Archive for the ‘Economist’ Category

How a historic meeting laid the foundations of US fiscal policy and choice of Washington as capital…

March 8, 2018

Interesting bit of history by Vitor Gaspar and David Amaglobeli of IMF.

On the evening of June 20, 1790, James Madison and Alexander Hamilton met at Thomas Jefferson’s home on Maiden Lane, in New York. Over a long dinner, the three struck a historic deal that laid the financial groundwork for the fledgling nation. Madison agreed to have the US federal government take over the states’ Revolutionary War debt; in return, Hamilton agreed to support the move of the nation’s capital to the banks of the Potomac River, a location favorable to Madison’s home state of Virginia. The deal is an early and vivid example of how fiscal politics can shape history. The episode remains relevant because it shows that politics plays a crucial role in far-reaching reforms of public finances. Public finance reform is fundamentally political, and it has the potential to shape the political system itself. As this most famous dinner shows, political negotiation can help overcome apparently insurmountable obstacles and become a force for institutional transformation. Today’s policymakers who disregard political realities are doomed to be ineffective.

The whole narrative is fascinating to read…


A brief history of Harvard’s EC 10 (introductory economics) course

March 2, 2018

Interesting bit by Cher Applewhaite.

“For the umpteenth year in a row Economics 10, ‘Principles of Economics,’ led the list of largest courses taken at Harvard.” This reads like a Crimson headline from last semester, but in fact it’s from the Fall of 1978.

To the many undergraduates who take it, and the many graduate students who teach it, Ec10 is—for better or worse—a pillar of Harvard’s liberal arts education, perennially popular but oft-critiqued. The history of the course shows that the unbound textbook used today, priced at $131, was not always how Harvard students got their start in the discipline of economics.

“Contrary to popular belief, Ec10 was never designed to be a pipeline for lower Manhattan,” says David W. Johnson, a former head teaching fellow who taught sections from 1980s until 2014.

Indeed, lower Manhattan was the furthest thing from Harvard’s original introductory economics course, Economics 1. According to a 1896 syllabus entitled “Lectures on Economic Development,” students were required to read books on topics ranging from philosophy to anthropology. This interdisciplinary focus meant students had to consider why economic history was a useful topic of study.

Only three professors have led the course since the 1960s: Otto Eckstein, Martin Feldstein, and N. Gregory Mankiw. All were, at some point during their careers, either members or chairs of the government’s Council of Economic Advisors.


Why Amartya Sen remains the century’s great critic of capitalism

March 1, 2018

Tim Rogan has a piece.

He says there are two types of critiques of capitalism – moral and material. Sen combines the two effectively:


Past, Present and Future of Economics: An interview project

February 14, 2018

A superb series of interviews of leading economists on state of economics education and the need for pluralism.

Economics education has been discussed in the public domain for a long time,  but since the Global Financial Crisis it has come under renewed scrutiny. This interview project aims to provide material for new generations of economics students and scholars, as well as the general public, to get acquainted with different schools of economic thought and their bearing on economics thinking.

Distinguished economists speak on how the plurality of analytical traditions within economics has influenced their work. The interviews range from long-standing debates to current issues, and provide first-hand access to the thought of key contemporary economists.

This video series intends to promote pluralism by presenting schools of economic thought as viable methodological, theoretical and policy alternatives.

We have interviews of Profs Charles Goodhart, Sheila Dow, Geoff Harcourt, Tony Lawson Julie Nelson and Ha-Joon Chang…

Teaching the Real Adam Smith lessons: He was hardly the poster boy for free-market economics..

January 31, 2018

Paul Sagar chips in on the burning question on Adam Smith: Did Adam Smith really preach free market economics as we understand the term:

If you’ve heard of one economist, it’s likely to be Adam Smith. He’s the best-known of all economists, and is typically hailed as the founding father of the dismal science itself.

Furthermore, he’s usually portrayed as not only an early champion of economic theory, but of the superiority of markets over government planning. In other words, Smith is now known both as the founder of economics, and as an ideologue for the political Right.

Yet, despite being widely believed, both these claims are at best misleading, and at worst outright false.



The speed of British ships improved during the early Industrial Revolution…

January 29, 2018

Fascinating research by Morgan Kelly and Cormac Ó Gráda.

The research says two things. One, the steamships did increase their speeds overtime against the conventional view. Two, the impact of industrial revolution was not limited to cotton, iron, cotton etc. It was more broad based and extended to printing, machine tools, water power and shipping as well:


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?


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