Archive for the ‘Economist’ Category

The curious case of Lloyd Mints, Milton Friedman, and the emergence of monetarism

September 5, 2019

Harris Dellas and George Tavlas  in this voxeu post points to ignored role of Lloyd Mints in developing monetarism:


Don’t blame economics, blame public policy..

September 3, 2019

Prof Ricardo Hausmann in this piece tries to rescue economics and economists:

It is now customary to blame economics or economists for many of the world’s ills. Critics hold economic theories responsible for rising inequality, a dearth of good jobs, financial fragility, and low growth, among other things. But although criticism may spur economists to greater efforts, the concentrated onslaught against the profession has unintentionally diverted attention from a discipline that should shoulder more of the blame: public policy…

Economics and public policy are closely related, but they are not the same, and should not be seen as such. Economics is to public policy what physics is to engineering, or biology to medicine. While physics is fundamental to the design of rockets that can use energy to defy gravity, Isaac Newton was not responsible for the Challenger space shuttle disaster. Nor was biochemistry to blame for Michael Jackson’s death.

Although engineering schools teach physics and medical schools teach biology, these professional disciplines have grown separate from their underlying sciences in many respects. In fact, by developing their own criteria of excellence, curricula, journals, and career paths, engineering and medicine have become distinct species.

Public-policy schools, by contrast, have not undergone an equivalent transformation. Many of them do not even hire their own faculty, but instead use professors from foundational sciences such as economics, psychology, sociology, or political science. The public-policy school at my own university, Harvard, does have a large faculty of its own – but it mostly recruits freshly minted PhDs in the foundational sciences, and promotes them on the basis of their publications in the leading journals of those sciences, not in public policy.

Policy experience before achieving professorial tenure is discouraged and rare. And even tenured faculty have surprisingly limited engagement with the world, owing to prevailing hiring practices and a fear that engaging externally might entail reputational risks for the university. To compensate for this, public-policy schools hire professors of practice, such as me, who have acquired prior policy experience elsewhere.


Happy Birthday Milton Friedman

July 31, 2019

Milton Friedman would have turned 107 years today.

Chicago Booth School has some of his articles and others’ articles who use his work/insights.

The Fall of the Economists’ Empire (and their imperialism)

July 23, 2019

Another scathing piece on state of economics and its carrier which is economist. This one is by Robert Skidelsky:


The experts we need..

June 20, 2019

Andres Velasco has a timely piece on the topic.

Worldwide experts are disliked and trolled. But does that mean we don’t need experts. Of course not. Just that we need more grounded and humbled ones:

In an ideal world, experts would present a menu of policy choices from which citizens wisely choose. But in the real world, citizens have neither the time nor the inclination to sift through complex and tedious policy alternatives. Nor, sadly, do most politicians. Policy wonks are seldom asked for a menu of options; more often, they are asked a simple question: what should we do? And in answering that question, wonks inevitably bring their own values and preferences to bear.

So, as with so many political issues nowadays, it comes down to a matter of identity: can voters identify with the expert or the politician whom the expert advises? Can voters sense that they belong to the same tribe and uphold the same values?

Typically, the answer is no. And there lies the root of the problem. Policy gurus and politicians probably spend too much time with others like them – top civil servants, high-flying journalists, successful businesspeople – and too little time with ordinary voters. This undoubtedly shapes their worldview. As a Spanish-language saying goes, “Dime con quién andas y te dire quién eres”: “Tell me who your friends are and I’ll tell you who you are.”

So how can experts regain citizens’ trust? The answer is paradoxical: by becoming intellectually more modest, less beholden to the rarified ways of the ivory tower and the lecture hall, and likelier to listen to people who do not have a PhD. If they could become “humble, competent people on a level with dentists,” as John Maynard Keynes once suggested, then there is at least a chance that voters will identify with the nerdy pointy-heads and find them trustworthy.

The task is urgent, because the world needs credible experts. After all, if a tooth aches, we turn not to a pleasant and well-meaning friend, but to the frightening syringes and drills of the most competent dentist we can find.


Why Adam Smith ideas mean different things for different people

June 14, 2019

Nice piece by Glory M Liu, a postdoctoral research fellow at the Political Theory Project at Brown University. She is currently working on a book project titled ‘Inventing the Invisible Hand: Adam Smith in American Thought and Politics, 1776-Present’.

Liu argues how Smith leads to fight between people:

People like to fight over Adam Smith. To some, the Scottish philosopher is the patron saint of capitalism who wrote that great bible of economics, The Wealth of Nations (1776). Its doctrine, his followers claim, is that unfettered markets lead to economic growth, making everyone better off. In Smith’s now-iconic phrase, it’s the ‘invisible hand’ of the market, not the heavy hand of government, that provides us with freedom, security and prosperity. 

To others, such as the Nobel prizewinning economist Joseph Stiglitz, Smith is the embodiment of a ‘neoliberal fantasy’ that needs to be put to rest, or at least revised. They question whether economic growth should be the most important goal, point to the problems of inequality, and argue that Smith’s system would not have enabled massive accumulations of wealth in the first place. Whatever your political leanings, one thing is clear: Smith speaks on both sides of a longstanding debate about the fundamental values of modern market-oriented society.

But these arguments over Smith’s ideas and identity are not new. His complicated reputation today is the consequence of a long history of fighting to claim his intellectual authority.


Scholars keep inventing, reinventing and cherrypick Smith:

Indeed, it is easy to forget that Smith – who he was, is, and what he stands for – has been invented and reinvented by different people, writing and arguing in different times, for different purposes. It can be tempting to dismiss some past interpretations and uses of Smith as quaint, superficial, misleading or wrong.

But they also reveal something about how and why we read him. Smith’s value has always been political, and it’s often politicised. But much of that value stems from assumptions about the neutrality and objectivity of the science he invented when, in fact, those assumptions are ones that his later readers projected onto him. Smith was a scientist, no doubt, but his ‘science of man’ (in David Hume’s phrasing) was not value-free. At the same time, we should be wary of reading his science through the lens of a single normative value – whether that is freedom, equality, growth or something else.

Adam Smith’s works remain vital because our need to identify and understand the values of a market society, to take advantage of its unique powers and temper its worst impulses, is as important as at any time in the previous two centuries. Economic ideas carry immense power. They have changed the world as much as armies and navies. The extraordinary breadth and sophistication of Smith’s thought reminds us that economic thinking can not – and should not – be separated from moral and political decisions. 

Perhaps one of the most important lines written on Smith’s works…

RIP Prof Martin Feldstein

June 12, 2019

2019 is bringing its own sets of sorrows.

Prof Martin Feldstein passed away yesterday. Having grown up reading NBER papers, Feldstein’s contribution to building NBER is immense.

Rest in Peace Professor.

IMF @ 75: When Lord Keynes pays a visit to the organisation he created…

May 31, 2019

Nice piece by Atish Ghosh, IMF’s historian in Finance & Development, a quarterly magazine released by IMF.

The piece is written in a conversation style between Keynes and Lagarde. Keynes visits IMF on its 75th anniversary. He is surprised to see a woman at helm of affairs and that too a French! Also surprised how the Great Britain to which he once belonged is not that great anymore:


Evolution or revolution: What next in macroeconomics?

May 20, 2019

Olivier Blanchard and Lawrence Summers have edited a book: Evolution or Revolution?  Rethinking Macroeconomic Policy after the Great Recession.

They share the afterword on voxeu:


What it means for an economist to work in tech firms: Interview of R. Preston Mcafee

April 12, 2019

Tech firms are becoming ‘the workplace’ for economists.  This article reported how Amazon has hired 150 PhDs, Niranjan wrote a piece on the opportunities, Susan Athey also wrote on Economists in the tech space.

Here is an addition to this series of write-ups. Richmond Fed has a must read interview of R. Preston McAfee, who quit academia to work as an economist in firms such as Yahoo, Google and Microsoft.

He says the opportunities at tech firms provide opportunities to microeconomists:

EF: You were one of the first academic economists to move to a major technology company when you joined Yahoo as chief economist. You’ve since spent more than a decade as an economist at major technology companies. What has changed in the way that economic research is used in these firms?

McAfee: The major change is the relevance of microeconomics — the study of individual markets. 

Economists have had a big role in companies doing macroeconomics for forever, worrying about inflation, GDP, and how those broad aggregates influenced demand for the firm’s products. Microeconomists bring a very different skill set and answer very different questions.

That’s a major change in roles. Amazon, for instance, has more than 150 microeconomists. A really big thing there, and at Microsoft and at Google, is the problem of causality. Microeconomists have been studying how to get at causality — what caused something as opposed to what’s just correlated with it — for 40 or 50 years, and we have the best toolset.

Let me give an example: Like most computer firms, Microsoft runs sales on its Surface computers during back-to-school and the December holidays, which are also the periods when demand is highest. As a result, it is challenging to disentangle the effects of the price change from the seasonal change since the two are so closely correlated. My team at Microsoft developed and continues to use a technology to do exactly that and it works well. This technology is called “double ML,” double machine learning, meaning it uses machine learning not once but twice.

This technique was originally created by some academic economists. Of course, as with everything that’s created by academic economists, including me, when you go to apply it, it doesn’t quite work. It almost works, but it doesn’t quite work, so you have to change it to suit the circumstances.

What we do is first we build a model of ourselves, of how we set our prices. So our first model is going to not predict demand; it’s just going to predict what decision-makers were doing in the past. It incorporates everything we know: prices of competing products, news stories, and lots of other data. That’s the first ML. We’re not predicting what demand or sales will look like, we’re just modeling how we behaved in the past. Then we look at deviations between what happened in the market and what the model says we would have done. For instance, if it predicted we would charge $1,110, but we actually charged $1,000, that $110 difference is an experiment. Those instances are like controlled experiments, and we use them in the second process of machine learning to predict the actual demand. In practice, this has worked astoundingly well.

The pace at which other companies like Amazon have been expanding their microeconomics teams suggests that they’re also answering questions that the companies weren’t getting answered in any other way. So what’s snowballing at the moment is the acceptance of the perspective of economists. When I joined Yahoo, that was still fairly fragile.

He speaks about several things such as firms vs markets, big data, machine learning, regulation, antitrust, work culture at top tech firms and so on.

This bit on the tech industry is fascinating:


RIP Prof Alan Krueger

March 19, 2019

Really sad to receive the news. Prof Alan Kruger passed away at just 58.

His paper on minimum wages is legendary and was on future Nobel lists for many economists. That he took how own life adds so much more to the tragedy.

Italian Opera, World Fairs and Innovation

March 4, 2019

Prof Petra Moser of NYU has done some fascinating research on the topic.

IMF Podcast interviews her over the research findings.

The effects of copyright and patent laws on artistic creativity and technological innovation are gaining more and more significance in today’s economy driven to a large part by content. Economic historian Petra Moser uses data from 19th century Italian operas and world fairs to examine the economic implications of basic copyright and patent protection for innovators. In this podcast, Moser describes how Napoleon’s military victories in Italy in the late 1700s changed the copyright landscape and created an excellent model to study the effects on Italian opera composers.


Essential Adam Smith and Essential Hayek

March 1, 2019

Two free e-books on the two scholars: Smith and Hayek. The essentials summarise the key ideas of the two scholars…


Econfip: A network of academic economists committed to an inclusive economy and society..

February 25, 2019

Interesting initiative by a team of economists. It is named Econfip or Economists for inclusive prosperity.

We live in an age of astonishing inequality. Income and wealth disparities between the rich and the poor in the United States have risen to heights not seen since the gilded age in the early part of the 20th century. Technological changes and globalization have fueled great wealth accumulation among those able to take advantage of them, but have left large segments of the population behind. Advances in automation and digitization threaten even greater labor market disruptions in the years ahead. Climate change fueled disasters increasingly disrupt everyday life.

This is a time when we need new ideas for policy. We think economists, among other social scientists, have a responsibility to be part of the solution, and that mainstream economics – the kind of economics that is practiced in the leading academic centers of the country – is indispensable for generating useful policy ideas.

Much of this work is already being done. In our daily grind as professional economists, we see a lot of policy ideas being discussed in seminar rooms, policy forums, and social media. There is considerable ferment in economics that is often not visible to outsiders. At the same time, the sociology of the profession – career incentives, norms, socialization patterns – often mitigates against adequate engagement with the world of policy, especially on the part of younger academic economists.

We believe the tools of mainstream economists not only lend themselves to, but are critical to the development of a policy framework for what we call “inclusive prosperity.”

While prosperity is the traditional concern of economists, the “inclusive” modifier demands both that we consider the interest of all people, not simply the average person, and that we consider prosperity broadly, including non-pecuniary sources of well-being, from health to climate change to political rights.

Hmm…Surprised that something like this has come so late…

There are policy briefs on different topics as well on the website.


Women in Economics: Elinor Ostrom

February 13, 2019

Tylwer Cowen (Marginal Revolution Univ) discusses Elinor’s work as part of MRU’s series on Women in Economics.

MIT Faculty Skit: Robert Solow as the 2000 year old economist

January 31, 2019

Fun bit from Irwin Collier who continues to dig into archives of economics departments:

A skit in economics typically involves a humor transplant of some sort. The following script from the faculty contribution to an annual M.I.T. economics skit party (ca.  late-1970s?) took its inspiration from  two greats in American comedy, Carl Reiner & Mel Brooks, who sometimes performed as interviewer and 2,000 year-old man, respectively.

While it is fairly clear that Robert Solow performed and probably wrote the entire skit, the identity of the interviewer still needs to be established. Hint: there is a comment box at the bottom of this post. 

The script comes from a file of such Solovian skits that Roger Backhouse has copied during his archival research and has shared with Economics in the Rear-View Mirror.

Sample this:

Q: Let’s come to your recent impressions. What do you see as the most important recent development in economics?

A: That’s easy – the increase in the mandatory retirement age to 70. Of course it’s got a long way to go before it does me any good, but I underestimate the DRI Mandatory Retirement Age Monitor estimates the retirement age to be rising at 1.73 years per year, so time is on my side.

Q: Apart from its effects on you personally, why do you think this is an important development?

A: It saves a lot of time at department meetings never to have to make a tenure appointment again. And you know what department meetings are like – even worse than skit parties.

Q: How do you think the change will affect students?

A: They’ll love it. Courses will be the same year after year. Reading lists will never change. Textbooks will go on and on and on. Can you imagine the 200th edition of Dornbusch and Fischer? I hope it’s printed on better paper than the low-grade papyrus of the first edition… I do wonder about Eckaus and that Sphinx…… Exams will be the same year after year. Students hate change. Look at what happened when you fellows tried to change 14.121 this year.

Q: Turning to economic theory, what has been the most important development you have witnessed in the last 2000 years?

A: The two-dimensional diagram.

Q: Be serious.

A: I am serious. Can you imagine Bhagwati, the Picasso of the Production Possibility Locus, trying to fit all those curves in a one-dimensional diagram, which was all we had in the old days? There wasn’t hardly room for anything besides the axis.

Q: Come, come. Bhagwati would find a solution for that little difficulty. Who needs an axis?

A: Maybe so, but can you imagine four-color one-dimensional diagrams? How could we have expensive textbooks without four-color diagrams? How could we have expensive professors without expensive textbooks? How could……

Q: OK, OK. What is the second most important development in economic theory in your lifetime?

A: The subscript.

Q: Don’t you know the difference between trivia and serious economic theory?

A: Sure. Trivia are worth remembering, but serious economics is OK to forget.

Q: Maybe we better stick to trivia…

A: I was just kidding. I really know the answer. There is no difference between trivia and serious economic theory.


The ideas of Harold Demsetz, 1930-2019

January 30, 2019

Nice Tribute by Prof Thomas N. Hubbard of Kellogg’s School at Northwestern Univ:

Why we need to be wary of narratives of economic catastrophe?

January 22, 2019

Thoughtful piece by Prof Jeremy Adleman of Princeton Univ:

It’s important to recognise one of the catastrophist’s rhetorical moves. Stories of doom thrive on turning a tension into an incompatibility. A tension implies two forces at odds – like hot and cold, like price stability and jobs, like helping strangers and assisting neighbours; while they pull in different directions, they can be mixed. Earlier big narratives used to explain choices in terms of tension and unstable compromise. In the 1950s and ’60s, debates focused on how much the developing world could advance while being part of a wider global economy. A decade later, the tension was how to co-manage a troubled global commons.

Nowadays, the chorus of catastrophe presents differences as intractable and incompatible, the choice between them zero-sum. It’s globalism or ‘nation first’, jobs or climate, friend or foe. The model is simple: earlier leaders muddled, dithered, compromised and mixed. In their efforts to avoid hard decisions, they led the nation to the edge of disaster.

Pessimism helped exorcise post-1989 triumphalism; Piketty and Tooze are right about structural features of inequality and how the makers of catastrophe became its beneficiaries. But we also need to see how the consensus of catastrophe that straddles the ideological spectrum – but grows more dire and menacing as one approaches the extremes – favours the politics of the strong man glaring down the nation-doubters.

The alternative is not to be wistful about flat-world narratives that find solace in technical panaceas and market fundamentalisms; the last thing we need is a return to the comforts of lean-in fairy tales that rely on facile responses to a complicated world. To learn from collapses and extinctions, and prevent more of them, we need to recover our command over complex storytelling, to think of tensions instead of incompatibilities, to allow choices and alternatives, mixtures and ambiguities, instability and learning, to counter the false certainties of the abyss. If we don’t, it really will be too late for many people and species.


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:


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:

%d bloggers like this: