at his doorstep as he returned, and died; two years later, Nelly died of lung disease, leaving her two children orphans.

One of them was Eric, then aged 14. He went to live in Berlin with his uncle Sydney. But then came the Great Depression and massive unemployment. The desperate Germans voted Nazis to power. Nazis forced employers to employ Germans; Sydney, being British, lost his job. He had to go back to England; Eric had to change over from his mother’s to his father’s language, and go to a local school. He had less homework to do than in Germany and had more time to himself. Some of his teachers were Oxbridge graduates; they encouraged him to read; being lonely, he did so voraciously. Amongst his readings were Marx, Engels and Lenin; they turned him into a communist at the age of 17. But he also became knowledgeable – a scholar. As a result, he did well in the scholarship examination and got into King’s College, Cambridge.

Quite a story…

How a historic meeting laid the foundations of US fiscal policy and choice of Washington as capital…

March 8, 2018

Interesting bit of history by Vitor Gaspar and David Amaglobeli of IMF.

On the evening of June 20, 1790, James Madison and Alexander Hamilton met at Thomas Jefferson’s home on Maiden Lane, in New York. Over a long dinner, the three struck a historic deal that laid the financial groundwork for the fledgling nation. Madison agreed to have the US federal government take over the states’ Revolutionary War debt; in return, Hamilton agreed to support the move of the nation’s capital to the banks of the Potomac River, a location favorable to Madison’s home state of Virginia. The deal is an early and vivid example of how fiscal politics can shape history. The episode remains relevant because it shows that politics plays a crucial role in far-reaching reforms of public finances. Public finance reform is fundamentally political, and it has the potential to shape the political system itself. As this most famous dinner shows, political negotiation can help overcome apparently insurmountable obstacles and become a force for institutional transformation. Today’s policymakers who disregard political realities are doomed to be ineffective.

The whole narrative is fascinating to read…

A brief history of Harvard’s EC 10 (introductory economics) course

March 2, 2018

Interesting bit by Cher Applewhaite.

“For the umpteenth year in a row Economics 10, ‘Principles of Economics,’ led the list of largest courses taken at Harvard.” This reads like a Crimson headline from last semester, but in fact it’s from the Fall of 1978.

To the many undergraduates who take it, and the many graduate students who teach it, Ec10 is—for better or worse—a pillar of Harvard’s liberal arts education, perennially popular but oft-critiqued. The history of the course shows that the unbound textbook used today, priced at $131, was not always how Harvard students got their start in the discipline of economics.

“Contrary to popular belief, Ec10 was never designed to be a pipeline for lower Manhattan,” says David W. Johnson, a former head teaching fellow who taught sections from 1980s until 2014.

Indeed, lower Manhattan was the furthest thing from Harvard’s original introductory economics course, Economics 1. According to a 1896 syllabus entitled “Lectures on Economic Development,” students were required to read books on topics ranging from philosophy to anthropology. This interdisciplinary focus meant students had to consider why economic history was a useful topic of study.

Only three professors have led the course since the 1960s: Otto Eckstein, Martin Feldstein, and N. Gregory Mankiw. All were, at some point during their careers, either members or chairs of the government’s Council of Economic Advisors.

 

Why Amartya Sen remains the century’s great critic of capitalism

March 1, 2018

Tim Rogan has a piece.

He says there are two types of critiques of capitalism – moral and material. Sen combines the two effectively:

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Past, Present and Future of Economics: An interview project

February 14, 2018

A superb series of interviews of leading economists on state of economics education and the need for pluralism.

Economics education has been discussed in the public domain for a long time,  but since the Global Financial Crisis it has come under renewed scrutiny. This interview project aims to provide material for new generations of economics students and scholars, as well as the general public, to get acquainted with different schools of economic thought and their bearing on economics thinking.

Distinguished economists speak on how the plurality of analytical traditions within economics has influenced their work. The interviews range from long-standing debates to current issues, and provide first-hand access to the thought of key contemporary economists.

This video series intends to promote pluralism by presenting schools of economic thought as viable methodological, theoretical and policy alternatives.

We have interviews of Profs Charles Goodhart, Sheila Dow, Geoff Harcourt, Tony Lawson Julie Nelson and Ha-Joon Chang…

Teaching the Real Adam Smith lessons: He was hardly the poster boy for free-market economics..

January 31, 2018

Paul Sagar chips in on the burning question on Adam Smith: Did Adam Smith really preach free market economics as we understand the term:

If you’ve heard of one economist, it’s likely to be Adam Smith. He’s the best-known of all economists, and is typically hailed as the founding father of the dismal science itself.

Furthermore, he’s usually portrayed as not only an early champion of economic theory, but of the superiority of markets over government planning. In other words, Smith is now known both as the founder of economics, and as an ideologue for the political Right.

Yet, despite being widely believed, both these claims are at best misleading, and at worst outright false.

Further:

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The speed of British ships improved during the early Industrial Revolution…

January 29, 2018

Fascinating research by Morgan Kelly and Cormac Ó Gráda.

The research says two things. One, the steamships did increase their speeds overtime against the conventional view. Two, the impact of industrial revolution was not limited to cotton, iron, cotton etc. It was more broad based and extended to printing, machine tools, water power and shipping as well:

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Modern economics — an intellectual game without practical relevance

January 10, 2018

RWER Blog points to  this interesting piece written by Prof Mark Blaug in 1997.

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Why we (should) read dead economists?

January 3, 2018

Joakim Book has a piece:

One of many accusations of the economics discipline is that it spends too much time on the ideas of rich white men, long since buried. In our world ruled by moral and intellectual relativism and group identities, such an accusation is serious indeed. We can ridicule such positions all we want, and Mises does an excellent job of it in chapter 3 of Human Action, but there may be still some merit to the accusation. Beyond relativism, how serious is the charge: are we reading too many dead economists?

So why care? Well it is all about seperating the sound economics ideas from unsound ones:

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The rate of return on key asset markets in advanced economies from 1870-2015…

January 2, 2018

I have just started to read this long paper by Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, Alan Taylor.

But they just put the summary on voxeu.

They find equity and housing give similar returns and surprisingly volatility is much higher in housing, One would expect equity to have lower volatility as one has the option to diversify in this market. Then even in bond markets, volatility is high making it even worse for bondholders compared to equity ones. Then rate of return on capital is much higher than rate of growth than Piketty showed in his research.

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In defense of so called jholawala economist and their economics…

December 26, 2017

Jean Dreze (now in Ranchi University) who has written a book by the same name dismisses the term- jholoawala economist. But he says that economics and activism goes hand in hand. It actually makes economics better as the subject experts try and reach out to people:

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Martin Luther King’s 95 theses to protest against catholic church vs. Steve Keen’s 33 thesis to protest against economics

December 19, 2017

Brilliant post by Frances Coppola.

How Prof Steve Keen who has long dissented against current economics teaching has taken a leaf from one one of the buggest dissents/protests in human history:

Five hundred years ago, so legend has it, a dissident priest called Martin Luther nailed a list of 95 “theses” to the door of the Castle Church in Wittenburg. His action launched the Protestant Reformation. 

Last week, the dissident economist Steve Keen “nailed” a list of 33 Theses to the door of the London School of Economics. His aim was to launch a Reformation in economics as significant as the religious Reformation that Luther started. It was a bold gesture.

Wow!

However, Coppola finds the the 33 theses disappointingt:

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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..

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