Archive for the ‘Economist’ Category

The covid pandemic ought to shake up the field of economics

June 26, 2020

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

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

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

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

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

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

Rest in Peace: Prof A Vaidyanathan

June 17, 2020

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

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

Profile of Abhijeet Banerjee, Esther Duflo and Iqbal Dhaliwal

June 3, 2020

IMF’s Finance and Development Quarterly Magazine profiles the trio behind rise of JPAL.

(more…)

RIP Alberto Alesina and Oliver Williamson: Taking political and economic frictions seriously

May 25, 2020

2020 roars and keeps bringing bad news.

Economists Oliver Williamson and Alberto Alesina passed away last week.

A Fine Theorem Blog pays a tribute:

Very sad news this week for the economics community: both Oliver Williamson and Alberto Alesina have passed away. Williamson has been in poor health for some time, but Alesina’s death is a greater shock: he apparently had a heart attack while on a hike with his wife, at the young age of 63. While one is most famous for the microeconomics of the firm, and the other for political economy, there is in fact a tight link between their research agendas. They have attempted to open “black boxes” in economic modeling – about why firms organize the way they do, and the nature of political constraints on economic activity – to clarify otherwise strange differences in how firms and governments behave.

 

A reality check on economists as plumbers

April 14, 2020

Gulzar has an ouch post on hubris of economists.

Must read!

Frank Ramsey and the Rate of Interest

March 3, 2020

Alex Thomas of APU in this blogpost  writes on Frank Ramsey.

This para alone tells us why Alex should be blogging more and regularly:

The rate of interest in Ramsey, as in Alfred Marshall, is a reward for waiting. Therefore, inequality in Ramsey necessarily arises from the heterogeneity of tastes or preferences; if a family is (relatively) more patient, it saves more than the (relatively) impatient one, and ends up owning all the capital stock (Attanasio 2015). How does this conception differ from the notions of interest rate found in Marx and Keynes? For Marx, the rate of interest is the part of surplus value which is expropriated by the financial capitalist; the source of it is from the value added by labour. Keynes views the rate of interest as an expression of the preference for liquidity. To conclude, is the conception of the rate of interest found in Ramsey satisfactory for understanding a competitive economy?

How about other economists view of interest?

Nobel Economics Podcast series: Dialogue with Nobel Economics Awardees

February 3, 2020

Podcast is becoming the new cool thing.

Nobel Committee has started a new podcasts series,  The first speaker is who else but Richard Thaler!

This week Nobel Prize Conversations launches – a new biweekly podcast series where the listener gets the chance to know some of the individuals who have been awarded the Prize in Economic Sciences a little better. The conversations focus on motivation, creativity and choices in life – large and small. The first episode features behavioural economist Richard H. Thaler. 

The Nobel Prize Conversations podcast series premieres on Thursday 30 January and runs during spring 2020. It consists of ten programmes and will be available for listening via Acast and major podcast platforms and on nobelprize.org, the official website of the Nobel Prize. The host for this podcast series is Adam Smith, who also has the happy task of interviewing new laureates just after they have received the news of their prize.

These easily-accessible conversations delve into how these personalities found their research fields, how they view collaboration, curiosity and failure, and what keeps them going. The laureates share what they have learned from their career and what they like to do outside of their work – from music to fly-fishing and horseback riding. The discussions flow freely, resulting in richly varied stories on topics ranging from poverty prevention to markets for kidney exchange to nudging in behavioural economics.

The first episode is a conversation with Richard H. Thaler – awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 2017 – on nudges, sludges, and the connection between stubbornness and success. His work has helped us understand how people make choices in the real world and has also given us tools to nudge people towards better decisions. 

“We are very excited to launch this new podcast. These conversations have a clear in-depth ambition and take an informal approach. It is fascinating to learn more about the laureates’ life and work and how things can take unexpected turns,” says Magnus Gylje, Editor-in-Chief for the Nobel Prize’s digital channels.

Other laureate conversations to come are Angus Deaton (2015 Economic Sciences laureate), Paul M. Romer (2018 Economic Sciences laureate), Alvin E. Roth (2012 Economic Sciences laureate) and more.

The podcast is produced by production company Filt Hinterland together with Nobel Media. The producer is journalist Fanny Härgestam, co-author of the Hans Rosling biography. The series is brought to you with support from the Riksbank. The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (Prize in Economic Sciences) was instituted in 1968, at the tercentenary of the bank. 

Superb stuff..

Free Market or Socialism: Have Economists Really Anything to Say?

January 28, 2020

Andrea Attar and Thomas Mariotti of INET in this piece:

A central tenet of partisans of a free-market system is that it uniquely provides economic agents with the incentives that secure an optimal economic outcome. “I believe in markets,” “People respond to incentives” are among the mantras they repeat tirelessly. Sometimes they take a darker twist, as in the former EU budget commissioner Gunther Oettinger’s ominous “Markets will teach them.”

A recent, authoritative example of this view is the October 2018 report on the “Opportunity Cost of Socialism” published by the White House Council of Economic advisors. Just before recalling Margaret Thatcher’s definition of freedom, it states: “In assessing the effects of socialist policies, it is important to recognize that they provide little material incentive for production and innovation.”

But the die-hard advocates of free markets do not exclusively belong to politics or policy environments. They seem to have the solid guarantee of academic respectability. A prominent case is Gregory Mankiw’s Principles of Economics (1998), possibly now the most widely adopted and influential textbook in economics; a quick glance at the book’s introduction teaches one the ten “principles” of the economic discipline that define the relationship between incentive-driven individual decisions and the aggregate welfare generated by trade in competitive markets.

The present essay is an attempt at instilling some doubt about this view, while retaining the basic premises of its holders. We shall proceed in a mostly historiographical way, retracing some basic tenets of the otherwise complex theoretical elaborations of the notions of market efficiency and incentives. The picture that will eventually emerge turns out to be more nuanced, if not bleak.

Hmm..

The next development challenge: go indigenous and not copy Western institutions….

January 27, 2020

Arvind Submramanian and Josh Felman in this Proj Synd piece:

What is clear is that solutions to the new growth and development challenges in emerging markets will have to be indigenous, rather than coming from Western institutions. Building and maintaining among national policymakers the sort of open, self-confident intellectual capacity that Gandhi espoused could well be the next development challenge.

Really? Given both worked at IMF where you pushed western institution ideology over indigenous ideas, it is quite something.

Robert C. Merton and the Science of Finance

January 23, 2020

Zvi Bodie, Professor Emeritus, Boston University pays tribute to Prof Merton’s work:

In my view, no individual has contributed more to the beneficial relationship between finance theory and practice than Robert C. Merton. Today, he still teaches at MIT and often lectures around the world. Not only has “The Mertonian Revolution in Finance” helped shape modern finance, it has also provided
us with insights, theories, and models for our collective future. The title of one of Merton’s recent lectures to an audience in China describes his central theme: “Solving Global Challenges Using Finance Science.”To that I say, amen! 

My earlier piece on Prof Merton’s new project on designing financial solutions for retirement..

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.

Nice!

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.

Hmm..

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.

Hmm..


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