Madhulika Dash has a nice food for thought piece in Swarajya.
She says it is interesting how temples have enriched our cuisines:
A nice paper which sums up quite a bit of US monetary history since formation of the Fed. It is written by monetary historians Robert Hetzel and Gary Richardson.
The United States Congress created the Federal Reserve System in 1913. The System consists of the Federal Reserve Board in Washington, D.C.; 12 Federal Reserve Banks; and thousands of member commercial banks. This entry describes the evolution of the System and of monetary policy from its foundation through 2013.
This question is actually posed to BIS’s Mr Hyun Song Shin. The interview reminds you of this post on death of economics. I mean such is the chaos in thinking and explanation. No one has a clue really.
He says based on the traditional economic story we should have had some inflation. But we don’t:
Federico Fubini (a financial columnist) hits out at the murky world of economists (read economists based at US Ivy league).
He starts with this idea that say you sleep in 2006 and wake up in 2016, you see a very different world. Based on how much economic world has changed, one would imagine status of economists changing as well. But nothing happens here. People who called shots in 2006 remain as powerful in 2016 as well:
I remember writing on Fed exit policy way back in 2009-10. Fed chair Bernanke had listed several ways for the exit way ahead of its time. It has taken nearly five years for atleast some type of exit to happen. And even now one does not know how far the exit will go.
Liberal arts macroeconomists? What the hell is that?
David Colander one of the few economists who is really worried about the decline of quality in economics teaching, has a piece here.
He says there are not enough people who can teach macro at undergrad level. At undergrad level, one needs people who can connect the various dots and generate interest in aggregate econ issues. The macro at grad level is the specialist DSGE type which remains the focus for most macro people:
Liberal arts macro professors have not always been endangered. Thirty or forty years ago, standard macro theory blended pedagogical, methodological, and historical issues into macro theory, making macroeconomics more undergraduate professor research friendly. Then standard macroeconomic theoretical research was based on IS/LM analysis, as was pedagogy. Standard macro econometric research still included activities such as estimating consumption functions and money demand functions — activities that one could have an honors students do. Undergraduate macro professors could be active participants in the standard macroeconomic theoretical and policy debates.
That has changed. Standard macro is now dynamic stochastic general equilibrium (DSGE) analysis. Theoretical and applied macro econometric research has become so technical and specialized that it is beyond what can reasonably teach in an undergraduate liberal arts school. For macroeconomic theory, this is a gain; macro theory is beginning to come to grips with the complexity of the macro economy. But it is not a gain for undergraduate teaching of macro.
The problem is exacerbated by the fact that graduate training in macro is not designed to prepare graduate students to become undergraduate professors of economics who combine both research and undergraduate teaching. Graduate economics training in macro is designed to prepare students for full-time research positions at a graduate university or a Central Bank. The result is a very small pool of highly qualified macro-research-focused candidates from standard programs whose goal is to teach macro at a liberal arts school. While the pool is small, it is not zero. There are always a few graduate students who want to teach at a liberal arts program where they can integrate undergraduate liberal arts teaching with their research. So they accept jobs at liberal arts schools. Unfortunately few of them survive to tenure.
Given how much messed up so called modern macro is, one should atleast appreciate and encourage liberal arts macro. Even that is not happening.
Well, I didn’t know there is an economic term like Gross Planet Product.
Prof. Peter A.G. van Bergeijk of Erasmus University brings this term in this article. Basically, it is GDP of the entire world. Prof. says that there is a difference in GPP at current prices and GPP at constant prices + inflation. The first one shows a decline and latter shows a rise!:
The blog was on a break which got longer than planned. There has been no blogging for a while and it is quite a sad post to start off with.
Prof Douglass North passed away this week. No words can do justice to the contribution made by Prof North to institutional economics. There is a collection of tributes on MR and another one at his Univ website.
I only have couple of things to add. I was once reading his interview where he said he learnt most of his economics after his PhD! Moreover, he mugged and cleared his written comprehensive exams (a set of exams in a Phd program one has to clear before writing the dissertation). But the people on his oral viva figured he knew very little about economics. They could not fail him as his written scores were really good! Sometimes inefficiency in the system does some good :-) In the same interview, he also explains how his first students did not take him seriously at all. He thought the students were smarter than him.
Knowing Hos Prof North shaped economics later on, one can hardly believe all this. As they say, if one stays committed to a cause(with dash of some luck), anything can happen in life.
Here is another tribute posted on eh.net:
Prof. Frederic Payor of Swathmore College has had some experience in life. He was mistook for a spy in East Berlin due to his dissertation on Russian economy! The topic of dissertation was on the foreign trade system of the Soviet bloc.
All this interesting titbit was hardly known till Steven Spielberg/Tom Hanks did not play the events in their recent movie – Bridge of Spies.
In this interview, Prof Payor narrates the experience and how closely the movie captures reality:
Not even heard of the name. Apparently he was the main economic thought behind China’s 1978 rural transformation.
Last week, Du Runsheng passed away at the ripe old age of 102. The death of the “father of rural reform” was widely covered in China and Hong Kong, as Du’s proteges include such Chinese economic luminaries as Zhou Qiren and Justin Yifu Lin, not to mention Wang Qishan, who is now one of the seven most powerful men in China. But I have yet to see a proper obituary of Du in the foreign press, which is a real pity. You could make a case that Du was one of the most influential economists to have ever lived.
He was one of the primary authors of the rural reform policies China adopted in the early 1980s, which reversed agricultural collectivization and returned control of farmland to individual farm households. It is no exaggeration to say that as a result, hundreds of millions of people were able to escape poverty. If you measure influence by the sheer number of lives affected, then it seems Du would have to rank pretty high.
Shocking to see complete ignorance..
One of my Profs always says Blame the Swedes for all the mess in economics. First, having created the prize for economics from thin air and then each year giving it to scholars from select Universities, they have just ignored contributions of so many others. Moreover, it has fostered hubris and enormous amount of belief that the subject is indeed a science. The Prize afterall is in Economics Sciences..
For the first time in nearly a decade, the Federal Reserve is considering raising its target interest rate, which would end a long period of near-zero rates. Like the cessation of large-scale asset purchases in October 2014, that action will be an important milestone in the unwinding of extraordinary monetary policies, adopted during my tenure as Fed chairman, to help the economy recover from a historic financial crisis. As such, it’s a good time to evaluate the results of those measures, and to consider where policy makers should go from here.
To begin, it’s essential to be clear on what monetary policy can and cannot achieve. Fed critics sometimes argue that you can’t “print your way to prosperity,” and I agree, at least on one level. The Fed has little or no control over long-term economic fundamentals—the skills of the workforce, the energy and vision of entrepreneurs, and the pace at which new technologies are developed and adapted for commercial use.
What the Fed can do is two things: First, by mitigating recessions, monetary policy can try to ensure that the economy makes full use of its resources, especially the workforce. High unemployment is a tragedy for the jobless, but it is also costly for taxpayers, investors and anyone interested in the health of the economy. Second, by keeping inflation low and stable, the Fed can help the market-based system function better and make it easier for people to plan for the future. Considering the economic risks posed by deflation, as well as the probability that interest rates will approach zero when inflation is very low, the Fed sets an inflation target of 2%, similar to that of most other central banks around the world.
How has monetary policy scored on these two criteria? Reasonable people can disagree on whether the economy is at full employment. The 5.1% headline unemployment rate would suggest that the labor market is close to normal. Other indicators—the relatively low labor-force participation rate, the apparent lack of wage pressures, for example—indicate that there is some distance left to go.
Not many will agree though..
Praveen Patil comments on the recent Jairam Ramesh book on 1991 crisis and changes thereon.
He wonders why people do not give any credit to then PM Narasimha Rao. The entire credit has been taken by then FM Dr. Manmohan Singh. All this is sop ridiculous as without the PM’s confidence, Finance Minister could have hardly done anything. Even the choice of a FM is made by the Prime Minister and as we know Dr Manmohan Singh was an unlikely choice:
How history was morphed to glorify Manmohan Singh as the sole architect of 1991 reforms while painting P.V. Narasimha Rao as a reluctant, indecisive and often communal Brahman.
Jairam Ramesh’s ‘To the brink and Back – India’s 1991 story’ is one such example of this intellectual snobbery
Q: Given the minority character of your government, do you feel confident as Prime Minister?
A: Yes, I do feel confident now. Although the responsibility is very heavy, the Congress party can discharge this very effectively. And the kind of response which the government has got from the people during the last three weeks has provided us greater confidence.
Q: Is it due to this that you have resorted to strong economic measures like steep depreciation of the rupee?
A: We mean business now. The country could not wait any longer. These decisions should have been taken long ago.
This is the snapshot of P.V. Narasimha Rao’s interview given to Prabhu Chawla of the Indian Express on 8th July 1991. The then Prime Minister of India, in this interview, comes across as an extremely confident leader who was aware of his historic duty to liberalize Indian economy, especially when he emphatically states, “We mean business now”!
Jairam Ramesh quotes this and another equally unequivocal interview given to K.K. Katyal of The Hindu a day before that, on 7th July 1991, in his book “To the brink and back – India’s 1991 Story.”
Yet, despite these publicly available proofs of Mr. Rao’s total belief in the reforms agenda, Jairam Ramesh presents a subtly contrarian picture when he writes that, “He (Rao) remained emphatic, although I very well knew, as did the Finance Minister, how deeply uncomfortable he was with the move (to devalue rupee), and had, in fact, tried hard to stop the July 3, devaluation”.
Essentially what Ramesh is telling us is simple – do not believe all the interviews, all the publically available records which forcefully state P.V. Narasimha Rao’s total faith in the reforms, but believe my own fantasies that he was a reluctant reformer.
This has been the intellectual snobbery of the last two and a half decades that India has lived with, wherein history has been subtly morphed to somehow glorify Manmohan Singh as the sole architect of 1991 reforms while trying to paint P.V. Narasimha Rao as this reluctant, indecisive and often communal Brahman.
Prime Minister Rao is that conjecture of India’s economic history whom everybody wants to forget by anointing a more pliable individual as the emperor of reforms. But alas, the decade of decay between 2004 and 2014 has put an emphatic full stop to any such effort and Jairam Ramesh’s latest attempt also fails to add any gloss to Manmohan Singh’s checkered CV.
Both Congress and Dr MMS are paying a huge price for this omission. They just could not carry forward the spirit raised by Narasimha Rao and ended up committing harakiri on several issues. This vacant space was ironically captured by BJP, the party which caused PVN huge heart burn during his tenure due to Ayodhya related issues. Even more ironically, BJP was once a party which believed in Swadesi and now stands for foreign participation in Indian economy.
Though, I have a different take on all this reform business.
In India it is all about who was behind reforms with hardly any effort to institutionalise the process. What we and our media wants is this one person who can take on the system and create huge noise in the process. The end result is all these ideas are just hinged on this one/few person/persons. Things are rosy till that person can push things and factors favor it. As tides turn, we are again lost.
The media and markets had created huge hype around Dr. MMS getting second tenure without the left in 2009. The equity markets had to be closed due to upper circuit. There was a feeling that father of 1991 is going to create another round of magic in 2009.
What unravelled eventually was just unimaginable. The father of 1991 became the father of 2012-13 crisis as well. We can blame the Gandhi family for destroying all this expectations but we still need to question why the chaos could not be prevented? He had all the team and all the economists around him. There was an Economic Advisory Council, Planning Commission chief, Honorary Personal Economic Adviser, CEA in Finance Ministry and what not. I mean you just name it and it was there.
One important factor is lack of team work and institutionalising the process. I mean whichever countries have developed, they hardly care about who was behind the transformation. What is more important is the transformation process and belief in its continuity.
So even this article should not just look to credit PVN but the entire team behind the process. There are many unsung people who must have contributed immensely in the 1991 proposals. But we hardly know about them.
These are lessons for current administration as well which are busy creating this entire hype around select individuals. The efforts should be made to make India a better place not glorify/blemish certain careers/CVs..