Archive for the ‘Economist’ Category

Who cooked Adam Smith’s dinner?

July 1, 2016

Didn’t know about this book at all – Who cooked Adam Smith’s Dinner? It is by Katrine Marcal who has written a scathing review of economics built around “rational man”:

It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest

When Adam Smith wrote that all our actions stem from self-interest and the world turns because of financial gain he brought to life ‘economic man’. Selfish and cynical, economic man has dominated our thinking ever since and his influence has spread from the market to how we shop, work and date. But every night Adam Smith’s mother served him his dinner, not out of self-interest but out of love.

Today, our economics focuses on self-interest and excludes all other motivations. It disregards the unpaid work of mothering, caring, cleaning and cooking. It insists that if women are paid less, then that’s because their labour is worth less – how could it be otherwise?

Economics has told us a story about how the world works and we have swallowed it, hook, line and sinker. Now it’s time to change the story.

In this courageous look at the mess we’re in, Katrine Marçal tackles the biggest myth of our time and invites us to kick out economic man once and for all.

🙂

Malcolm Harris reviews the book:

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How Keynes advocated central policies to advocate population control…

June 7, 2016

Phillip Magness points to this interesting aspect of Keynes thinking. He gave a lecture tracking history of laissez faire and said there are three areas where laissez faire needs to be done away  and we need a central control  – banking, need for population control and savings/investment:

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Keynesianism is the most successful and pernicious hoax in the history of economic thought…

May 27, 2016

Llewellyn H. Rockwell Jr. has a stinging piece on Keynes and his ianisms. The title of the post is Keynes must die which was picked from a Korean translator:

As the Korean translator of an Austrian text put it, “Keynes must die so the economy may live.” With your help, we can hasten that glorious day.

The piece goes onto show how Keynes successfully captured economics and politicians minds (but obviously) despite being a”tissue of distortions, fallacies, and drastically unrealistic assumptions”.

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12 Articles Every Aspiring Economist Should Read..

May 27, 2016

Steven Horwitz points to the 12 articles all wannabes must read. The list is for all those wanting to enrol into PhD in economics. I am pretty sure students of most econ places barely recommend reading all these pieces unless students discover them by themselves. The list has  Tullock, Hayek, Friedman, Coase and so on..

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Did Prof. Joseph Stiglitz endorse Venezuelan socialism?

May 25, 2016

Things are falling apart in Venezuela as documented by scores of articles.

Here is a startling post by Tho Bishop who quotes Joseph Stiglitz:

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Media macro vs actual macro, city economists vs academic economists…

May 13, 2016

Simon Wren Lewis introduced this term called media macro. It basically meant financial media taking control over economic matters. Using their propoganda they kept highlighting macro issues which they thought were important. The problem is their understanding of these macro issues is mostly flawed and actually creates further problems. He shows how British media’s obsession over austerity in early part of the crisis got the economy into tailspin laters.

In a longish essay Prof Lewis, explains the issues further:

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Niti Aayog’s (even India’s) real problem: Many macroeconomists, no microecons

May 6, 2016

The author picks up an important issue but like previous other pieces barely digs enough.

He says Niti Aayog is looking for economists but there is deficit:

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What would have happened if Mises was the Nobel Prize winner?

April 13, 2016

Perhaps we would have lesser case of economic planning says Karl-Friedrich Israel in this article. Though if the list of awardees remained same post Mises getting it in 1969, likes of Mises would have opted out of the list rather than remain there..

 

Could Humpty Dumpty have been an economist?

April 8, 2016

Noah Smith in another superb column points to how most popular terms/words used in economics are vague and poorly defined. He starts with Humpty Dumpty:

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Is modern economics the same as ancient Chinese astrology?

April 5, 2016

Alan Jay Levinovitz Professor of philosophy and religion at James Madison University (Virginia) has a scathing long piece on state of economics (HT: Mises blog). Despite the poor state of economies worldover, the status of economists keep rising and becoming more powerful.

He compares economists to Chinese astrologers who also relied a lot on math but got things wrong. However, their prestige kept rising. It is strikingly similar:

Astral Science in Early Imperial China, a forthcoming book by the historian Daniel P Morgan, shows that in ancient China, as in the Western world, the most valuable type of mathematics was devoted to the realm of divinity – to the sky, in their case (and to the market, in ours). Just as astrology and mathematics were once synonymous in the West, the Chinese spoke of li, the science of calendrics, which early dictionaries also glossed as ‘calculation’, ‘numbers’ and ‘order’. Li models, like macroeconomic theories, were considered essential to good governance. In the classic Book of Documents, the legendary sage king Yao transfers the throne to his successor with mention of a single duty: ‘Yao said: “Oh thou, Shun! Theli numbers of heaven rest in thy person.”’

China’s oldest mathematical text invokes astronomy and divine kingship in its very title – The Arithmetical Classic of the Gnomon of the Zhou. The title’s inclusion of ‘Zhou’ recalls the mythic Eden of the Western Zhou dynasty (1045–771 BCE), implying that paradise on Earth can be realised through proper calculation. The book’s introduction to the Pythagorean theorem asserts that ‘the methods used by Yu the Great in governing the world were derived from these numbers’. It was an unquestioned article of faith: the mathematical patterns that govern the stars also govern the world. Faith in a divine, invisible hand, made visible by mathematics. No wonder that a newly discovered text fragment from 200 BCE extolls the virtues of mathematics over the humanities. In it, a student asks his teacher whether he should spend more time learning speech or numbers. His teacher replies: ‘If my good sir cannot fathom both at once, then abandon speech and fathom numbers, [for] numbers can speak, [but] speech cannot number.’

Modern governments, universities and businesses underwrite the production of economic theory with huge amounts of capital. The same was true for li production in ancient China. The emperor – the ‘Son of Heaven’ – spent astronomical sums refining mathematical models of the stars. Take the armillary sphere, such as the two-metre cage of graduated bronze rings in Nanjing, made to represent the celestial sphere and used to visualise data in three-dimensions. As Morgan emphasises, the sphere was literally made of money. Bronze being the basis of the currency, governments were smelting cash by the metric ton to pour it into li. A divine, mathematical world-engine, built of cash, sanctifying the powers that be.

The enormous investment in li depended on a huge assumption: that good government, successful rituals and agricultural productivity all depended upon the accuracy of li. But there were, in fact, no practical advantages to the continued refinement of li models. The calendar rounded off decimal points such that the difference between two models, hotly contested in theory, didn’t matter to the final product. The work of selecting auspicious days for imperial ceremonies thus benefited only in appearance from mathematical rigour. And of course the comets, plagues and earthquakes that these ceremonies promised to avert kept on coming. Farmers, for their part, went about business as usual. Occasional governmental efforts to scientifically micromanage farm life in different climes using li ended in famine and mass migration.

Like many economic models today, li models were less important to practical affairs than their creators (and consumers) thought them to be. And, like today, only a few people could understand them. In 101 BCE, Emperor Wudi tasked high-level bureaucrats – including the Great Director of the Stars – with creating a new li that would glorify the beginning of his path to immortality. The bureaucrats refused the task because ‘they couldn’t do the math’, and recommended the emperor outsource it to experts.

There are some interesting references and interviews of people in the article.

Why would skeptical astronomers question the emperor’s faith in their models? In a phone conversation, Daniel Hausman, a philosopher of economics at the University of Wisconsin, put it bluntly: ‘If you reject the power of theory, you demote economists from their thrones. They don’t want to become like sociologists.’

George F DeMartino, an economist and an ethicist at the University of Denver, frames the issue in economic terms. ‘The interest of the profession is in pursuing its analysis in a language that’s inaccessible to laypeople and even some economists,’ he explained to me. ‘What we’ve done is monopolise this kind of expertise, and we of all people know how that gives us power.’

Every economist I interviewed agreed that conflicts of interest were highly problematic for the scientific integrity of their field – but only tenured ones were willing to go on the record. ‘In economics and finance, if I’m trying to decide whether I’m going to write something favourable or unfavourable to bankers, well, if it’s favourable that might get me a dinner in Manhattan with movers and shakers,’ Pfleiderer said to me. ‘I’ve written articles that wouldn’t curry favour with bankers but I did that when I had tenure.’

Interesting stuff..

How doorstep banking has been forgotten in India but is increasing savings in Sri Lanka..

April 4, 2016

Interesting article by a team of scholars: Michael Callen , Suresh de Mel , Craig McIntosh  and Christopher Woodruff.

They point how a bank in Sri Lanka has pioneered this doorstep banking approach. In this, deposits are collected from houses of people:

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Why gains from devaluation are just a delusion..

April 1, 2016

Prof Steve Hanke has an article on this delusion:

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Given IMF’s record, should we put too much faith in the Fund’s ‘economic expertise’?

March 31, 2016

AV Rajvade has a piece on this. It is actually amazing given mistakes of IMF, it remains as prominent a body as ever.

The author reflects on a recent IMF top brass visit and setting a regional centre in India. Indian PM in his speech praised IMF and must have been music to latter’s ears:

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Lower Brent prices and Saudi policy options: What’s shale oil got to do with it?

March 30, 2016

Prof Lutz Kilian had earlier also said shale oil has very little to do with low oil prices in recent times.

In his recent piece, he revisits the idea and looks at options for Saudi (and other oil producers as well):

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Italy: No country for young men (and women)

March 30, 2016

Prof. Paola Subacchi of University of Bologna has a depressing piece on state of affairs in Italy. Despite having a really young Prime Minister, he can’t hold on to talented young people:

Problems of plenty for the long legged country:

Over the last 20 years, roughly a half-million Italians aged 18 to 39 have moved abroad, especially to more economically dynamic European Union countries such as Germany, France, and the United Kingdom. And those are just the official figures; the actual numbers are probably much higher, possibly more than double. Why are young Italians so eager to leave?

It is not for lack of political representation. Since 2013, the share of Italy’s parliament that is under 40 has increased from 7% to 13%. Moreover, Italy now has one of the youngest governments among advanced countries (only France does better). And Prime Minister Matteo Renzi, at age 41, is Italy’s youngest prime minister ever.

Nonetheless, young Italians remain deeply dissatisfied with the state of their country and the economic opportunities it can provide. Indeed, despite Renzi’s promise to implement reforms aimed at rejuvenating the country’s economy and institutions – the platform on which he won power in 2014 – some 90,000 Italians under the age of 40 have since left.

Renzi’s message, while skillfully crafted and optimistic, cannot mask the harsh economic reality in Italy today. Most jarring, youth unemployment stands at 39% – one of the highest rates in the EU and well above the bloc’s average of 20%. With 26% of people under the age of 30 not in school, employment, or training – the second-highest rate in the EU, behind only Greece – structural youth unemployment will prove difficult to correct.

Even those who have jobs have reasons to be unhappy. According to Eurostat, Italy’s young people are among the most dissatisfied with their jobs, with many convinced that the best jobs are reserved for the well connected. And, indeed, corruption still poses a major challenge for Italy; Rome’s last two mayors, for example, were forced out of office for malfeasance. In last year’s Transparency International’s Corruption Perceptions Index, Italy was ranked 61st, trailing all other advanced economies.

Making matters worse, Italy’s economy has been stagnant for years.

How countries decline..

Ricardian equivalence and Fisher effect are actually misnomers..

March 28, 2016

This is a very important post  by Thorvaldur Gylfason, Helgi Tomasson and Gylfi Zoega. It is another strong reminder of what omitting history of economic thought has done to economics students. We are just being made to use certain terms without knowing whether they are actually true. Quite a few economics terms/relationships are actually weak when tested empirically. So, one should always be careful while stating them as some theory or facts which we often do.

The authors point to two such highly popular terms used by both econs and wannabe econs across the world- Ricardian equivalence and Fisher effect. In both these, even the authors on whom they are named had cautioned on the relationship. But, over time like we see in game of Chinese  whispers, these ideas have become distorted. The weak relationships showed by these two have become a matter of fact leading to all kinds of wrong policies:

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Modern misuses of Adam Smith with Laissez-Faire economics

March 23, 2016

Most of today’s economics students are victims of scrapping history of economic thought from our courses. Whatever little we know is just  picked from here and there. This just leads to incomplete and unbaked information which is even more dangerous as much of it is misconceptions.

Jag Bhalla has a reminder on associating Adam Smith with just Laissez-Faire economics. I mean this aspect is now much more of standard knowledge that Adam Smith was hardly just a free market enthusiast. He was more of a moral philosopher than really an economist. But then we continue to err and think Smith to be a Laissez-Faire economics man.

Bhalla points to a whole list of links where he points to these modern misuses..

Against public policy and why nobody should be making policies for your life…

March 22, 2016

Jeff Deist has a post on why we should be skeptical of public policy.

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Lies, damn lies, and European growth statistics

March 18, 2016

Yanis Varoufakis, a former finance minister of Greece writes on how the recent stats showing growth in Europe are all wrong.

What he shows is how people are getting even elementary macro wrong. There is confusion between nominal and real growth. In times of inflation, one looks at real growth but in times of deflation, one should look at nominal growth:

“Greece has at last returned to economic growth.” That was the official European Union storyline at the end of 2014. Alas, Greek voters, unimpressed by this rejoicing, ousted the incumbent government and, in January 2015, voted for a new administration in which I served as finance minister.

Last week, similarly celebratory reports emanated from Brussels heralding the “return to growth” in Cyprus, and contrasting this piece of “good” news to Greece’s “return to recession.” The message from the troika of European bailout lenders – the European Commission, the European Central Bank, and the International Monetary Fund – is loud and clear: “Do as we say, like Cyprus has done, and you will recover. Resist our policies, by electing people like Varoufakis, and you will suffer the consequences of further recession.”

This is a powerful story. Except that it is built on a disingenuous lie. Greece was not recovering in 2014, and Cyprus’s national income has not recovered yet. The EU’s claims to the contrary are based on an inappropriate focus on “real” national income, a metric bound to mislead during periods of falling prices.

If asked whether you are better off today compared to a year ago, you would answer in the affirmative if your money income (that is, its dollar, pound, euro, or yen value) rose during the previous 12 months. In the inflationary times of yore, you might have also accompanied your response with the (reasonable) complaint that increases in the cost of living eroded your increased money income.

To account for this gap between your money income and your capacity to buy things with it, economists focused on your purchasing power by adjusting your money income for average prices.

A country’s aggregate income is measured in a similar way. Economists begin by summing up everyone’s money incomes to derive nominal Gross Domestic Product – or, for the sake of simplicity, the country’s total money income (N). Then they adjust N for changes in average prices (P) by dividing N by P. This ratio is the country’s “real” income (R = N/P).

During inflationary times, the purpose of calculating the figure for real national income, R, was that it stopped us from becoming overexcited by reports that money income had increased substantially. For example, at a time when average prices were rising by, say, 8%, a 9% increase in money income translated into a mere 1% real growth rate in our capacity to buy stuff.

So, clearly, in inflationary times, the number for real national income, R, was the one to look at before rejoicing that the economy was growing. Only when R rose strongly did we have good cause to believe that economic activity was rising. But in periods of deflation (when prices are falling), like those encountered in Greece and in Cyprus today, R can be deeply misleading.

Well, anything can happen during these times..

Did Mr Ricardo consult Mrs Ricardo before coming out with the Ricardian equivalence idea?

March 9, 2016

Manasiecon blog is the go to blog on economics humor.

In her recent post on the International Women’s day, she takes a dig at the male dominated world of economic theories:

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