Archive for the ‘Economist’ Category

Why Adam Smith favoured public education?

January 10, 2019

Prof Alex Thomas of APU in this piece says Smith was hardly a one idea or one phrase economist. His canvas was much wider than believed:

The authority of Adam Smith is frequently invoked by supporters of the free market, who argue for extending the market forces to all conceivable goods and services and eliminating any kind of government intervention in markets. However, Smith’s The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations make it clear that he was not a laissez faire or free market capitalism apologist.

Smith favoured liberal capitalism over the extant socio-economic arrangement (elements of feudalism and mercantilism). While feudalism was characterised by the rule of the nobility/landowners, mercantilism was characterised by state monopoly over trade. The East India Company was an example of the latter. It is in this historical context that Smith called for the state to withdraw its monopolistic interventions in both external and internal commerce.

Contrary to public opinion, Smith presupposed the government provision of legal infrastructure, defence, transport infrastructure and education for the proper functioning of liberal capitalism. For him, the responsibility of providing institutions “for promoting the instruction of the people” is one of the chief duties of the state. The state, he said, must undertake this responsibility just as it accepts responsibility “for protecting society from the violence and invasion of other independent societies”.

The appropriators of Smith also forget his telling commentary on the role of power in society. One aspect of this relates to the power employers have over workers. The second aspect relates to the inequality of power, expressed in the form of status and ranks.

Modern appropriators of Smith also make abundant use of the “invisible hand” metaphor. But Smith used this metaphor only once in Wealth of Nations, and twice in his other writings in different contexts.

His views on public education:

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Where are the Chinese economists? The surprising disparity between the economy and economists..

December 21, 2018

Prof Bruno Frey in this piece wonders that though Chinese economy is doing well, but we barely hear of Chinese economists:

The role of transaction costs in Douglass North’s understanding of economic history

December 13, 2018

Nice paper by Rosolino Candela of George Mason University:

The purpose of this chapter is an attempt to reconstruct the evolution of North’s approach to understanding economic history. Underlying this evolution has been an increasing recognition of the role that transaction costs play in explaining the economic performance of different societies through time. I argue that, as a by-product of North’s emphasis on transaction costs throughout his scholarship, he transitioned from a neoclassical to an Austrian understanding of the process of economic change.

The implications of North’s growing emphasis on transactions costs throughout his career was a growing importance of other complementary features of economic theory, shared by Austrians, to explain processes of institutional change throughout economic history. These features of Austrian economic theory include: methodological subjectivism; competition and discovery under uncertainty; a dynamic conception of learning through time; and the role of ideology in structuring the patterns of meaning and purpose attached to human action.

 

Nobel Prize 2018 lectures

December 10, 2018

The lectures are up on the Nobel website:

  1. People must understand the gravity of global warming. This involves intensive research and resisting false and tendentious reasoning.
    2. Nations must raise the price of CO2 and other greenhouse-gas emissions.
    3. Policies must be global and not just national or local. The best hope for effective coordination is a climate club.
    4. Rapid technological change in the energy sector is essential.

 

Profile of Caludia Goldin: Why history is important, role of women in labor force and new expansion of NBER…

December 4, 2018

Nice profile of Prof Goldin in IMF’s Finance & Development:

Born in 1946 in the Bronx, a borough of New York City, Goldin recalls an early fascination with investigation and intellectual discovery, immersing herself in the wonders of Manhattan’s museums as she fell in love first with archeology, then bacteriology. She went to Cornell University initially to study microbiology but came to embrace the humanities and social sciences, especially history and economics, which became her undergraduate major. She completed her doctorate in industrial organization and labor economics in 1972 at the University of Chicago.

Goldin explains why history is important to economics, citing the book The Race between Education and Technology (2008), which she wrote with fellow Harvard labor economist Lawrence Katz, who is also her husband.

“Larry Katz and I looked at changes in income inequality post-1980 versus pre-1980 and investigated the theory that inequality has risen more post-1980 because of skill-biased technological change,” Goldin says. “History allowed us to understand that skill-biased technological change is not new but has been around for a very long time and to identify the longer-term forces at work.”

The earnings gap between more-educated and less-educated workers was also wide in 1915, then narrowed until the 1950s, and then expanded again in the 1980s, Goldin and Katz found. By studying the whole century, they saw that changes in the supply of and demand for college-educated workers explain most of the fluctuation in wage premiums for better-educated workers. These ups and downs reflect a race between education and technology as the education system keeps up with evolving technologies’ changing demands for skills.

On women’s role in economics:

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Why historians worry more about Trump than economists…

November 30, 2018

Whether it is interviews done by Tyler Cowen or his articles, they are usually worth reading.

His recent piece doing rounds on social media:

The dangers of the current political moment in the West — with its polarization, harsh rhetoric and growing hostility toward cosmopolitanism — are evident to historians and economists alike. But which group sees the situation as more grave? I suspect it is historians, and it is worth considering why.

To be sure, some of the disgruntlement of historians stems from their political orientation. Historians are relatively left-wing, so it is no surprise that they are hostile to an “alt-right” shift in the political discourse. During the 2016 campaign, the group Historians Against Trump received widespread publicity.

More fundamentally, however, historians stress the importance of contingency, that things really could have gone another way. The decisions of a solitary assassin or the outcome of a single battle can shift the course of history. Particular leadership decisions might have avoided or limited World War I. Or what if the Germans had not, in 1917, put Lenin on a train back into Russia? The Bolshevik Revolution might have been avoided and probably the entire course of history would have been different. A shrewder President Paul von Hindenburg might have prevented the rise of Adolf Hitler.

If you think about these questions enough, you can end up very nervous indeed. Historians have seen too many modest mistakes spiral out of control and turn into disasters.

Economists, in contrast, work more with general models than with concrete historical situations, and those models emphasize underlying structural forces. Economies have fairly set populations, birth rates, natural resources, capital stocks, savings rates, trading partners, and so on. So to an economist, the final outcomes are closer to necessary than contingent.

Economists also study “catch-up growth,” which holds that systems tend to be self-repairing. So if some resources are destroyed, GDP will fall but the system will produce new replacement resources more rapidly, just as a lobster might regrow a lopped-off arm. Catch-up growth tends to make economists less nervous about natural disasters or wartime losses, although of course we think it is better to avoid the resource destruction in the first place. Many of Japan’s major cities were bombed to oblivion in World War II, but in time they regained their former prominence.

Some economic models do emphasize contingency — for instance, how a small force could induce an economy to make a major shift from one equilibrium to another. To give an example, some amount of defense contracting in Silicon Valley later caused the area to blossom into a major technology center. But perhaps the same could have happened in some other regions of the U.S. And these economic models remain the exception rather than the rule, often criticized for the fact that, under some circumstances, they can predict almost anything.

Hmm..

 

Tributes to Prof TN Srinivasan

November 12, 2018

Prof TN Srinivasan passed away yesterday.

Tributes from Niranjan (IDFC Institute) and Madan Sabnavis (CARE Ratings).

Hunting for a Hot Job in High Tech? Try ‘Digitization Economist’

November 1, 2018

HBSWK reports that Amazon has hired more than 150 PhD economists in last 5 years.

Under chief economist Pat Bajari, Amazon has hired more than 150 PhD economists in five years. He’s also cornered the market on what might be called “rookie economists” just out of school. That crowns Amazon the largest employer of tech economists—with more working full-time than even the largest academic economics department. Amazon is far from alone in this trend.

Some 50 tech companies “have been snapping up economists at a remarkable scale,” says Michael Luca, the Lee J. Styslinger III Associate Professor of Business Administration at Harvard Business School. “All of the big Bay Area tech companies have teams of economists, and lots of the smaller companies are starting to hire handfuls of them.” The list includes Google, Microsoft, Airbnb, Uber, Facebook, and numerous smaller companies.

Tech companies are turning to sharp economic minds to provide their unique lens on business problems like advertising auctions and market design. The accelerating phenomenon has given rise to a new field within economics called the economics of digitization. Research from the field is quickly finding its way into practice, directly through the work of PhD economists, and in the classroom, as HBS and other business schools add more tech-germane courses to their MBA offerings.

What do econs do there?

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Will Indian financial markets click Robert Merton’s SeLFIES?

October 24, 2018

Prof. Robert Merton recently gave the RH Patil memorial lecture organised by NSE.

Here is my recent piece where I have reviewed the key ideas of his lecture. The lecture was about this retirement financial product which he has named as SeLFIES. I also have tried to figure whether and how India can click these SeLFIES.

Reading the the wisdom of Leonard E. Read on his 120th birthday

October 12, 2018

Nice collection of 34 e-books of Leonard Read of I, pencil fame.

So much to read…

In praise of India’s women economists

October 10, 2018

Niranjan in his recent piece lists some of the prominent women economists of India and discusses their work.

In any general economic discussion, it is rare to find mention of Indian economists and even rarer to find mention of  works by women economists. This is a good starting put to think and work on the women economists in India….

Why Nordhaus and Romer deserve the Economics Prize for 2018?

October 9, 2018

My 2 paise on the economics prize for 2018.

Reblogging and reminiscing: Before Thaler there was Pai

October 9, 2018

I cannot help but reblog this article I wrote reflecting on last year’s Economics Prize.

The recipient was Richard Thaler for his amazing and inspirational work on behavioral economics.  His Nobel lecture is really inspirational on getting ideas and then pursue them despite all adversity. Thaler even mocked himself saying on completing his thesis, his adviser famoulsy said:” We didn’t expect much of him”.

Having said that, we have barely engaged with Indian financial history in a meaningful way. I wrote how Dr TMA Pai of Syndicate Bank had not just thought about the financial nudge idea but even implemented it very successfully at his bank via pigmy deposits way back in late 1920s. Sidin the editor of Mint Sunday paper not just agreed to publish it right away but also gave it a teasing title “Before Thaler there was Pai”. 🙂

I am still amazed how little we learnt from Pigmy Deposits gives our focus on financial inclusion. It helped open bank accounts across the region, encourage savings, mobilise deposits for the bank and most importantly generated enormous trust amidst bank’s customers. It was a huge win-win for all the stakeholders. But still never got the traction it deserved..

Reading Hayek on the Economics Prize day…

October 8, 2018

Just in one and a half hours, we are going to learn of the recipient of ‘The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel’ for the year 2018.

I had read Hayek’s Prize lecture (received the prize in 1974) but saw this Banquet speech recently (HT: Conversable Economist Blog)

Your Majesty, Your Royal Highnesses, Ladies and Gentlemen,

Now that the Nobel Memorial Prize for economic science has been created, one can only be profoundly grateful for having been selected as one of its joint recipients, and the economists certainly have every reason for being grateful to the Swedish Riksbank for regarding their subject as worthy of this high honour.

Yet I must confess that if I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it.

One reason was that I feared that such a prize, as I believe is true of the activities of some of the great scientific foundations, would tend to accentuate the swings of scientific fashion.

This apprehension the selection committee has brilliantly refuted by awarding the prize to one whose views are as unfashionable as mine are.

I do not yet feel equally reassured concerning my second cause of apprehension. It is that the Nobel Prize confers on an individual an authority which in economics no man ought to possess. 

This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence.

But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally. There is no reason why a man who has made a distinctive contribution to economic science should be omnicompetent on all problems of society – as the press tends to treat him till in the end he may himself be persuaded to believe.

One is even made to feel it a public duty to pronounce on problems to which one may not have devoted special attention.

I am not sure that it is desirable to strengthen the influence of a few individual economists by such a ceremonial and eye-catching recognition of achievements, perhaps of the distant past. I am therefore almost inclined to suggest that you require from your laureates an oath of humility, a sort of hippocratic oath, never to exceed in public pronouncements the limits of their competence.

Or you ought at least, on confering the prize, remind the recipient of the sage counsel of one of the great men in our subject, Alfred Marshall, who wrote: “Students of social science, must fear popular approval: Evil is with them when all men speak well of them”.

Wish Hayek had declined the economics prize with these words! That would have set a benchmark of sorts..

 

How the media helped turn the worst recovery in 100 years into a strong economy in stable hands before the 2015 election

October 5, 2018

Prof Simon Wren Lewis in his blogpost takes on UK’s financial media and City economists (non-academic) for painting a rosy picture of UK economy:

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Asia’s Strongmen and Their Weak Economies

October 4, 2018

Jayati Ghosh of JNU in this piece argues that our belief that authoritarian leaders deliver better economic performance is flawed:

all of Asia’s strongmen share a key characteristic: they secure public support by preying on economic ignorance. In particular, they trade on the popular belief that leaders who concentrate political power are freer to guide economic growth. For the most part, people accept this claim, expecting that financial gain and “development” will be their reward.

Curiously, markets have also accepted this flawed reasoning. Global investors tend to overlook human rights, and to prefer stability and autocratic resolve to the unpredictability of democracy. Equity and currency markets regularly punish countries for even a hint of political upheaval, whereas rulers with more power and fewer checks and balances are assumed to be more capable of ensuring meaningful “reforms.”

And yet, with the possible exception of Xi, the perception that strong autocratic rulers deliver better economic results is wrong. The truth is that Asia’s strongmen are presiding over increasingly vulnerable states and even more fragile economies.

….

What explains weak economic performances by Asia’s strongmen? Maybe untrammeled political power enables large-scale economic mistakes. Furthermore, while most autocrats show strength to their own public, they become meek in the face of global capital. Even when rulers rant against policies that will hurt their populist agendas – like high interest rates – they typically succumb to pressure from financial markets.

This is because the policies they have pursued have integrated their economies so completely into global trade and finance, on unequal terms. Despite their nationalist rhetoric, when the economic winds blow against them, it can be hard to change direction. The exception is China, where heterodox policies and significant state intervention have made the economy far less vulnerable to external shocks. But while Xi has thus far managed to deal with an increasingly complex and hostile external economic environment, many serious internal concerns could easily erupt into bigger problems.

Whatever the reason for Asia’s profusion of strongmen, people and markets have gotten it wrong for too long. Strongman rulers are bad for democracy, and they are really bad for the economy.

 Well, the decline is a lot due to hubris as well…

Adam Smith and his Russian admirers of the 18th century

October 4, 2018

How ideas transcend borders and in unlikeliest of places.

This is a fascinating paper written in 1937 by a Russian Michael P. Alekseev. It is reprinted in Econ Journal Watch.

Alekseev writes on how Adam Smith’s thoughts and ideas were so well admired in Russia in the late 18th- early 19th century. There is even a Pushkin connection!:

Reproduced here is an essay by Michael P. (Mikhail Pavlovich) Alekseev. In the 1760s two students from Russia, Semyon Efimovich Desnitsky (1740–1789) and Ivan Andreevich Tretyakov (1735–1776), attended Glasgow University, learned directly from Adam Smith, John Millar, and others, returned to Russia, and commenced a tradition of Smithian thought in Russia. Alekseev tells of other Russian Smithians including N. S. Mordinov (1754–1845), Ekaterina Romanovna Dashkova (1744–1810), Alexander Romanovich Vorontsov (1741–1805), Semyon Romanovich Vorontsov (1744–1832), Christian von Schlözer (1774–1831), Heinrich Friedrich von Storch (1766–1835), M. A. Balugiansky (1769–1847), Nikolay Turgenev (1789–1871), and the great author Alexander Pushkin (1799–1837). Alekseev writes: “After the war of 1812 Adam Smith became extremely popular among the liberal youth of Russia who were organizing secret circles. In endowing the hero of his novel Eugene Onegin with a taste for economic problems and by making him read Adam Smith, Pushkin merely reproduced the actual feature of the time, the writer himself having had the same taste.”

Hmm. That is a long list of admirers.

What is even more interesting is how there were these two Russian students who had studied under Smith. They made notes in early 1770s which clearly shows that Smith was teaching what was to become The Wealth of Nations. 🙂

 

Using Thirlwall’s framework to figure India’s Balance of Payments problems..

October 3, 2018

Trust Niranjan Rajadhyaksha to keep educating us about older generation of economists and their ideas.

As per Niranjan, India needs to figure was to fund its $75 billion current account deficit. This will act as a constraint on growth. We need to understand this In via the Thirlwall framework.

The uncomfortable question is how rapidly the Indian economy can expand in the long run without running into a balance of payments problem. Srinivas Thiruvadanthai of the Jerome Levy Forecasting Center recently pointed out the importance of assessing the balance of payments neutral growth rate that India can maintain. The English economist Anthony Thirwall said in a 1979 book that any country that has to maintain a current account equilibrium with a constant real exchange rate should grow at a rate equal to the ratio of the growth of exports to the income elasticity of demand for imports. A simpler explanation is that economic growth over the long run for a country that cannot easily fund its current account deficit is constrained by its export growth on the one hand and the income elasticity of its imports on the other.

Maybe Indian policy makers need to bring this insight back into their assessments of how rapidly India can grow without tipping into periodic balance of payments problems—to complement the usual discussions about the potential growth rate that keeps inflation close to the mandated target.

Hmmm..

Ideological Profile of Eugene Fama

October 3, 2018

Nice bit here by Econ Journal Watch:

This profile resumes the Econ Journal Watch projectexploring the ideological sensibilities of the economics laureates. Eugene Fama describes himself as a libertarian, and by his late twenties seems to have been well on the way towards such views. Like many Chicago economists, he firmed up those views during the 1960s and 1970s. He has not been outspoken, but he has lent his name to at least ten petitions, and events from 2008 called him into public discourse. He kindly provided answers to our questionnaire about his own ideological orientation over the course of his lifetime.

Ideological profiles are as important as citing works of prominent econs. Here is a whole list of profiles of the winners of the economics prize.

Book Review: How Economics Professors Can Stop Failing Us

September 27, 2018

Prof Samuel Bostaph (University of Dallas) reviews this hard-hitting book: How Economics Professors Can Stop Failing Us: The Discipline at a Crossroads bSteven Payson.

The book says:

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