Links for 2nd May, 2019

  1. “I think that most capitalists don’t know how to divide the economic pie well and most socialists don’t know how to grow it well, yet we are now at a juncture in which either a) people of different ideological inclinations will work together to skillfully re-engineer the system so that the pie is both divided and grown well or b) we will have great conflict and some form of revolution that will hurt most everyone and will shrink the pie.”
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    Written from an America centric viewpoint, but the article is worth reading for the wealth of data it shares, as also for the viewpoint about the need to reform capitalism.
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  2. “The solution, Wishnatzki believes, is to make a robot that can pick strawberries. He and a business partner, Bob Pitzer, have been developing one for the past six years. With the latest iteration of their invention—known around the farm as Berry 5.1—they are getting close.”
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    Strawberry fields forever. The article is worth reading because it speaks about robots, unemployment, demographics, immigration and the inevitability of agriculture becoming ever more mechanized.
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  3. “He also had a warning to anyone who assumes it will be “business as usual” once America’s Trump fever breaks. The idea that the Trump presidency is some sort of accident, he says, is a fantasy.”
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    An interview with the outgoing French ambassador to America. Worth reading on trade, Israel, Iran and much else besides.
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  4. “The Scrabble career of Nigel Richards went from great to astounding this week, after he won the French-language Scrabble World Championships. A New Zealand native, Richards has won several English-language titles; his new victory follows weeks of studying a French dictionary.”He doesn’t speak French at all, he just learnt the words,” his friend (and former president of the New Zealand Scrabble Association) Liz Fagerlund tells the New Zealand Herald. “He won’t know what they mean, wouldn’t be able to carry out a conversation in French I wouldn’t think.”
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    Oddly depressing, for multiple reasons. Takes the romance out of Scrabble, for one, but also points to the inevitability of automation.
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  5. “What’s woefully underexplored by economists is what the prevalence of caste implies to the Indian economy. A basic premise of the free market model is the absence of entry barriers—not just for firms keen to enter markets for goods and services, but also for people pursuing career options. In theory, companies that are under the pressure of competition to perform would want to hire workers in a way that maximizes the productivity of their workforce; a caste bias would probably stymie the cause of corporate efficiency. None of it may be overtly or even consciously done, but the effects of such a tendency could add up. Caste, thus, would result in an inefficient allocation of human resources across the economy. ”
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    Worth reading if you are starting to learn economics, and aren’t quite sure what competition and barriers to entry mean – but also if you are a student of India today.
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Links for 24th April, 2019

  1. “Really? When is the last time you ran a search with DuckDuckGo? Too often, he seems to be stretching the evidence. He argues that, given the social aspects of the workplace, “companies are actually responsible for some of our most important relationships.” But that’s a function of work — not of corporate life. People at nonprofits make friends, too. Cowen asserts in defense of Amazon, “My options as a book consumer never have been better.” He includes as evidence of a competitive book market the option (which he doesn’t condone) of “illegal downloads of free PDFs.” Jeff Bezos must rue such defenders. (Bezos founded Amazon and owns The Washington Post.)”
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    Roger Lowenstein reviews Tyler Cowen’s latest book. I myself have not read it yet, but the review was interesting to me, in particular this excerpt about illegal PDF’s and how they encourage competition.
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  2. “Alwyn’s related analysis of published studies is even more striking. He shows that, in a sample of 1359 IV regressions in 31 papers published in the journals of the American Economic Association,
    “… statistically significant IV results generally depend upon only one or two observations or clusters, excluded instruments often appear to be irrelevant, there is little statistical evidence that OLS is actually substantively biased, and IV confidence intervals almost always include OLS point estimates.” ”
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    Econometric nerds/students only (consider yourself warned) – but IV isn’t as great as it is made out to be. Occam’s razor is massively ignored in econometrics.
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  3. “The Fiscal Affairs Department and the Institute for Capacity Development of the IMF are pleased to announce that the online course on Public Financial Management (PFM) will relaunch on May 1, 2019 and remain open year-round. In its two previous offerings, this free online course has been taken by more than 2,200 participants in 194 countries, with very high satisfaction rates. Taught by more than 15 experts of the Fiscal Affairs Department, the course is open for government officials, staff of bilateral and multilateral development agencies, civil society organizations, parliamentarians, academics and the general public. The course has been updated in 2019 to reflect the revisions brought to IMF’s PFM standards and tools and adopted in the last twelve months – namely the Public Investment Management Assessment (PIMA) framework and the Natural Resource Management pillar of the Fiscal Transparency Code (FTC).”
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    You might, as a student of economics or policy making, want to consider taking this course.
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  4. “So why, then, does the government tax, under the MMT view? Two big reasons: One, taxation gets people in the country to use the government-issued currency. Because they have to pay income taxes in dollars, Americans have a reason to earn dollars, spend dollars, and otherwise use dollars as opposed to, say, bitcoins or euros. Second, taxes are one tool governments can use to control inflation. They take money out of the economy, which keeps people from bidding up prices.And why does the government issue bonds? According to MMT, government-issued bonds aren’t strictly necessary. The US government could, instead of issuing $1 in Treasury bonds for every $1 in deficit spending, just create the money directly without issuing bonds.”
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    Yet another explainer of MMT – it’s counterintuitive (at least to me), and I’m still not sure it makes sense and will work – but I understand it better than I did before upon reading this article.
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  5. “This is an issue for economics too: the construction of the deflators used to turn nominal pound or dollar GDP into ‘real’ GDP, on which so much policy hangs, relies on a theory of constant, known preferences which determine the utility of consumption, and yet modern economic growth is all about creating wants for new goods and services for which preferences have to be created. So at a time of rapid innovation it is not at all clear what the deflators and ‘real’ GDP measures are measuring.”
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    Diane Coyle reviews a book that helps us understand Amartya Sen’s work better. I found this excerpt above quite interesting.

Links for 28th March, 2019

  1. “While nightlife and entertainment are certainly drivers of the night-time economy, they need not be the only ones. According to a report released by the London mayor’s office, 1.6 million people in London—constituting more than a third of the workforce—worked at night in 2017. Of these, 191,000 worked in health and 178,000 in professional services, with nightlife coming in third at 168,000. These were closely followed by transport, automotive, IT and education.In other words, the city’s nighttime economy is not merely bars and restaurants, but an extension of its day-time economic activities as well. It is estimated that the night component comprises 6-8% of the city’s economy and contributes £18-23 billion in gross value added to the British economy. The figures are approximations but significant enough for Mayor Sadiq Khan to champion the night-time economy and appoint a “Night Czar” to manage it.”
    In which Nitin Pai makes the argument for having more shops, establishments and services operate at night as well, in India. A useful read for students of urbanization, microeconomics and life in India.
  2. “I think that our economic system reflects our understanding of humankind, and that understanding has been developing, with especial rapidity lately. You have to understand people first before you can understand how to devise an economic system for them. And I think our understanding of people has been accelerating over the last century, or even half-century.”
    Robert Shiller chooses five books to help us understand capitalism better. I haven’t read all of them, and read one a very long time ago (Theory of Moral Sentiments) – but this has tempted me to go and read at least A.O. Hirschman’s book, if not all of them!
  3. “The problem with cricket in most cricket-playing countries, certainly in India, is that the cricket market is what economists call a monopsony. A monopsony is a market in which there is only one buyer for a particular class of goods and services. Until now, a young Indian cricketer who wanted to play at the highest level could only sell his services to the BCCI. If it treated him badly and did not give him his due rewards, he had no other options open to him.”
    I am happy to admit that I got the IPL gloriously wrong – I approached the IPL while wearing my cricketing purist hat, but I really should have approached it wearing my economist’s hat. Which is exactly what Amit Varma did, ten years ago. Monopsony, the power of markets, incentive mechanisms, it’s all here.
  4. “The 737 assembly line in Renton, Wash. is a marvel of lean manufacturing. The line inches forward little-by-little as assembly proceeds. Born from Toyota’s production methods, the process is one of continual improvement. It’s what made the 737 the lifeblood of Boeing in the first place and why this crisis, taken to its most extreme, could threaten the company’s very existence. But the assembly line also comes with a tool called an Andon cord. The cord empowers all employees to pull it and stop the line if something is amiss or requires investigation and needs fixing. The rest of the world has already pulled it.”
    A mostly understandable explanation of the possible reasons behind the crash – but when I say possible reasons, I do not mean the technical ones. Why compromises had to be made, and the impact of those compromises.
  5. “I’m happy for the descriptive part of economics to stay as it is. The prescriptive part, when we tell people what to do – that one should be much more broad. In fact, we should stop using just economics and take all kinds of ideas from psychology, sociology, anthropology, philosophy and economics, and test which ones work, which ones don’t work and under what conditions. There is no question that behaviour is the ultimate goal – to try to understand behaviour, and how to change or modify it. I hope we can create a discipline that is much more empirically based and data driven. Maybe we can call it “applied social sciences”. It will draw from all the social sciences equivalently as we approach problems in the real world, and try to find solutions for them.”
    Dan Ariely on five books that he’d recommend when it comes to understanding behavioral economics better. If you are interested in this topic, as I am, the interview is great reading – and the books too! I have not read Mindless Eating, and will begin it soon.