Archive for the ‘Economist’ Category

Modern economics — an intellectual game without practical relevance

January 10, 2018

RWER Blog points to  this interesting piece written by Prof Mark Blaug in 1997.



Why we (should) read dead economists?

January 3, 2018

Joakim Book has a piece:

One of many accusations of the economics discipline is that it spends too much time on the ideas of rich white men, long since buried. In our world ruled by moral and intellectual relativism and group identities, such an accusation is serious indeed. We can ridicule such positions all we want, and Mises does an excellent job of it in chapter 3 of Human Action, but there may be still some merit to the accusation. Beyond relativism, how serious is the charge: are we reading too many dead economists?

So why care? Well it is all about seperating the sound economics ideas from unsound ones:


The rate of return on key asset markets in advanced economies from 1870-2015…

January 2, 2018

I have just started to read this long paper by Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, Alan Taylor.

But they just put the summary on voxeu.

They find equity and housing give similar returns and surprisingly volatility is much higher in housing, One would expect equity to have lower volatility as one has the option to diversify in this market. Then even in bond markets, volatility is high making it even worse for bondholders compared to equity ones. Then rate of return on capital is much higher than rate of growth than Piketty showed in his research.


In defense of so called jholawala economist and their economics…

December 26, 2017

Jean Dreze (now in Ranchi University) who has written a book by the same name dismisses the term- jholoawala economist. But he says that economics and activism goes hand in hand. It actually makes economics better as the subject experts try and reach out to people:


Martin Luther King’s 95 theses to protest against catholic church vs. Steve Keen’s 33 thesis to protest against economics

December 19, 2017

Brilliant post by Frances Coppola.

How Prof Steve Keen who has long dissented against current economics teaching has taken a leaf from one one of the buggest dissents/protests in human history:

Five hundred years ago, so legend has it, a dissident priest called Martin Luther nailed a list of 95 “theses” to the door of the Castle Church in Wittenburg. His action launched the Protestant Reformation. 

Last week, the dissident economist Steve Keen “nailed” a list of 33 Theses to the door of the London School of Economics. His aim was to launch a Reformation in economics as significant as the religious Reformation that Luther started. It was a bold gesture.


However, Coppola finds the the 33 theses disappointingt:


An interdisciplinary model for macroeconomics

November 29, 2017

Andy Haldane and Arthur Turrell of Bank of England in this paper:

Macroeconomic modelling has been under intense scrutiny since the Great Financial Crisis, when serious shortcomings were exposed in the methodology used to understand the economy as a whole. Criticism has been levelled at the assumptions employed in the dominant models, particularly that economic agents are homogeneous and optimising and that the economy is equilibrating. This paper seeks to explore an interdisciplinary approach to macroeconomic modelling, with techniques drawn from other (natural and social) sciences. Specifically, it discusses agent-based modelling, which is used across a wide range of disciplines, as an example of such a technique. Agent-based models are complementary to existing approaches and are suited to answering macroeconomic questions where complexity, heterogeneity, networks, and heuristics play an important role.

 Lots of stuff to figure in the paper..

Why does Peoria (Illinois) dominate the Processed Pumpkin Market

November 23, 2017

History, geography and economics in this terrific post by Timothy Taylor.

He points why Peoria in Illinios produces 80% of pumpkins in US:

It’s not really the entire state of Illinois, either, but mainly an area right around Peoria. The University of Illinois extension service writes: “Eighty percent of all the pumpkins produced commercially in the U.S. are produced within a 90-mile radius of Peoria, Illinois. Most of those pumpkins are grown for processing into canned pumpkins. Ninety-five percent of the pumpkins processed in the United States are grown in Illinois. Morton, Illinois just 10 miles southeast of Peoria calls itself the `Pumpkin Capital of the World.'”

Why does this area have such dominance? Weather and soil are part of the advantage, but it seems unlikely that the area around Peoria is dramatically distinctive for those reasons alone. This also seems to be a case where an area got a head-start in a certain industry, established economies of scale and expertise, and has thus continued to keep a lead. The Illinois Farm Bureau writes: “Illinois earns the top rank for several reasons. Pumpkins grow well in its climate and in certain soil types. And in the 1920s, a pumpkin processing industry was established in Illinois, Babadoost [a professor at the University of Illinois] says. Decades of experience and dedicated research help Illinois maintain its edge in pumpkin production.” According to one report, Libby’s Pumpkin is “the supplier of more than 85 percent of the world’s canned pumpkin.”

The farm price of pumpkins varies considerably across states, which suggests that it is costly to ship substantial quantities of pumpkin across moderate distances. For example, the price of pumpkins is lowest in Illinois, where supply is highest, and the Illinois price is consistently below the price for other nearby Midwestern states. This pattern suggests that the processing plants for pumpkins are most cost-effective when located near the actual production.

While all States see year-to-year changes in price, New York stands out because prices have declined every year since 2011. Illinois growers consistently receive the lowest price because the majority of their pumpkins are sold for processing.

Finally, although my knowledge of recipes for pumpkin is considerably more extensive than my knowledge of supply chain for processed pumpkin, it seems plausible that demand for pumpkin is neither the most lucrative of farm products, nor is it growing quickly, so it hasn’t been worthwhile for potential competitors in the processed pumpkin market to try to establish an alternative pumpkin-producing hub somewhere else.


When the definitive history of demonetisation is documented, RBI’s valiant defence of financial stability hopefully gets its due?

November 21, 2017

It is like when the kings force war onto its people and then saying look how well I defended you.

RBI Executive Director and MPC member Michael Patra in this speech reviews one year of RBI’s Monetary Policy Committee and comments:


Nothing Natural About the Natural Rate of Unemployment

November 16, 2017

Edmund Phelps debunks some macro myths. In a short piece, there is fair bit if history of macro thought as well:


Great Depression research remains the holy grail..

November 15, 2017

Bernanke called Great Depression the holy grail of macroeconomics.  It is perhaps one of those few events despite being historical continues to inspire so much research after all these years. Books continue to be written and debated vigorously on the crisis .

Came across two recent posts in this regard:

  • David Glasner argues how Friedman was not the first to argue about France’s role in gold standard which eventually was one of the key reasons for the Depression to become global. Lots of history of monetary thought in the post.
  • In another post, Robert Murphy says Gold Standard was not responsible for Depression.

Phew…Keep breaking heads over it…

What Keynes, Sraffa and Hayek knew about bitcoin….

November 10, 2017

Andy Mukherjee in this piece:

While preparing antidotes for the widespread unemployment of his time and imagining a future age of leisure and abundance, John Maynard Keynes also worked out the interest rate on bitcoin. 

Amend that. Since cryptocurrencies weren’t around in the 1930s, the famous British economist worked out the price at which bitcoin should be lent and borrowed, were it to be invented.

 That interest rate is 57 percent. Before we get to the how and wherefore of that astonishing number, another qualifier. The original insight wasn’t Keynes’s. As part of his takedown of Friedrich Hayek’s idea of a uniquely important interest rate for the economy, Italian academic Piero Sraffa posited that every commodity has its own borrowing cost. For example, there’s such a thing as a cotton rate of interest. Keynes borrowed the concept for The General Theory of Employment, Interest and Money.
While nobody I know tries to work out how many bales or barrels it would cost to borrow some cotton or oil today, currency traders deal with implied interest rates all the time. Here’s how it works. Suppose you’re marooned on an island with some Singapore dollars but the bank there can give you a deposit facility only in U.S. dollars. What the island does have, however, are foreign-exchange spot and forward markets. So on Nov. 9, you take 100 Singapore dollars, sell it for about 73 U.S. dollars, deposit the money in your greenback account for 50 days through Dec. 29, and simultaneously buy Singapore dollars in a forward contract for Dec. 29, using up all your principal and interest. 
Come to think of it. We have just given bitcoin etc a cryptic name like cryptocurrency. But the broad fundamentals still apply..

Economists should keep asking big questions and economics columnists should relate and explain the discussion..

November 7, 2017

Gene Epstein has a piece of advice for both economists and economics columnists (and both):


How GDP obsession failed the economy (same with most economic indicators/indices/ranking)…

November 6, 2017

Umair Haque writes on the topic. He says Kuznets excluded advertising and finance from his idea of GDP. But then government thought why not include tham and blow the GDP?:


Why is Austria not influenced by the Austrian School of Economics?

October 27, 2017

I am forgetting the name but someone did tell me this: That the famous Austrian school is perhaps least famous in Austria itself.

In this piece,  Mohammad J. Malayeri and Bill Wirtz look at recent evidence. They wonder why is Austria so un-Austrian?


He died as he lived: David Hume, philosopher and infidel

October 26, 2017

Prof. Dennis Rasmussen (political science at Tufts University) has a nice piece:

As the Scottish philosopher David Hume lay on his deathbed in the summer of 1776, his passing became a highly anticipated event. Few people in 18th-century Britain were as forthright in their lack of religious faith as Hume was, and his skepticism had earned him a lifetime of abuse and reproach from the pious, including a concerted effort to excommunicate him from the Church of Scotland. Now everyone wanted to know how the notorious infidel would face his end. Would he show remorse or perhaps even recant his skepticism? Would he die in a state of distress, having none of the usual consolations afforded by belief in an afterlife? In the event, Hume died as he had lived, with remarkable good humour and without religion.

In particular, how Adam Smith’s essay celebrating Hume’s life brought the former so much reproach:


Islam and Economic Performance: Historical and Contemporary Links

October 3, 2017

Timur Kuran of Duke Univ has a research paper  (HT: MR blog):

This essay critically evaluates the analytic literature concerned with causal connections between Islam and economic performance. It focuses on works since 1997, when this literature was last surveyed. Among the findings are the following: Ramadan fasting by pregnant women harms prenatal development; Islamic charities mainly benefit the middle class; Islam affects educational outcomes less through Islamic schooling than through structural factors that handicap learning as a whole; Islamic finance hardly affects Muslim financial behavior; and low generalized trust depresses Muslim trade. The last feature reflects the Muslim world’s delay in transitioning from personal to impersonal exchange. The delay resulted from the persistent simplicity of the private enterprises formed under Islamic law.

Weak property rights reinforced the private sector’s stagnation by driving capital out of commerce and into rigid waqfs. Waqfs limited economic development through their inflexibility and democratization by restraining the development of civil society. Parts of the Muslim world conquered by Arab armies are especially undemocratic, which suggests that early Islamic institutions, including slave-based armies, were particularly critical to the persistence of authoritarian patterns of governance. States have contributed themselves to the persistence of authoritarianism by treating Islam as an instrument of governance. As the world started to industrialize, non-Muslim subjects of Muslim-governed states pulled ahead of their Muslim neighbors by exercising the choice of law they enjoyed under Islamic law in favor of a Western legal system.

Hmm.. A very long paper (95 pages)..

The coevolution of kinship systems, cooperation, and culture

September 25, 2017

Prof Benjamin Enke of Harvard Univ analyses the relationship between kinship, cooperation and culture. This issue is perhaps the holy grail of all social studies.

He says that societies with tighter kinship cooperate more within but poorly outside:


Dominant sect in economics today: There are none so blind as those who will not see.

September 18, 2017

Prof Steven Keen hits out at mainsteam economists for choosing to ignore obvious evidence:


The seven sins of economists..

September 18, 2017

Pramit Bhattacharya on the 10th anniversary of sub-prime crisis points to 7 sins of economists:


  • Sin 1: Alice in Wonderland assumptions
  • Sin 2: Abuse of modelling
  • Sin 3: Intellectual capture
  • Sin 4: The science obsession
  • Sin 5: Perpetuating the myth of ‘the textbook’ and Econ 101
  • Sin 6: Ignoring society
  • Sin 7: Ignoring history

Given the number of omissions and assumptions, one wonders what does the subject include?

Challenging the Samuelson paradigm in economics textbooks…

September 8, 2017

This blog had written about a new economics text called “The Economy” or the core textbook. The book is making inroads.

Samuel Bowles and Wendy Carlin explain how the book marks a shift from the Samuelson textbook (HT: CafeEconomics):

Things are radically different at the undergraduate level. The Samuelsonian paradigm is basically Marshall plus Keynes, and this remains the basic content of the dominant textbooks today. Asymmetric and local information, and strategic social interactions modelled by game theory are mentioned, if at all, at the end of the introductory course, or as special topics,. (Von Neumann had commented – surely ungenerously – about Samuelson that “…even in 30 years he won’t absorb game theory”.)

Understandably, students think information problems and strategic interaction are simply refinements of the standard model, rather than challenges to two of its foundations – price-taking as the benchmark for competitive behaviour, and complete contracts (and hence market clearing in competitive equilibrium) made possible by complete information.

CORE’s introductory text, The Economy, attempts to do for information economics and strategic social interaction what Samuelson did for aggregate demand. CORE has made these concepts part of the foundation of an economic paradigm that can be effectively taught to introductory students. This new open-access online text, simultaneously published as a conventional book, is now available (The CORE Team 2017).1

The Economy takes on board the fundamental innovations of Hayek and Nash used in contemporary economics research. But concerns about climate and other market failures as well as economic instability provide reasons to doubt Hayek’s argument that governments should limit their activities to enforcing property rights and other rules that permit markets to function.

Likewise, behavioural experiments and research on human cognitive capacities call for a more empirically grounded conception of human behaviour than is present in Nash’s work. Integrating both limited cognitive capacities with greater capacities for cooperation among individuals provides a more adequate foundation. Keynes’ contribution is similarly in need of modification. We provide both models and evidence to question his optimism that government demand-management policies could substantially eliminate involuntary unemployment in the long run.

In Table 1 we contrast the foundational tenets of the standard paradigm, as represented by Samuelson, with that represented by CORE. By the ‘benchmark model’ we mean the standard case presented to students, from which ‘deviations’ are studied. For example, competitive markets are treated as the standard case, with monopolistic competition as an extension.

Table 1 Samuelsonian and CORE paradigms


One keeps wondering why economics textbooks take so long to change? For a subject which talks so much about change, it is amazing how little its own textbooks change?

I mean our major macroeconomics textbooks continue to rely on IS-LM models which say central banks change money supply. Whereas central banks change interest rates.

Undercover Historian tweets on this new textbook as: “Using thin history of economics to manufacture a scapegoat”



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