Chitarman’s “Shah Jahan on a Terrace, Holding a Pendant Set With His Portrait,”

You’ve probably seen this already, for it has been making the rounds on Twitter this past week. But just in case you haven’t, arm yourself with a cup (or two) of coffee, and spend about thirty minutes going over this feature.

It is beautifully done, and covers India, Persia, aspects of Christianity, Rembrandt(!), the advent of the British in India, Aurangzeb, the Taj Mahal and much more in a wonderfully informative package. Plus, personally speaking, I added two words to my vocabulary: anthomaniac, and lapidary.

Was *the* googly a meta-googly?

If you are a cricket tragic, this thread is zimbly zuperb

Here is the video footage, for what it is worth:

What about an MBA, then?

I opened a rather large can of worms with my post about whether or not one should do a PhD last Friday, for the most popular question I have gotten since then is whether one should do an MBA – is it “worth it”?

Here are my thoughts on the subject:

  1. Just like the PhD, so also with the MBA. You are doing it to get a job, or get more money in your current job. You should be clear about this. You are not doing it to get better at business, or to start your own business. 1
  2. The major difference between an MBA and a PhD is that one is a marathon, and the other is a sprint. There is some satisfaction to be gained from simply finishing the marathon – but the point of a sprint is to win it. You need to be faster than the others – or the others need to be slower than you.
  3. And if that is true (and I think it is), and if your job is likely to come from the placements process, then “winning” at the placement process becomes oh-so-important. Or, here is another way to think about it – if you think that you CV will look better by being able to say that you got placed in a “good” company while in college, then your MBA degree is about “winning” at the placement process.
  4. And that, unfortunately, makes the acquisition of an MBA degree a zero sum game. You only win by defeating everybody else. Because you don’t get the best job offer by making sure that the others get the best job offers – there’s only so many best job offers to go around.
  5. Walk into an MBA education with your eyes wide open: that’s why you are there, to be the best in a zero-sum game. By definition, the MBA game is a cut-throat game. If that is the world you want to inhabit, then an MBA is a great education to acquire.
  6. Remember, though, that the education isn’t what you learn in class. That education, these days, you can get for free online, and it’ll be better than the education you get in your college. The education that you get is learning how to be demonstrably better than your peers while being part of the same community for two years. You then have to apply these learnings to your career.
  7. That makes the MBA one of those rare degrees where the quality of the college really matters. Not because the faculty is likely to be better, or because you will get better facilities, or because the library will be better. All that is likely true, but the reason you want to get into a “good” college is because you need to show that you have beaten the best, twice over. You first beat everybody else by getting into this college when so many others couldn’t, and you beat everybody else who got in by scoring more than they did. It really is the ultimate zero-sum game!
  8. An MBA with prior work-experience is worth so much more than an MBA with no prior work-experience. Identify the gaps in what you know about the corporate world by working in the corporate world, and then do an MBA.
  9. You do an MBA for the job, for your peer group and for what you learn in the classroom – in that order.
  10. If you are faintly horrified by what you have just read, don’t even think about doing an MBA. If you can’t wait to get started, you should definitely do an MBA!
  1. I’m talking about the median MBA candidate here[]

In Memoriam: Robert Mundell

Robert Mundell passed away earlier this week. Most macroeconomics students will know of the Mundell-Fleming model, of course, while a lesser number may have heard of his work on optimum currency areas.

Here is a relatively old article about him from the New York Times:

”In the very short run, I’m a Keynesian,” he said. ”In the intermediate run, I’m a supply-sider, and in the long run I’m a monetarist.”

https://www.nytimes.com/1986/01/12/business/eccentric-economist-robert-a-mundell-supply-side-s-intellectual-guru.html

And here is a summary by The Economist on the impossible trilemma:

HILLEL THE ELDER, a first-century religious leader, was asked to summarise the Torah while standing on one leg. “That which is hateful to you, do not do to your fellow. That is the whole Torah; the rest is commentary,” he replied. Michael Klein, of Tufts University, has written that the insights of [[international macroeconomics]] (the study of trade, the balance-of-payments, exchange rates and so on) might be similarly distilled: “Governments face the policy trilemma; the rest is commentary.”

https://www.economist.com/schools-brief/2016/08/27/two-out-of-three-aint-bad)

Here is Paul Krugman, first rhapsodizing about the Optimum Currency Area1:

First up, Mundell, whose classic 1961 paper argued that a single currency was more likely to be workable if the regions sharing that currency were characterized by high mutual labor mobility. (He actually said factor mobility, but labor is almost surely the one that matters). How so?

https://krugman.blogs.nytimes.com/2012/06/24/revenge-of-the-optimum-currency-area/

.. and then rhapsodizing about Robert Mundell and his early theoretical work:

Those of us who work on international monetary theory have been wondering for a decade when Robert Mundell would get his richly deserved Nobel Memorial Prize in Economic Sciences. Mundell’s work is so central to that field, so “seminal”–an overused term that really applies here–that on many disputed issues his ideas are the basis for both sides of the debate. But a layperson might be confused about exactly what Mundell and his prize are really about.

https://slate.com/business/1999/10/o-canada.html

This is the NYT obituary:

In his 2006 interview, he said that winning the Nobel “was particularly pleasing to me as my work has been quite controversial and no doubt stepped on a lot of intellectual toes.”
He added: “Even more than that, when I say something, people listen. Maybe they shouldn’t, but they do.”

https://www.nytimes.com/2021/04/05/business/economy/robert-mundell-dead.html

And finally, the Washington Post’s obit:

Dr. Mundell gave one of the more unusual — and crowd-pleasing — acceptance speeches in the history of the Nobel Prize. He ended his remarks by singing a few bars of the hit Frank Sinatra song “My Way,” an allusion to the independent-minded approach that he brought to his life and work.

https://www.washingtonpost.com/local/obituaries/robert-mundell-dead/2021/04/06/36793d92-96d4-11eb-b28d-bfa7bb5cb2a5_story.html

RIP.

  1. This essay, along with the tables, used to be freely available on the NBER website. No longer, and I don’t know why. My apologies[]

Ooh those tricky poverty lines

Noah Smith had a rather exasperated blogpost (or newsletter post) out recently about Jason Hickel.

Hickel, an anthropologist by training, has two major theses about the world:

He believes that global poverty reduction is a myth, and
He believes that degrowth is the best solution to environmental problems.
Both theses are wrong. And not just wrong in the “Ackshually, sir, you don’t have the facts quite right” sense, but wrong in consequential, potentially dangerous ways. In this post I’m only going to push back against the first of these two narratives; I promise I will write more about degrowth later, and in the meantime you can read this and this.

https://noahpinion.substack.com/p/against-hickelism

As usual, please do read the whole thing.

In that post, Noah Smith refers to an article by Hickel in The Guardian a couple of years ago. Here’s an excerpt:

What Roser’s numbers actually reveal is that the world went from a situation where most of humanity had no need of money at all to one where today most of humanity struggles to survive on extremely small amounts of money. The graph casts this as a decline in poverty, but in reality what was going on was a process of dispossession that bulldozed people into the capitalist labour system, during the enclosure movements in Europe and the colonisation of the global south.
Prior to colonisation, most people lived in subsistence economies where they enjoyed access to abundant commons – land, water, forests, livestock and robust systems of sharing and reciprocity. They had little if any money, but then they didn’t need it in order to live well – so it makes little sense to claim that they were poor. This way of life was violently destroyed by colonisers who forced people off the land and into European-owned mines, factories and plantations, where they were paid paltry wages for work they never wanted to do in the first place.

https://www.theguardian.com/commentisfree/2019/jan/29/bill-gates-davos-global-poverty-infographic-neoliberal

I honestly don’t know where to begin in terms of refuting just this excerpt, let alone the rest of the essay, but thankfully, I don’t really need to. Noah Smith takes on part of the burden in his essay already, and Max Roser also pads up in this essay:

You can see this more clearly in the chart below. Clicking on the ‘relative’ button shifts the chart from absolute numbers to percentages. Whilst the proportion of the world’s population living in extreme poverty has been falling consistently since 1820, it is only in recent decades that this has translated into a decline in the number of people living in extreme poverty.

https://ourworldindata.org/extreme-history-methods
The chart above is absolute numbers, while the one below is in percentage terms. Both charts are from the essay by Roser linked to above. Here is the link again.

Look, much remains to be done in our battle with poverty. Much, much more. The fight is nowhere close to finishing, and we still aren’t sure about how to best reduce poverty – and by we I mean even the best of economists, no matter how you measure “best”. But this fact is incontestable: the world is better off today than it was a century ago, and that by various measures. One of which is the fact that poverty levels are down. By how much, by which yardstick, for which country and why – all are questions worthy of debate. Your answer about the magnitude of reduction in absolute levels of poverty might differ from mine, as might your choice of poverty line. It might also differ in terms of proximate cause.

But not the direction. Your answer about the direction when it comes to reduction of poverty ought to be the same: lower.

So You Think You’ve Understood Macro…

Warning: this post actually isn’t “for everybody”.

Teaching macro is hard enough. Teaching macro to non-economists is all but impossible, because things get really messy really quickly – and I cannot emphasize how messy, and how quickly. The simplest way to teach macro to non-economists is to say that macroeconomics attempts the impossible – it tries to analyze too many variables at the same time in a gloriously inadequate framework, with not enough attention being given to how to understand, measure and forecast risk uncertainty.

And that’s before we’ve even touched the concept of time and inherent unknowability!1

Shackle went on to write that what the market equilibrium conception showed was a world of perfect knowledge frozen in time. It thereby negated itself as being of any use in a world where knowledge of the future is impossible and time moves in one direction. In such a world the action of human beings must be in part based on reason and in part on imagination—specifically, imagination with respect to what various individuals imagine the future might be or even should be. Shackle wrote that neoclassical economics rested on a teleological or pre-determined future and thus left no space for human choice which was inherently tied up with a human being’s capacity to freely imagine what might be in store in the future.

https://en.wikipedia.org/wiki/G._L._S._Shackle#Equilibrium_versus_time

I’m going to sound very woo-woo when I say this, but if at the end of your macro semester you think you’ve understood the subject, then both you and your prof haven’t done a very good job. Macro is hard, and the macroeconomy is inherently unknowable, and yes, I’m willing to die on this hill.

But that does not mean it is not worth studying! Quite the contrary, in fact: it is precisely this reason – the inherent unknowable nature of macro – that makes it so fascinating to study.2

And if you are somewhat familiar with macro – say you’ve spent a semester or so studying it, maybe a bit more – then a good way to check if you have “understood” the subject is to read this lovely little essay by Trevor Chow. (Please, be warned, if you have not had a course in theoretical macro, this essay will make very little sense, and you absolutely should not read it. )

Description: The goal is to bring you up to speed from knowing nothing about business cycle macroeconomics till you know everything you want to know about it at an intermediate macro level within a single post. We’ll mess around with the notion of goods and money market equilibrium to see where it takes us, though if you want to get to the interesting stuff and already know enough about IS-LM etc, feel free to skip to Part 4 and onwards. This is probably, even more than my growth series, the hardest I’ve tried at making things accessible and clear, so please do get in touch if you think there are things which are underexplained or could be rewritten. And check out Miles Kimball and Nick Rowe, whose ideas I borrow very generously from in this post.

https://tmychow.com/blog/2021/03/29/the-fallacy-of-composition

It’s very simply written, and is easily understandable – and trust me, that is hard to do when it comes to macro. It covers a lot of useful concepts, and there is a lot of back and forth between various schools of thought in macroeconomics.

My favorite excerpt was this one:

Macroeconomics is itself quite difficult, because even in the simplest business cycle models we are interested in all sorts of things: output, consumption, investment, the real interest rate, the nominal interest rate, prices, the money supply and inflation. Squeezing all of this into a static model is nigh impossible. Although I do think the canonical IS-LM model can be a bit deceptive with respect to interest rates, the idea of reconciling the goods and money markets is a useful approach. And by putting the IS-LM model through its paces, we’ve already illustrated some important ideas:

That the short run is a monetary question and not one of price adjustment
That there can be indeterminacy or unstable equilibria with bad monetary regimes
That liquidity traps and debt deflation can cause problems, but liquidity traps are really expectations traps
That there are good reasons for the Taylor rule and the Taylor principle

https://tmychow.com/blog/2021/03/29/the-fallacy-of-composition

Again, let me reiterate my basic point: if you are left with the feeling that you “get” macro, beware. Read more, and keep asking how you might be wrong in your understanding of the subject. And excellent places to begin would be Frank Knight and GLS Shackle – even the Wikipedia articles are more than enough to get started!

Bonus reading material: Snowdown and Vane.3

I’ve said it before, and I’ll say it again: macro is hard!

  1. I’m genuinely curious: if you’ve been taught a course in theoretical macro, did G.L.S. Shackle ever come up for discussion?[]
  2. Quite like studying theology, no?[]
  3. These prices make no sense whatsoever. Pah.[]

What is common between the AER and markets in Nashik?

Not a joke, that is a genuine question.

The AER, by the way, is the American Economic Review. Getting published in the AER for an economist is like a cricketer getting to a century in a Test at Lords. Although drawing this analogy does remind me of what Harsha Bhogle said about Sachin and the Lord’s honours board.1. Nashik, of course, is a city in Maharashtra.

So what’s the reason for the title of today’s blog post?

Exhibit A:

Exhibit B:

Amid rising Covid-19 cases in Maharashtra, the Nashik district administration has now issued new restrictions to limit people from visiting the markets unnecessarily. The people in Nashik will now have to pay ₹5 per person for an hour every time they visit any market in the city. news agency ANI reports.

https://www.livemint.com/news/india/new-covid-19-restrictions-in-nashik-now-pay-rs-5-for-hour-long-market-visit-11617154785051.html

In the boring but functional language of the economist, no free entry in these markets anymore.2.

What should we anticipate in terms of effects of such policies? Why? Are these policies good, or bad?

  1. Frivolous visits to both markets become rarer than before. In both cases, that was the intended outcome.
  2. In Nashik’s case, the price isn’t just 5 rupees, but also the time that you will have to spend waiting in line before you can cough up the fie rupees. Plus, the fine print says that if you end up spending more than one hour, you will have to pay 500 rupees as an additional fine.
  3. 1000 dollars is steep even by American standards. It is just completely out of reach for most of the rest of the planet. 5 rupees is nowhere close to being a back-breaking amount for most Indians. Does that make the AER price too high and the Nashik price too low? I think so, but that then begs the question of what the price should be in each case.
  4. You’ll “bunch together” a number of separate visits to the market. You won’t just pop down to the market to buy half a litre of milk in the morning and then pop back later in the day for some onions. You’ll combine the two trips. That is the intended outcome, so this is a good thing! But in the case of the AER entry fee, you’ll want to “get your money’s worth” – which means there is a chance that your paper will end up being longer than would otherwise have been the case. This is nobody’s idea of a good idea!
  5. Neighbours might get together and deputize one person to go get the shopping done. Again, that’s wonderful! Authors will get together too, that is, co-authorship will go up. Free <cough> rider <cough> problems?
  6. At the margin, sellers in Nashik’s markets are incentivized to figure out home delivery options. Again, wonderful! Since getting published in the AER is anything but a perfectly competitive market (just the one seller, by definition), AER has no such incentive. But the substitution effect will come into play, no? Other journals will see more papers being submitted. And if those journals raise prices, then fewer papers will be submitted all around. Personally, I don’t see this as such a big problem.3

(Here’s Tyler Cowen on other, related points about the AER pricing.)

As a student of economics, you should be able to see the similarity between both of these pricing calls, and also see the differences. That allows you to begin to think through whether these will, in fact, be good ideas or not, and why. I’m sure that there are many other points to think about in both cases.

If you are a student of microeconomics (and who isn’t, really), it might be worth your while to think about what I am missing in my analysis. Please, feel free to let me know!

  1. Sachin famously never managed to score a century at Lord’s, and therefore his name isn’t up on the Lord’s honours board. Harsha Bhogle apparently asked whose loss it was, Sachin’s, or Lord’s[]
  2. To be clear, the AER thing was an April Fool’s joke.[]
  3. To be clear, research may not go down. The attempt to publish that research will. And I’m ok with that![]

The Heider and Simmel Animation

What did you think was being shown here? Now read this blogpost!

Sylvia Plath’s Food Diaries

Seems like such a mundane tweet, unless you know who Sylvia Plath was, of course. The entire account is just “Everything Sylvia Plath ate, according to her journals, her letters, her poems, The Bell Jar, and other miscellany” It has been lovingly curated.

So who was Sylvia Plath?

Sylvia Plath was one of the most dynamic and admired poets of the 20th century. By the time she took her life at the age of 30, Plath already had a following in the literary community. In the ensuing years her work attracted the attention of a multitude of readers, who saw in her singular verse an attempt to catalogue despair, violent emotion, and obsession with death. In the New York Times Book Review, Joyce Carol Oates described Plath as “one of the most celebrated and controversial of postwar poets writing in English.” Intensely autobiographical, Plath’s poems explore her own mental anguish, her troubled marriage to fellow poet Ted Hughes, her unresolved conflicts with her parents, and her own vision of herself.

https://www.poetryfoundation.org/poets/sylvia-plath

Here is her bibliography on Wikipedia, and here is NY Times coverage of Sylvia Plath.

Via the truly excellent splainer.in

(I am anything but an expert on poetry, and you should keep that in mind!)

Doing a PhD

Abhishek had a pretty interesting question on last Friday’s post:

“Is doing a PhD still worth it?”

I don’t know (and deliberately haven’t asked him) what he means by “still”. I am going to interpret that to mean “in recent years”. And my answer is the same as any other economists’ answer: it depends.

What does it depend on, you ask?

  1. Don’t do a PhD to learn a topic, or master one. That happens by working on a topic in the real world for many years. It doesn’t happen by studying a topic for many years. Some of the brightest people I know do not have a PhD, and unfortunately, that statement also makes sense the other way round.
  2. Do a PhD to get a job. We have this idea, both here in India but also the world over, that only a PhD has the moral authority to teach on a full time basis. I call bullshit on that idea, but it is not an idea that is going to go away anytime soon. So if you want to be employed by a university on a full time basis as a teacher, do the PhD.
    1. If you want to teach in an Indian university, you can get away by getting a PhD from an Indian University.
    2. If you want to teach abroad, I’d strongly recommend getting a PhD from abroad.
  3. A PhD is a useful signaling device. If you want a leg-up in your career after a decade of working, or if you want more “cred” in your workplace, at seminars and conferences and what not, then get a PhD. A “Dr.” in front of your name is a wonderful signaling device.
  4. It’s got fairly decent “Sharmaji ka beta” powers too. Not, of course, as good as the IIT-IIM badge, but still, it will impress family. The same point at 3., really, but in a non-academic/non-corporate context.
  5. Bottomline: it buys you optionality, and if you think your career is going to be remotely associated with academia in one way or the other, it’s probably, still, a good idea. But it is expensive in terms of time, and has recently become more expensive in terms of dancing through hoops.

But if you ask me, I completely agree with the idea that we should just ban PhD degrees.

Along those lines, I have a modest proposal. Eliminate the economics Ph.D, period. Offer everyone three years of graduate economics education, and no more (with a clock reset allowed for pregnancy). Did Smith, Keynes, or Hayek have an economics Ph.D? This way, no one will assume you know what you are talking about, and the underlying message is that economics learning is lifelong.

https://marginalrevolution.com/marginalrevolution/2019/09/how-to-reform-the-economics-ph-d.html

It’s never going to happen, because we all love signaling far too much, but hey, one can dream.

And you may also want to read this book, Abhishek.

And on an entirely related note, please, anybody reading this: call me Ashish.