Chinese private sector saving could have a huge impact on
the rest of the world if free capital flows become the norm:
http://www.bloomberg.com/news/articles/2015-06-25/with-21-trillion-china-s-savers-are-set-to-change-the-worldAttention Economy
Sunday, June 28, 2015
Friday, June 26, 2015
Measuring Poverty
A new multidimensional poverty measure from Oxford
University:
http://www.ophi.org.uk/wp-content/uploads/Global-Multidimensional-Poverty-Index-2015-8pp-Digital.pdfThursday, June 25, 2015
Meat Consumption and Climate Change
Brahma Chellaney shines light on an issue that is often neglected in climate change discussions:
“In recent decades,
rising incomes have catalyzed a major shift in people’s eating habits, with
meat, in particular, becoming an increasingly important feature of people’s
diets. Given that livestock require much more food, land, water, and energy to
raise and transport than plants, increased demand for meat depletes natural
resources, places pressure on food-production systems, damages ecosystems, and
fuels climate change.”
Global Risk Assessment: The Consensus View is Wrong
A short but excellent piece by Richard Bradley in the WSJ –
“The received wisdom is that emerging markets are risky
and volatile—and therefore are first in the firing line when risk aversion
rises. The latest jitters over U.S. interest rates and Greece have proved no
different. Investors’ exposure to emerging markets stood at a 15-month low in
June, with a big reduction since May, Bank of America Merrill Lynch’s global
fund manager survey showed. That looks increasingly like outdated thinking, however.
The story since the global financial crisis broke out has been one of belated
realization that risks in developed markets have been underpriced. Vast swaths
of apparently low risk or “risk-free” instruments, from U.S. mortgage-backed
securities to eurozone government bonds, turned out to be anything but. …
The temptation with emerging markets always seems to be
to take the glass half-empty view. Take the latest worries about lower
growth—some of which, at least, is due to reforms that could make growth more
sustainable. Emerging countries are still growing faster in aggregate than
their developed peers. They will account for more than 70% of global growth
this year, the International Monetary Fund thinks, and already account for more
than half of world gross domestic product on a purchasing-power-parity basis.
The bigger puzzle surely is the lackluster growth in developed economies given
the sheer scale of stimulus thrown at them since the crisis.”
Wednesday, June 24, 2015
The Austerity Debate
IMF Study on Debt Reduction
http://www.brookings.edu/research/opinions/2015/06/16-imf-study-what-it-says-what-it-doesnt-gale-lim
Bloomberg Markets on Paul Krugman’s battle against
austerity proponents:
An interesting piece by Krugman:
Oxford economist Simon Wren-Lewis on austerity:
Jeffrey Sachs on the right kind of Investment
http://www.project-syndicate.org/print/declining-investment-in-rich-countries-by-jeffrey-d-sachs-2014-10Do We Still Need Public Utilities?
In economics, public utilities occupy a special middle
ground – they are neither fully private nor fully public corporations. With the
rapid decline in the cost of solar power and other green technologies, it is
worth considering if American-style power companies are still necessary? They
may even be hindering the adoption of new and cleaner technologies.
An interesting article on the topic:
The article notes –
“But, in the odd world of regulated utilities, a company like Con Ed traditionally makes money by building more stuff: put in a billion-dollar substation and you can “rate base” it, making customers pay the cost, plus a ten-per-cent markup, for decades. That arrangement worked well when society needed utilities to build the electrical system, to serve everyone, and when the cheapest technical solution involved big plants “pushing electrons in one direction,” Kauffman said. But today “the system is not just energy-inefficient; it’s capital-inefficient.” At any given moment, New York’s utilities are using only about fifty-five per cent of their system capacity. “No other industry uses capital like that anymore,” Kauffman said. The regulations are perverse: new software that can reduce electrical demand must be expensed in the current year, while a new wooden pole can generate that ten-per-cent markup for the utility in the course of its fifty-year life span. A pole makes money—hence, poles.”
“But, in the odd world of regulated utilities, a company like Con Ed traditionally makes money by building more stuff: put in a billion-dollar substation and you can “rate base” it, making customers pay the cost, plus a ten-per-cent markup, for decades. That arrangement worked well when society needed utilities to build the electrical system, to serve everyone, and when the cheapest technical solution involved big plants “pushing electrons in one direction,” Kauffman said. But today “the system is not just energy-inefficient; it’s capital-inefficient.” At any given moment, New York’s utilities are using only about fifty-five per cent of their system capacity. “No other industry uses capital like that anymore,” Kauffman said. The regulations are perverse: new software that can reduce electrical demand must be expensed in the current year, while a new wooden pole can generate that ten-per-cent markup for the utility in the course of its fifty-year life span. A pole makes money—hence, poles.”
Productivity Slowdown
Yale economist Stephen Roach has a wonderful piece on the
slowdown in productivity observed in the US and elsewhere:
“In the US, the
Bureau of Labor Statistics estimates that the length of the average workweek
has held steady at about 34 hours since the advent of the Internet two decades
ago. Yet nothing could be further from the truth: knowledge workers continually
toil outside the traditional office, checking their email, updating
spreadsheets, writing reports, and engaging in collective brainstorming.
Indeed, white-collar knowledge workers – that is, most workers in advanced
economies – are now tethered to their workplaces essentially 24 hours a day,
seven days a week, a reality that is not reflected in the official statistics.
Productivity growth
is not about working longer; it is about generating more output per unit of
labor input. Any undercounting of output pales in comparison with the
IT-assisted undercounting of working hours.”
http://www.project-syndicate.org/commentary/america-china-output-per-worker-productivity-paradox-by-stephen-s--roach-2015-06
http://www.project-syndicate.org/commentary/america-china-output-per-worker-productivity-paradox-by-stephen-s--roach-2015-06
Tuesday, June 23, 2015
Readings on “The Middle Income Trap”
IMF piece on Malaysia and the middle income trap:
Turkey and the middle income trap”
Andrés Velasco on Greece, Argentina and the Middle-Income
Trap
Danny Quah on China
ADB paper on China and the middle income trap:
Why China Will Avoid the Middle Income Trap for Now
Interesting paper from the Levy Institute
The Economist
on the middle income trap debate
Emerging Markets Update
Evolution of India’s
Tech Industry
The Indian tech industry is transforming rapidly:
Urbanization in
China
An interesting case study of urbanization and female
empowerment in China:
http://www.bbc.co.uk/news/resources/idt-dd0e6fd5-12fc-4a4a-a0eb-4ef064900f92Eurozone Economic Update
While the world appears transfixed by the latest developments involving the Greek
debt saga, the 19-member common currency area is actually experiencing some positive economic
momentum:
---
Backgrounder on the Greek Crisis -
An interesting and somewhat sobering piece on the Greek
economy:
http://www.telegraph.co.uk/finance/economics/11687802/The-fight-to-end-Greeces-Great-Euro-Depression.html
http://www.telegraph.co.uk/finance/economics/11687802/The-fight-to-end-Greeces-Great-Euro-Depression.html
Monday, June 22, 2015
Top CEO Pay – Not Really About Rewarding Talent
Democracy versus Meritocracy
Thought-provoking new book – The China Model by Daniel Bell
(Princeton University Press provides access to the Introduction section)
FT’s Gideon Rachman in his review of the book notes
“The China Model will
upset liberals in China and outrage mainstream opinion in the west. Some will
see it as little more than a justification for one-party rule and political
repression. But it is part of the job of academics to ask fundamental questions
that challenge conventional thinking. Bell performs this role admirably in
lucid, jargon-free prose that leads the reader back to some of the most
fundamental questions in political philosophy — refracted through the
experience of contemporary China.”
Matteo Renzi – Italy’s Last Hope?
Italian economy has stagnated for the past fifteen years. Reform-minded
Prime Minster Matteo Renzi might be Italy’s last chance at undertaking
significant structural reforms:
http://www.newyorker.com/magazine/2015/06/29/the-demolition-man
http://www.newyorker.com/magazine/2015/06/29/the-demolition-man
Stay-At-Home Millennials
Interesting new study:
Debt, Jobs, or Housing: What’s Keeping
Millennials at Home?
Zachary Bleemer, Meta Brown, Donghoon Lee, and Wilbert
van der Klaauw
Federal Reserve Bank of New York Staff Reports, no. 700
Abstract
Young Americans’ residence choices have changed markedly over the past fifteen years, with recent cohorts entering the housing market at lower rates and lingering much longer in parents’ households. In this paper, we use rich panel data to document steep increases in the rate of living with parents or other substantially older household members, with youth increasingly forsaking living alone or with groups of roommates. Homeownership at age thirty, correspondingly, shows a steady deterioration following the recession. In order to understand the consequences of this declining independence for young people’s economic lives, and hence for the ongoing U.S. economic recovery, we must understand its origins. We exploit cross-cohort and geographic variation in housing market, labor market, and student debt changes to estimate the relationship between local economic conditions and young Americans’ residence choices. We model flows into and out of co-residence with parents at the individual, county, and state level. Estimates suggest countervailing influences of local economic growth on co-residence: strengthening economic climates support moves away from home, but rising local house prices send independent youth back to parents. Finally, we find that student loans deter independence. All else equal, state-cohort groups who were more heavily reliant on student debt while in school are significantly and substantially more likely to move home to parents when living independently, and are significantly and substantially less likely to move away from parents when living at home.
Young Americans’ residence choices have changed markedly over the past fifteen years, with recent cohorts entering the housing market at lower rates and lingering much longer in parents’ households. In this paper, we use rich panel data to document steep increases in the rate of living with parents or other substantially older household members, with youth increasingly forsaking living alone or with groups of roommates. Homeownership at age thirty, correspondingly, shows a steady deterioration following the recession. In order to understand the consequences of this declining independence for young people’s economic lives, and hence for the ongoing U.S. economic recovery, we must understand its origins. We exploit cross-cohort and geographic variation in housing market, labor market, and student debt changes to estimate the relationship between local economic conditions and young Americans’ residence choices. We model flows into and out of co-residence with parents at the individual, county, and state level. Estimates suggest countervailing influences of local economic growth on co-residence: strengthening economic climates support moves away from home, but rising local house prices send independent youth back to parents. Finally, we find that student loans deter independence. All else equal, state-cohort groups who were more heavily reliant on student debt while in school are significantly and substantially more likely to move home to parents when living independently, and are significantly and substantially less likely to move away from parents when living at home.
FT Masters in Finance Rankings
Masters in finance – 2015 Ranking
Does a Masters in Finance offer an edge over the CFA?
http://www.ft.com/cms/s/2/db7a4838-1352-11e5-ad26-00144feabdc0.html#axzz3dnaSrVYP
http://www.ft.com/cms/s/2/db7a4838-1352-11e5-ad26-00144feabdc0.html#axzz3dnaSrVYP
Sunday, June 21, 2015
Weekend Videos
Norwegian Women’s Soccer Team’s Hilarious Spoof [A Brilliant
Take Down of Stereotypes Associated with Female Soccer Players]
Book TV (C-Span): Martin Ford talks about his book Rise
of Robots: Technology and the Threat of the Jobless Future
http://www.c-span.org/video/?326298-1/book-discussion-rise-robotsPolicymaking in the Real World – Hardly Ideal
A terrible example of real world policymaking from
Louisiana:
International Yoga Day
Modi’s attempt at projecting India’s ‘soft power’:
http://www.wsj.com/articles/bend-it-like-narendra-modi-turns-to-tradition-with-yoga-1434874237
William Dalrymple on the history of Yoga:
http://www.nybooks.com/articles/archives/2014/mar/06/under-spell-yoga/Saturday, June 20, 2015
Books for the Intelligent Reader
Genuinely thought-provoking and intellectually stimulating
books:
Sapiens: A Brief
History of Humankind by Yuval Noah Harari
Why Information Grows:
The Evolution of Order, from Atoms to Economies by Cesar Hidalgo
Geek Heresy: Rescuing
Social Change from the Cult of Technology by Kentaro Toyama
Who Gets What — and
Why: The New Economics of Matchmaking and Market Design by Alvin E. Roth
Misbehaving: The
Making of Behavioral Economics by Richard H. Thaler
Do No Harm: Stories of
Life, Death, and Brain Surgery by Henry MarshTrade Agreements - Not Really About Trade
Any half intelligent economist would be supportive of agreements
that reduce traditional trade barriers (tariffs, quotas, etc.). However, most
modern economies have few trade barriers. Increasingly, multilateral trade
agreements are about the protection of multinationals and investors from the
rich nations.
Trade-Agreement Troubles BY JAMES SUROWIECKI offers a brief
and excellent summary of the reasons why many are dismayed by agreements such
as the TPP. Surowiecki notes:
“But these days
signing such agreements is risky for countries. I.S.D.S. lawsuits used to be
rare, but they’re becoming a growth industry. Nearly a hundred have been filed
in the past two years, as against some five hundred in the quarter century
before that. Investor protection, previously a sideshow in corporate law, is
now a regular part of law-school curricula. “We’ve also seen an expansion in
the types of claims that have been brought,” Lise Johnson, the head of
investment law and policy at the Columbia Center on Sustainable Investment,
told me. I.S.D.S. was originally meant to protect investors against seizure of
their assets by foreign governments. Now I.S.D.S. lawsuits go after things like
cancelled licenses, unapproved permits, and unwelcome regulations.”
Update:
Roger Lowenstein on David Ricardo, Comparative Advantage
and the TPP:
http://fortune.com/2015/06/22/top-fast-track-david-ricardo/
http://vivekjayakumar.blogspot.com/2015/05/free-trade-agreements-and-mncs.html
http://vivekjayakumar.blogspot.com/2015/06/multilateral-trade-agreements.html
http://vivekjayakumar.blogspot.com/2015/06/multilateral-trade-agreements.html
Friday, June 19, 2015
China versus India - Charts
India’s Economy – Charts
China’s Economy – Charts
Related:
An interesting piece from Bloomberg Markets magazine on
the economic competition between the world's two most populous countries:
http://www.bloomberg.com/news/articles/2015-06-16/india-rising-china-slowing-doesn-t-necessarily-mean-modi-winsEvolution of the Job Search Process
Companies are taking longer to finalize their hiring
decisions. A WSJ piece notes
“the average
interview process in the U.S. took 22.9 days in 2014, up from just 12.6 days in
2010...
The increase in the
length of the job-interview process has occurred not only in the U.S., but in
France, Germany, the U.K., Australia and Canada according to the report. That
suggests that U.S. labor market or health-care regulations aren’t the primary culprit
behind the increasing length of the hiring process. Mr. Chamberlain’s
theory is that as the economy shifts to more-skilled and less-routine jobs, the
hiring process will naturally get more complicated.”
Wednesday, June 17, 2015
The Perennially Overoptimistic Central Bank
The Fed is Perennially Overoptimistic (or, Fed Economists
Suck at Forecasting):
http://www.economist.com/blogs/graphicdetail/2015/06/daily-chart-14American Universities – The Rich Get Richer
A great chart from The
Economist:
The Economist notes –
“Large donations to
well-funded universities, which come primarily from foundations and former
students, are becoming increasingly common. According to The Chronicle of
Higher Education, American universities have received over 100 private gifts of
$100m or more over the last decade. Roughly a third of these have gone to Ivy
League schools. Such giving is making rich universities even richer. Data from
the Council for Aid to Education show that Stanford University tapped its
donors for nearly $1bn in 2014, or $50,000 for each of its 18,000 students.
Berkeley, meanwhile, raised just $10,000 per student. Philanthropy may be
tilting America’s higher education system even further in favour of the rich.”
Related:
http://vivekjayakumar.blogspot.com/2010/10/worlds-richest-university-gets-richer.htmlChina – Domestic and International Development Agenda
Nobel Prize winning economist Mike Spence on China’s
global growth strategy:
WSJ on AIIB - How
China Plans to Run AIIB: Leaner, With Veto
The article notes –
“As one of China’s
biggest forays in trying to reshape the global order, the bank aims to set high
standards for efficiency and transparency—and counter criticisms it will be a
tool of Chinese foreign policy, the people close to the bank said.”
AIIB and India
China continues its pragmatic domestic reform strategy:
China’s Broad Group is attempting to
revolutionize architecture and high rise construction:
http://www.bbc.co.uk/news/resources/idt-3cca82c0-af80-4c3a-8a79-84fda5015115Water – A Precious Commodity in the 21st Century
IMF takes a look at water management challenges:
Related: NASA satellites indicate massive depletion of
underwater aquifers
Tuesday, June 16, 2015
Demographic Shifts and Asset Markets
An excellent WSJ article - Money Flows Out of 401(k) Plans as Baby Boomers Age [June 16, 2015]
– notes:
“Withdrawals from
401(k) plans are now exceeding new contributions as baby boomers age, a shift
that could have profound implications for the U.S. retirement industry.”
Monday, June 15, 2015
Larry Summers on International Trade
Harvard economist Larry Summers offers an interesting
analysis of multilateral trade issues:
http://www.washingtonpost.com/opinions/rescuing-the-free-trade-deals/2015/06/14/f10d82c2-1119-11e5-9726-49d6fa26a8c6_story.html
Related:
Columbia economist and leading international trade
scholar Jagdish Bhagwati - 2012 interview:
http://www.cfr.org/trade/exclusive-interview-worlds-leading-trade-scholar-jagdish-bhagwati/p29600Structural Reforms in India
Bloomberg’s William Pesek notes:
“Rajan and Modi
were both probably buoyed by recent news that tech giant Foxconn Technology is
looking at manufacturing Apple's iPhone in India. It's an endorsement of the
country's current economic stewardship, and an indication of India's broader
potential as a manufacturing hub, especially given China's determination to
move its production upmarket from basic manufacturing to software design,
aerospace and robotics. But if Modi hopes to reach the full potential of his
“Made in India” campaign, it will require bold government action -- action that
Rajan's quid pro quo strategy could help
motivate.”
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