Archive for the ‘Economist’ Category

A tale of Chilean social security system and how Lewinsky prevented reform of the same in US….

February 5, 2016

José Piñera was Chile’s secretary of Labor and Social Security and architect of the country’s successful reform of its pension system (now at Cato).

In this speech, he speaks on how the social security system was revamped in Chile but failed in US (due to the famous Clinton-Lewinsky scandal):


How Milton Friedman and Anna Schwartz became monetarists?

February 4, 2016

A superb paper by George S. Tavlas of Bank of Greece. Far more useful than several of those macro/monetary policy papers.

He tracks what led the Friedman/Schwartz duo to become monetarists. Friedman actually favored use of fiscal policy for stabilisation till 1940s. Then in the 1950s role of monetary factors started to make sense. There was also a huge role played by a FDIC economist Clark Warburton who has of course been forgotten. In many ways, Friedman’s core ideas came from Warburton:


Greek Business confidence decline in 2015: Varoufakis effect or Troika effect?

January 28, 2016

Yanis Varoufakis, the former and regular blog writing finance minister of Greece defends himself in this piece.

In his end-of-2015 missive, Holger Schmieding of the Hamburg investment bank Berenberg warned his firm’s clients that what they should be worrying about now is political risk. To illustrate, he posted the diagram below, showing how business confidence collapsed in Greece during the late spring of 2015, and picked up again only after my resignation from the finance ministry. Schmieding chose to call this the “Varoufakis effect.”

There is no doubt that investors should be worried – very worried – about political risk nowadays, including the capacity of politicians and bureaucrats to do untold damage to an economy. But they must also be wary of analysts who are either incapable of, or uninterested in, distinguishing between causality and correlation, and between insolvency and illiquidity. In other words, they must be wary of analysts like Schmieding.

Business confidence in Greece did indeed plummet a few months after I became Finance Minister. And it did pick up a month after my resignation. The correlation is palpable. But is the causality?

It was actually the Troika effect:


How temple cuisine helped enrich Indian food culture?

January 18, 2016

Madhulika Dash has a nice food for thought piece in Swarajya.

She says it is interesting how temples have enriched our cuisines:


Money, banking, and monetary policy from the formation of the Federal Reserve until today..

January 13, 2016

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.


Where’s the inflation in developed world?

January 13, 2016

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:


Why is there no creative destruction in economic ideas and economists’ ranking?

January 5, 2016

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:


History of US debt limits..

December 30, 2015

An insightful interview of Prof Thomas Sargent. He recently discussed his new paper on US debt limits at one of the IMF lectures.

In the interview, he further distils the lessons:


Finally, Fednesday is over..what next?

December 17, 2015

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.

So, finally it raised policy rates by 25 bps to 0.50% on what is nicely called as a Fednesday. WSJ discusses the day and here are reaction of the priests..

Liberal arts macroeconomists are becoming an endangered species

December 9, 2015

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.

Differing IMF forecasts of Gross Planet Product..

December 8, 2015

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!:


Do economists understand the economy?

December 3, 2015

Free markets may manipulate our thinking…

December 2, 2015

Prof. George Akerlof explains his recent book coauthored with Prof Robert Shiller. The book is called Phishing for Phools—The Economics of Manipulation and Deception.

He says free market equilibrium may not be the best thing:


RIP: Prof Douglass North

November 27, 2015

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


How is Development Economics Taught in Developing Countries?

November 19, 2015

David McKenzie (of World Bank) and Anna Luisa Paffhausen ( of University of Passau) have written an interesting paper on the topic. They summarise the findings in this post:


Even famous female economists get no respect..

November 13, 2015

Prof. Justin Wolfers has an article on the status of female economists. Just like females in other walks of life, in economics too they get a secondary status to males. This is even more irritating as even famous female economists are accorded the secondary status:


The tragedy of being Ben Bernanke..

November 2, 2015

Brad Delong reviews the book by big Ben and is puzzled what went wrong:


An econ professor who was mistook as a spy!

October 26, 2015

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:


Sanders, Trump, and John Maynard Keynes..

October 20, 2015

Hunter Lewis of Mises Institute points to how rise of Sanders and Trump shows people confusing capitalism with crony capitalism (how do you remove the crony from capitalism is a million dollar question).


Du Runsheng, world’s most influential yet ignored economist?

October 15, 2015

Not even heard of the name. Apparently he was the main economic thought behind China’s 1978 rural transformation.

Here is a story..

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..


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