Archive for the ‘Economist’ Category

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:

 

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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:

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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.

Hmm..

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…


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