Archive for the ‘Economist’ Category

A network analysis of economic history: how economic historians are interconnected through their research

January 15, 2020

Gregori Galofré Vilà of Universitat Pompeu Fabra in this voxeu piece:

Getting to Know Milton Friedman: The Essential Milton Friedman

January 10, 2020

Prof Tim Taylor on his blog points to a new free e-book: The Essential Milton Friedman.

One of the frustrations of describing Milton Friedman’s work to a noneconomist is that you usually have about four sentences to provide the overview, and maybe can speak a second paragraph if your listener is especially forbearing. It’s not enough. But the Fraser Institute has now published The Essential Milton Friedman, by Steven E. Landsburg (2019). It’s a free e-book, 73 pages long, that offers an intro-level, highly readable nonspecialist overview of many of Friedman’s most prominent ideas, by an author who knows this subject in much greater depth but is just hitting the high spots  The website also includes some short videos and links to other resources. Taken as a whole, the materials seem to me aimed at teachers who want to bring these ideas to their students, as well as those who would just like to learn more themselves.

The topics any economist would expect are covered here: monetary policy, the permanent income hypothesis, the foundations of inflation and unemployment, and also Friedman’s arguments in Newsweek columns and best-selling books for the abolition of the military draft, private K-12 schools (with government support for their finance), floating exchange rates, a reduction in occupational licensing, and in support of free markets. Here, I’ll mention some other aspects of Friedman that caught my eye: his role in shaping how economists argue and communicate.

Friedman set his exams differently:

For a number of years, Friedman taught a “price theory” course to the first-year PhD students at the University of Chicago. Here’s the story as told by Landsberg:

In the 1950s, Friedman’s counterpart at MIT was the enormously influential future Nobelist Paul Samuelson, who also taught microeconomics. Here are a few sample questions pulled almost at random from Samuelson’s final exams and problem sets:

  • Write a 45-minute essay explaining what Hicks does in Books I and II of Value and Capital, relating the parts to each other.
  • In 45 minutes, state the fundamental problems of bilateral monopoly, duopoly and/or game theory. What solutions have been advanced? Appraise them.
  • In 45 minutes, discuss the principal theories relative to capital and interest. Appraise.

At around the same time, Friedman at Chicago was posing exam questions like these:

  • Will a specific tax of, say, $1 per cup of coffee raise the price of coffee by more or less than an equivalent tax equal to a specified percentage of the price?
  • True or false: Technological improvements in the production of rayon, nylon, and other synthetic fabrics have tended to raise the price of meat.
  • If soybean farmers receive a subsidy of a fixed number of dollars per acre, will the yield per acre rise or fall?
  • It’s been alleged that the Kodak company’s highly profitable film business allows it to undercut its competitors’ prices in the market for cameras. Under what circumstances would it make sense for Kodak to behave in this way?

Again, these questions were asked of first-year PhD students in economics, but the first set of questions were from MIT and the second set were at Chicago. The MIT questions were explicitly about describing strengths and weaknesses of existing theories. Friedman’s Chicago questions were instead asking students to do economic reasoning in real time. For example, an answer to the question about how improvements in synthetic fabrics affect the price of meat would require a student to spell out in step-by-step detail the different ways in which how one might affect the other. Perhaps synthetic fabrics are a substitute for leather, and leather is produced jointly with meat? In addition, perhaps synthetic fabrics are cheaper and thus allow people to spend less on certain items of clothing, which might lead them to spend more on products including other kinds of clothing? Either “true” or “false” can be correct here! The challenge is to spell out a model connecting technological improvements in of one good to price change in another good, and to spell out each of the assumptions that would lead your answer.

This notion of economic discourse as a commitment to spelling out the underlying models,  assumptions, and empirical methods is now taken for granted–but it wasn’t always the case.


Friedman was a great debater:

I remember once hearing Friedman say that when he would speak at colleges and universities in the 1960s, there was often intense opposition to his free-market ideas–until he explained his opposition to the draft, when the audience was then abruptly and strongly on his side.

Friedman put forward his positions with a smile on his face and without using ad hominem attacks, but his rhetoric often had an edge.. Here’s a story about the arguments concerning the draft.

The same sharp tongue was in evidence during Congressional testimony about the military draft. Friedman was called to testify along with General William Westmoreland, the top commander of US forces in the Vietnam War. Westmoreland, an opponent of the volunteer army, said that he preferred not to command an army of mercenaries. Friedman immediately responded by asking Westmoreland whether he preferred to command an army of slaves. He went on to observe that if volunteer soldiers are mercenaries, then so is everyone else who is paid to do a job, including Westmoreland, Friedman, and every physician, lawyer and butcher in the country.

Here’s a story about his debates with student radicals of the 1960s and 1970s:

When he debated with leaders of the radical Students for a Democratic Society, Friedman always stressed that he and they sought the same things—individual freedom, pluralism, and prosperity for the masses. “Th e only difference between us,” he said with a smile, “is that I know how to achieve those things and you don’t.”

I should add that the Fraser Institute has published two previous introductions to great economic thinkers: The Essential Adam Smith, by James Otteson (2018), and The Essential Hayek, by Donald J. Boudreax (2014). These books (both under 100 pages of not-too-dense text) also provide a real overview of the person and the ideas from a highly informed author, but in the style of a reader-friendly introductory overview

Looks like a must read!

The productive career of Robert Solow

January 9, 2020

Robert Solow is 95 and continues to actively think and work on problems the world faces.

A profile of the economist and his productive career.

Last summer, as he turned 95, the economist Robert M. Solow sat at home poring over a draft outline of “The Work of the Future,” an MIT report about technology, jobs, and economic growth. Solow has been studying these topics since he returned from fighting in World War II—and won a Nobel Prize in 1987 for demonstrating that technological innovation generates a huge portion of economic growth.

True, Solow’s eyes bother him these days, and he reads less than he once did. His wife, Barbara, herself an economic historian, died in 2014, after nearly 70 years of marriage. And the economics colleagues he worked alongside for decades at MIT—and with whom he built a powerhouse department from scratch—are no longer around either.

“I’m the only one who’s still inhaling and exhaling,” Solow says wryly, sitting on his living-room couch.

But Solow, an Institute Professor emeritus, is doing quite a bit more than that. He reads academic literature, including papers about productivity, and follows economic trends, world events, and policy debates. His “wickedly devious sense of humor,” as his Institute Professor colleague Daron Acemoglu puts it, remains intact. Having joined MIT in 1949, Solow is a macroeconomist whose career almost predates the word “macroeconomics.” Yet here he is seven decades later, rigorously examining the draft materials of the new work report.

Solow serves on the Work of the Future Task Force’s advisory board, and near the project’s start in late 2017, he and MIT sociologist Susan Silbey wrote a memo offering guidance for the report’s authors—MIT economist David Autor, MIT engineer and historian David A. Mindell, PhD ’96, and Elisabeth Reynolds, PhD ’10, director of MIT’s Industrial Performance Center. They pointed out that despite ongoing speculation about what robots, AI, and automation will do to work, the more pressing job issues in the United States right now are the loss of middle-class careers and the rise of inequality. While the task force’s brief was broad, and the report does examine technological developments, Solow and Silbey stressed the importance of policy decisions in shaping these workplace trends.


25 years of WTO: Why Keynes would be a worried man!

January 6, 2020

My piece in Moneycontrol reflecting on 25 years of WTO.

In 2019, the IMF completed its 75 years. IMF historian Atish Ghosh wrote a fascinating piece “bringing” Keynes to visit IMF headquarters. Ghosh wrote how Keynes would be surprised by changes in the world economy, particularly transition from fixed exchange rates to flexible exchange rates and proud that the IMF has adapted to the changes and remains relevant — though some may not agree.

What would Keynes say of the WTO? He would be surprised that it took so long for the WTO to deliver, but still happy to note of the progress world economies have made under the GATT/WTO umbrella. He might show concern that post 2008 crisis, the world has increasingly turned protectionist. Some historians make references to how today’s times are similar to the end of the World War-I (1919), which would really worry Keynes (WW-3 was trending on Twitter recently). Keynes would say that it is exactly for such times that he had suggested creation of the ITO and unhappy that just in these times, the WTO has been sidelined!

Keynes would remind the current world polity to be aware of the fateful history and work in all possible ways to ensure this history is neither repeated nor rhymed.


The making of star economists..

January 6, 2020

Tim Sablik in this piece looks at making of star economists:

Every January, hundreds of newly minted economics Ph.D.s travel to the annual Allied Social Sciences Association (ASSA) meeting to engage in a whirlwind of interviews and presentations. (See “Scrambling for Economists: The Ph.D. Job Search,” Econ Focus, Fourth Quarter 2015.) Only a handful of these job-seekers land jobs at the most prestigious research institutions. In a recent article in the journal Economic Inquiry, titled “Young ‘Stars’ in Economics: What They Do and Where They Go,” Kevin Bryan of the University of Toronto investigated which new economists rise to the top of the entry-level job market. In other words, what makes a young economist a star?

Bryan defined stars as those job candidates who attract a high level of attention from academic employers. After the ASSA meeting, academic departments seeking to hire economists invite their top picks to present a seminar on their research and meet with their potential colleagues — an occasion known as a “flyout.” Bryan classified the candidates who get a certain number of flyouts, weighted by the prestige of the institution extending the invitation, as stars. Using this criterion, he examined data on flyouts for young economists between 2013 and 2018. Of the more than a thousand economics Ph.D.s awarded each year during that period, Bryan identified 226 stars.

One potential problem with using academic flyouts as a metric for star power is that it may overlook promising young economists who forgo academic work and instead go straight into the private sector. Reserve Banks, companies, and other nonacademic employers also conduct interviews at the ASSA meeting and post jobs alongside academic employers. As a result, many candidates apply for both academic and private sector jobs at the same time. Thus, Bryan argues that even star economists who choose the private sector are still likely to apply to and attract attention from top academic employers.

Where do stars go?

As it turns out, entry-level stars overwhelmingly choose employment in academia. Bryan found that nearly half of the stars took a job at one of the top 15 economics departments in the United States as ranked by the 2018 U.S. News & World Report. Another 21 percent took a job at a top 10 U.S. business school. All told, 86 percent of the stars in Bryan’s sample took a job in American academia. In contrast, only one candidate out of the entire 226 took a temporary position in the private sector, and that individual later returned to academia.


Just as many new stars end up working in top economics departments, they also tend to come from top departments. Nearly half of the stars in Bryan’s sample earned their Ph.D.s at one of five American universities — the Massachusetts Institute of Technology, Harvard University, Princeton University, Yale University, or Stanford University. Including another six top schools increases the share of stars to nearly 85 percent. Nearly all stars also have an undergraduate degree in economics or some technical field such as math, statistics, or engineering.

One trait that might seem predictive of star power, publishing papers while in school, does not seem strongly correlated with higher job prospects. Bryan found that about half of the stars in the sample did not publish a paper while in school. For those who did publish, their papers tended to be theoretical rather than empirical.

Bryan’s study also suggests that the gender imbalance present in economics generally is even more pronounced at the top. He found that stars are overwhelmingly male: In 2018, less than 17 percent of stars were women. This is even lower than the roughly 30 percent of women who pursue econ Ph.D.s each year on average. These low numbers have sparked a debate in the profession about potential barriers for female economists. (See “Where Are the Women?Pdf” Econ Focus, Second Quarter 2013.)

The fact that many of the stars who go to work in top departments graduated from top departments could raise concerns about academic “inbreeding.” Bryan examined this and found that very few stars in his sample take a job at the same institution where they earned their Ph.D.s — only around 2 percent. But he cited other studies that note that a higher share of faculty at top economics departments come from top departments than in other fields such as math or literature.

Addressing these concerns, Bryan noted that “to whatever extent social closure or other forms of irrational path dependence restrict the entry and diffusion of potentially important new researchers, we ought to be especially concerned about the process by which the next generation of gatekeepers is chosen.”

Gatekeepers are a problem in most fields..

Economics for people by Prof Ha Joon Chang

December 13, 2019

Nice video lectures on INET by Prof Ha Joon Chang

In the new series “Economics For People” from the Institute for New Economic Thinking (INET), University of Cambridge economist and bestselling author Ha-Joon Chang explains key concepts in economics, empowering anyone to hold their government, society, and economy accountable.

Profile of urban economist Edward Glesar

December 9, 2019

IMF F&D (Dec-2019 edition) profiles Ed Glaesar of Harvard Univ:

Growing up in New York City in the 1970s, Edward Glaeser saw a great metropolis in decline. Crime was soaring. Garbage piled up on sidewalks as striking sanitation workers walked off the job. The city teetered on the edge of bankruptcy.

By the mid-1980s, it was clear that New York would bounce back. But it could still be a scary place; there was a triple homicide across the street from his school on the Upper West Side of Manhattan. Glaeser was nevertheless captivated by New York’s bustling street life and spent hours roaming its neighborhoods.

“It was both wonderful and terrifying, and it was hard not to be obsessed by it,” Glaeser recalls in an interview at his office at Harvard University.

Today, that sense of wonder still permeates Glaeser’s work as an urban economist. He deploys the economist’s theoretical tool kit to explore questions inspired by his youth in New York. Why do some cities fail while others flourish? What accounts for sky-high housing costs in San Francisco? How does the growth of cities differ in rich and poor countries?


The history of financial development of London

October 14, 2019

I had blogged about this new study by Prof Nathan Sussman which shows how London emerged as a financial centre before the 1688 glorious revolution.

Voxeu has a good interview of Prof Sussman where he explains his study and some more ideas on history of finance, London, Europe and so on..

Machine learning in economics: Should economists worry?

October 14, 2019

My new article in Moneycontrol. Bottomline:

It is a good time for those with a computer science background to think of a career in economics!

What Moscow’s Sheremetyevo airport teaches about transition economics

October 4, 2019

Marcus Shera, a student at George Mason University reflects on his experiences travelling to the airport.

Overall experience:

No matter what economic system you live under, scarcity still exists, and choices have to be made along some margin. Socialism trades prices and the knowledge bundled within for politics, bureaucracy, and oversight. Some of the old way still continues in Russia, but in the meantime, the little kiosks will continue to outperform the results of bloated and dying central planning.


The ideas and influence of Martin Feldstein, 1939-2019

September 26, 2019

James Poterba and Lawrence H. Summers pay a tribute to Marty Feldstein who passed away this year:

Why are economists letting down the world on climate change?

September 25, 2019

Andrew Oswald and Nicholas Stern in this voxeu piece argue that climate/environment barely feature in economics:


We suspect that modern economics is stuck in a kind of Nash equilibrium.  Academic economists are obsessed with publishing per se and with pleasing potential referees.  The reason there are few economists who write climate change articles, we think, is because other economists do not write climate change articles. 

Attack on econs from all possible fronts..

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:


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