Economics and International Affairs Blog: July 2015

Friday, July 31, 2015

China’s Female Billionaires

An interesting piece in the NYT (“How a Chinese Billionaire Built Her Fortune”) observes:

http://www.nytimes.com/2015/08/02/business/international/how-zhou-qunfei-a-chinese-billionaire-built-her-fortune.html

“No country has more self-made female billionaires than China. The Communist party, under Mao Zedong, promoted gender equality, allowing women to flourish after capitalism started to take hold, according to Huang Yasheng, an expert in China’s entrepreneurial class and a professor of international management at M.I.T.”

Thursday, July 30, 2015

Economic Development – Escape from Poverty

New research on programs to alleviate poverty:

http://www.economist.com/node/21660133

The Decline in US Potential Growth Rate

Bloomberg piece - The U.S. Economy's Top Speed Has Probably Been Overestimated for Years

http://www.bloomberg.com/news/articles/2015-07-30/the-u-s-economy-s-top-speed-has-probably-been-overestimated-for-years

Following another round of revisions (will they ever end?), US GDP growth rate appears to have averaged just 2.2% in recent years:

http://blogs.wsj.com/economics/2015/07/30/the-worst-expansion-since-world-war-ii-was-even-weaker/

India’s IT Sector Grows Up

Changes at leading Indian IT firm Infosys indicate a rapidly changing industry landscape:

http://forbesindia.com/article/boardroom/vishal-sikka-the-outsider-at-infosys-wants-change/40783/0

http://forbesindia.com/article/boardroom/the-end-of-indias-it-miracle-vishal-sikka/40787/0

Book Recommendations - Updated List

Book recommendations (listed by topic/region):

Behavioral Economics/Market Design –

Misbehaving: The Making of Behavioral Economics by Richard H. Thaler

Who Gets What — and Why: The New Economics of Matchmaking and Market Design by Alvin E. Roth

Labor Market and Technology –

The New Geography of Jobs by Enrico Moretti

Rise of the Robots: Technology and the Threat of a Jobless Future by Martin Ford

Inequality/Economic Mobility –

Capital in the Twenty-First Century by Thomas Piketty

Inequality: What Can Be Done? by Anthony B. Atkinson

The Globalization of Inequality by François Bourguignon

Financial Crises –

The Shifts and the Shocks: What We’ve Learned-and Have Still to Learn-from the Financial Crisis by Martin Wolf

Boomerang: Travels in the New Third World by Michael Lewis

Hall of Mirrors: The Great Depression, The Great Recession, and the Uses-and Misuses-of History by Barry Eichengreen

The Road to Recovery: How and Why Economic Policy Must Change by Andrew Smithers

Asia –

How Asia Works by by Joe Studwell

Indonesia, Etc.: Exploring the Improbable Nation by Elizabeth Pisani

India: A Portrait by Patrick French

Reimagining India: Unlocking the Potential of Asia's Next Superpower by McKinsey & Company Inc.

Unbalanced: The Codependency of America and China by Stephen Roach

Deng Xiaoping and the Transformation of China by Ezra F. Vogel

Strange Stones: Dispatches from East and West by Peter Hessler [China]

River Town: Two Years on the Yangtze by Peter Hessler [China]

Age of Ambition: Chasing Fortune, Truth, and Faith in the New China by Evan Osnos

Bending Adversity: Japan and the Art of Survival by David Pilling

Africa –

The Fortunes of Africa: A 5000-Year History of Wealth, Greed, and Endeavor by Martin Meredith

The Looting Machine by Tom Burgis

Toxic Aid: Economic Collapse and Recovery in Tanzania by Sebastian Edwards

The Bright Continent: Breaking Rules and Making Change in Modern Africa by Dayo Olopade

The Lion Awakes: Adventures in Africa's Economic Miracle by Ashish J. Thakkar

Latin America –

Left Behind: Latin America and the False Promise of Populism by Sebastian Edwards

Brazil: The Troubled Rise of a Global Power by Michael Reid

The Accidental President of Brazil: A Memoir by Fernando Henrique Cardoso

History/Political Economy/International Affairs/Development Economics –

The Prize: The Epic Quest for Oil, Money & Power by Daniel Yergin

The Fourth Revolution: The Global Race to Reinvent the State by John Micklethwait and Adrian Wooldridge

Political Order and Political Decay: From the Industrial Revolution to the Globalization of Democracy by Francis Fukuyama

The China Model: Political Meritocracy and the Limits of Democracy by Daniel A. Bell

The Dictator's Handbook: Why Bad Behavior is Almost Always Good Politics by Bruce Bueno de Mesquita and Alastair Smith

Currency Politics: The Political Economy of Exchange Rate Policy by Jeffry A. Frieden

The Tragedy of Great Power Politics by John J. Mearsheimer

Lawrence in Arabia: War, Deceit, Imperial Folly and the Making of the Modern Middle East by Scott Anderson

Farthest Field: An Indian Story of the Second World War by Raghu Karnad

The Raj at War: A People’s History of India’s Second World War by Yasmin Khan

Midnight’s Furies: The Deadly Legacy of India’s Partition by Nisid Hajari

Empire of Cotton: A Global History by Sven Beckert

State, Economy and the Great Divergence: Great Britain and China, 1680s-1850s by Peer Vries

How Does My Country Grow?: Economic Advice Through Story-Telling by Brian Pinto

Why Information Grows: The Evolution of Order, from Atoms to Economies by Cesar Hidalgo

The Idealist: Jeffrey Sachs and the Quest to End Poverty by Nina Munk

Global Capitalism: Its Fall and Rise in the Twentieth Century by Jeffry A. Frieden

Geek Heresy: Rescuing Social Change from the Cult of Technology by Kentaro Toyama

The Age of Sustainable Development by Jeffrey D. Sachs

Wednesday, July 29, 2015

Asia’s Fab 50 Companies

Forbes ranking of top publicly listed companies in Asia:

http://www.forbes.com/sites/liyanchen/2015/07/22/2015-fab-50-asias-best-big-public-companies/

Spence on China’s Equity Bubble

Nobel Laureate Michael Spence offers his take on China’s stock market bubble:

http://www.project-syndicate.org/commentary/china-equity-bubble-correction-by-michael-spence-2015-07

Tuesday, July 28, 2015

Interesting Items – Tuesday, July 28, 2015

Profile of Yanis Varoufakis – the former Greek finance minister

http://www.newyorker.com/magazine/2015/08/03/the-greek-warrior

A fascinating case study into the labor practices of Subaru and other Japanese companies highlights the desperate need for Japan to reforms its immigration system:

http://www.reuters.com/investigates/special-report/japan-subaru/

Is there anything more uncivilized than the behavior of ‘big game hunters’?

http://www.telegraph.co.uk/news/worldnews/africaandindianocean/zimbabwe/11767119/Cecil-the-lions-killer-revealed-as-American-dentist.html

India – Emergence of a Naval Power

http://www.bloomberg.com/news/articles/2015-07-28/submarine-killers-showcase-india-s-61-billion-warning-to-china

Tributes Pour in for the Much Beloved Former President of India – Kalam

http://blogs.reuters.com/india-expertzone/2015/07/28/kalam-saw-india-as-a-knowledge-superpower-narendra-modi/

http://www.livemint.com/Opinion/7sEk6boIe8j6jfdV9PCPqL/APJ-Abdul-Kalam-The-president-with-wings-of-fire.html

Cycling Culture in Chennai

http://www.theguardian.com/cities/2015/jun/23/chennai-india-first-cycle-cafe

Market Intervention – The New Normal

Yale economist Stephen Roach, as usual, has written an insightful piece – Market Manipulation Goes Global
http://www.project-syndicate.org/commentary/china-stock-market-bubble-intervention-by-stephen-s--roach-2015-07

Sunday, July 26, 2015

An Unhealthy Stock Market

An astonishing fact from the WSJ –

http://www.wsj.com/articles/the-only-six-stocks-that-matter-1437942926

“Six firms — Amazon, Google, Apple, Facebook, Netflix and Gilead Sciences — account for more than half of the $664 billion in value added this year to the Nasdaq Composite. That is raising concerns about the health of the market.”

Economics of the ‘Gig Economy’

An interesting piece from NYU professor Arun Sundararajan

http://www.theguardian.com/commentisfree/2015/jul/26/will-we-get-by-gig-economy

Sundararajan observes:

“But these platforms [Uber, Airbnb, Etsy and TaskRabbit] are by no means merely the purveyors of Smith’s invisible hand. Rather, the hand they play in facilitating exchange is decidedly visible. Uber, not individual drivers, sets prices. Airbnb trains its hosts to be better providers of hospitality. Etsy facilitates seller community building. All of them provide user-generated feedback systems, creating a high-quality consumer experience. Much like an organisation building a brand might.

So it seems like we’ve invented a new institutional form – the peer-to-peer platform – a digitally powered hybrid between organising economic activity through the market and within the organisation. And because these platforms provide layers of trust, brand and expertise on demand, the need for specialising before you’re qualified to become a provider is reduced. Almost anyone with talent can become a part-time hotelier through Airbnb or an artisan retailer on the side through Etsy. Any reasonably competent driver can morph into a provider of commercial transportation by plugging into Uber or BlaBlaCar.”

http://vivekjayakumar.blogspot.com/2015/06/the-sharing-economy.html

Saturday, July 25, 2015

The Rise and Fall of Gold

An interesting piece in the FT on the decline in the price of gold after a 12 year bull run [gated]:

http://www.ft.com/cms/s/0/bc715480-31f3-11e5-8873-775ba7c2ea3d.html

Related:
Demise of Gold

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/25/gold-is-doomed/

The recent steep decline in gold price is likely driven by a complex set of factors -

http://www.telegraph.co.uk/finance/commodities/11752016/Speculators-smash-gold-as-dollar-squeeze-tightens.html

Reexamining Performance Evaluation

Accenture, Deloitte and others reconsider employee performance evaluation methodology:

http://www.newyorker.com/business/currency/the-push-against-performance-reviews

http://www.washingtonpost.com/blogs/on-leadership/wp/2015/07/21/in-big-move-accenture-will-get-rid-of-annual-performance-reviews-and-rankings/

“Accenture is joining a small but prominent list of major corporations that have had enough with the forced rankings, the time-consuming paperwork and the frustration engendered among managers and employees alike.”

Friday, July 24, 2015

Skills and Wages - A Complicated Relationship

An excellent piece on the dramatic variations in wage growth that many fields are experiencing:

http://www.nytimes.com/2015/07/25/business/economy/salary-gap-widens-as-top-workers-in-specialized-fields-reap-rewards.html

“A new study by the Bureau of Labor Statistics shows that pay near the top of the scale in fields like art, entertainment and media was six times what it was near the bottom in 2014, compared with four times in 2007. The best-paid health care professionals now earn nearly four times what workers in the lowest tier make, compared with less than three times in 2007.

Nor are industries like finance and real estate, which have gilded New York City’s economic fortunes in recent years, immune.

For workers making less than $50,000 in these fields, wages fell last quarter, while their colleagues in the $75,000 and above category enjoyed a 3.4 percent rise in wages, according to ADP, the payroll processing giant.”

British Universities – International Impact

An interesting piece in The Spectator by James Bartholomew:

How British universities spread misery around the world: From Nehru’s India to Varoufakis’s Greece, the trendy doctrines of our universities have much to answer for
http://www.spectator.co.uk/features/9589072/how-british-universities-spread-misery-around-the-world/

Economic Development: Colonialism and Historical Path Dependence

Shashi Tharoor on British Rule in India (Classic Oxford University Debate Video):

Shashi Tharoor – an Indian MP has a doctoral degree from Tufts University (Fletcher School of Law and Diplomacy)

Iyer, Lakshmi. "Direct versus Indirect Colonial Rule in India: Long-term Consequences." Review of Economics and Statistics 92(4): 693-713, 2010.

http://www.mitpressjournals.org/doi/pdfplus/10.1162/REST_a_00023

Abhijit Banerjee & Lakshmi Iyer, 2005. "History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India," American Economic Review, American Economic Association, vol. 95(4), pages 1190-1213, September.

http://www.econ.nyu.edu/user/debraj/Courses/Readings/BanerjeeIyer.pdf

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Excellent new books on Britain, India and the Raj:

Three of the best reviewed non-fiction books this year –

Farthest Field: An Indian Story of the Second World War by Raghu Karnad

The Raj at War: A People’s History of India’s Second World War by Yasmin Khan

Midnight’s Furies: The Deadly Legacy of India’s Partition by Nisid Hajari

[INTERVIEW: http://www.charlierose.com/watch/60584741]

RELATED BOOK REVIEWS:

http://www.spectator.co.uk/books/9553082/the-forgotten-army-abandoned-by-the-british-to-the-horrors-of-partition/

http://www.spectator.co.uk/books/9587602/britain-didnt-fight-the-second-world-war-the-british-empire-did/

http://www.newstatesman.com/culture/2015/07/indias-second-world-war-history-you-dont-hear-about

http://www.telegraph.co.uk/culture/books/bookreviews/11683954/The-bloody-fight-for-the-Raj.html

Chinese Overseas Investment

China’s growing role as a provider of capital to the rest of the world:

http://www.nytimes.com/2015/07/26/business/international/chinas-global-ambitions-with-loans-and-strings-attached.html

Edmund Phelps on Economics

Nobel Laureate Edmund Phelps offers his unique take on the challenges plaguing Western economies:

http://www.nybooks.com/articles/archives/2015/aug/13/what-wrong-wests-economies/

Thursday, July 23, 2015

Silicon Valley – How Long will the Boom Last?

A lengthy piece on Silicon Valley (highly recommended):
http://www.economist.com/news/briefing/21659722-tech-boom-may-get-bumpy-it-will-not-end-repeat-dotcom-crash-fly

A Potential Black Swan Event

Risk of a major earthquake in the Pacific Northwest:
http://www.newyorker.com/magazine/2015/07/20/the-really-big-one

Greek Crisis - Updated Links

The Politics of Debt Relief

http://www.nytimes.com/2015/07/24/world/europe/personalities-clashing-over-how-to-handle-new-greek-bailout.html

http://www.newyorker.com/business/currency/why-europe-needs-to-offer-greece-debt-relief

European Perspectives on the Eurozone Crisis

An illuminating piece from Neil Irwin:

http://www.nytimes.com/2015/07/21/upshot/finland-shows-why-many-europeans-think-americans-are-wrong-about-the-euro.html

Finnish Finance Minister’s great quote –

“As to whether the ability to devalue its currency would help deal with the current economic downturn, Mr. Stubb is similarly skeptical. “Devaluation is a little like doping in sports,” he said. “It gives you perhaps a short-term boost, but in the long run, it’s not beneficial. Just like anyone else, we need structural reform, structural adjustment; we need to increase our competitiveness, and a little bit of luck.””

http://www.washingtonpost.com/blogs/monkey-cage/wp/2015/07/21/this-is-what-economists-dont-understand-about-the-euro-crisis-or-the-u-s-dollar/

Greg Mankiw on the Greek Crisis

http://www.nytimes.com/2015/07/19/business/history-echoes-through-greek-debt-crisis.html

Jeffrey Frankel on Tsipras

http://www.project-syndicate.org/commentary/kim-dae-jung-lula-da-tsipras-by-jeffrey-frankel-2015-07

Greece and the Eurozone

http://www.economist.com/news/leaders/21657806-deal-between-greece-and-europe-averts-one-disaster-and-hastens-next-pain-without-end

An interesting piece on Greece’s capitulation to creditor demands:

http://www.newyorker.com/news/john-cassidy/greeces-surrender-a-return-to-1919-or-to-1905

SPIEGEL Interview with Wolfgang Schäuble

http://www.spiegel.de/international/germany/interview-with-german-finance-minister-wolfgang-schaeuble-a-1044233.html

Wednesday, July 22, 2015

Structural Change and Economic Transformation

Harvard economist Dani Rodrik highlights his concerns regarding early de-industrialization:

Infrastructure and Development

http://www.copenhagenconsensus.com/sites/default/files/infrastructure_-_assessment_-_auriol_fanfalone.pdf

India – Fighting Poverty
http://www.nytimes.com/2015/07/23/opinion/transforming-the-fight-against-poverty-in-india.html

Tuesday, July 21, 2015

China’s Economic Rebalancing – Good News for the Environment

An interesting piece (China War on Pollution Benefits From Economic Slowdown) in the WSJ notes:

http://www.wsj.com/articles/china-war-on-pollution-benefits-from-economic-slowdown-1437410558

“A “war against pollution” declared by China’s leaders is getting a boost from the slowing economy as the government forces bloated industries like steel, cement and glassmaking to slim down. The results of cuts in overcapacity are already visible in notoriously smoggy Beijing. Official air-pollution data released by China’s government and monitoring by the U.S. embassy show levels of fine-particulate matter damaging to human health—known as PM2.5—fell more than 15% in the capital in the first half of 2015, compared with a year earlier. The city’s 21 million residents have been greeted with unusual stretches of blue skies.”

Sunday, July 19, 2015

China's Plan for a Megalopolis

China attempts to create a megalopolis:

http://www.nytimes.com/2015/07/20/world/asia/in-china-a-supercity-rises-around-beijing.html

“The new megalopolis, Jing-Jin-Ji, is to cover ground the size of Kansas and have a population about six times larger than the New York metropolitan area.”

Australia and Canada – Trouble Ahead?

Two commodity rich economies are facing near term challenges:

http://www.telegraph.co.uk/finance/newsbysector/industry/mining/11749706/Commodities-crash-could-turn-Australia-into-a-new-Greece.html

http://yaleglobal.yale.edu/content/high-debt-and-low-oil-price-threaten-canada’s-globalized-economy

Entrepreneurship in Africa

A Special Report from the Financial Times on African Entrepreneurs:
http://im.ft-static.com/content/images/19d3a2b8-2aa6-11e5-8613-e7aedbb7bdb7.pdf

Saturday, July 18, 2015

Jeffrey Sachs on US Foreign Policy and Economic Development

George Mason economist Tyler Cowen’s interview (April 2015) with Jeffrey Sachs is worth watching:

Jeffrey Sachs on reforming macroeconomics:

http://www.huffingtonpost.com/jeffrey-sachs/why-we-need-a-new-macroec_b_4297896.html

Jeffrey Sachs highlights the need for various types of capital to sustain economic development:

http://vivekjayakumar.blogspot.com/2015/02/types-of-capital-and-economic.html

Jeffrey Sachs on Robots and Technological Progress:

http://vivekjayakumar.blogspot.com/2015/04/jeffrey-sachs-on-robots.html

Jeffrey Sachs on the Stimulus Debate:

http://vivekjayakumar.blogspot.com/2014/10/investment-and-government-stimulus.html

Profile of Jeffrey Sachs:

http://www.imf.org/external/pubs/ft/fandd/2012/12/pdf/people.pdf

Bill Gates on Jeffrey Sachs

http://www.project-syndicate.org/print/bill-gates-explains-why-the-millennium-villages-project--though-a-failure--was-worth-the-risk

Friday, July 17, 2015

What Comes After Capitalism?

Paul Mason, economics editor at Britain’s Channel 4, has an interesting piece on the evolution of capitalism in recent years. He observes:

http://www.theguardian.com/books/2015/jul/17/postcapitalism-end-of-capitalism-begun

“Postcapitalism is possible because of three major changes information technology has brought about in the past 25 years. First, it has reduced the need for work, blurred the edges between work and free time and loosened the relationship between work and wages. The coming wave of automation, currently stalled because our social infrastructure cannot bear the consequences, will hugely diminish the amount of work needed – not just to subsist but to provide a decent life for all.

Second, information is corroding the market’s ability to form prices correctly. That is because markets are based on scarcity while information is abundant. The system’s defence mechanism is to form monopolies – the giant tech companies – on a scale not seen in the past 200 years, yet they cannot last. By building business models and share valuations based on the capture and privatisation of all socially produced information, such firms are constructing a fragile corporate edifice at odds with the most basic need of humanity, which is to use ideas freely.

Third, we’re seeing the spontaneous rise of collaborative production: goods, services and organisations are appearing that no longer respond to the dictates of the market and the managerial hierarchy. The biggest information product in the world – Wikipedia – is made by volunteers for free, abolishing the encyclopedia business and depriving the advertising industry of an estimated $3bn a year in revenue.”

Technology and Productivity

An interesting piece in the WSJ regarding the US productivity slowdown:

http://www.wsj.com/articles/silicon-valley-doesnt-believe-u-s-productivity-is-down-1437100700

As the article notes, Silicon Valley folks are typically gung-ho about technological breakthroughs and productivity. Technology enthusiasts appear to see only the beneficial effects from new technology. These days, in debates surrounding US productivity slowdown, it is often posited by techno-optimists that our inability to accurately measure the impact of tech developments is the main problem.

What is, however, absent in such discussions is the increasing tendency to engage in unproductive activities as a consequence of some modern technologies – social media; (trolling) online shopping sites; watching dumb YouTube videos, etc. Just because an employee or a student is sitting in front of an internet connected device does not necessarily imply that they are engaging in productive activities. Having 24/7 access to Netflix might be a great tech breakthrough but it is not necessarily a productivity enhancing change.

http://vivekjayakumar.blogspot.com/2015/06/productivity-slowdown.html

Recession and Choice of College Major

Apparently, recessions tend to have a significant impact on the choice of a college major:

http://blogs.wsj.com/economics/2015/07/17/the-fields-that-students-flock-to-during-recessions/
“Graduating into a recession stunts the careers of the young men and women entering the labor market. But it turns out a lot of students don’t sit back and passively accept this outcome: Many students who see a recession during their early college years switch to majors with better job prospects.”

Thursday, July 16, 2015

Political Economy: Democracy and Economic Growth

China versus India – Shashi Tharoor evaluates the differing political and developmental approaches being pursued by the two Asian giants:

http://www.project-syndicate.org/print/china-authoritarian-and-india-democratic-models-by-shashi-tharoor-2015-07

PPP Exchange Rates and the Big Mac Index

The Economist has released its latest update of the Big Mac Index:

http://www.economist.com/news/finance-and-economics/21657841-our-burger-benchmark-finds-greenback-too-dear-few-dollars-less

The piece also provides a good discussion on PPP exchange rates.

Comparing GDP figures – Rankings Based on PPP Exchange Rates and Market Based Exchange Rates:

Latest World Bank Figures:

PPP Based GDP - http://databank.worldbank.org/data/download/GDP_PPP.pdf
Market Exchange Rates Based GDP - http://databank.worldbank.org/data/download/GDP.pdf

Urban Transportation Breakthrough?

An electric scooter that is as affordable as an expensive bicycle:

http://www.cnet.com/products/genze-2-0-electric-scooter/

Wednesday, July 15, 2015

Billionaires and GDP Growth Rates

Interesting new research:

Does Wealth Inequality Matter for Growth? The Effect of Billionaire Wealth, Income Distribution, and Poverty by Sutirtha Bagchi & Jan Svejnar

Full Paper: http://ftp.iza.org/dp7733.pdf

Non-Technical Summary:
http://www.theguardian.com/commentisfree/2015/jul/15/billionaires-drive-economic-growth-crony

Financial Markets, Investment Strategies and Rationality

Nobel Laureate Robert Shiller - The Mirage of the Financial Singularity:

http://www.project-syndicate.org/commentary/will-computer-algorithms-replace-humans-in-financial-markets-by-robert-j--shiller-2015-07

Shiller observes:

“Markets seem to be driven by stories, as I emphasize in my book Irrational Exuberance. There are stories of great new eras and of looming depressions. There are fundamental stories about technology and declining resources. And there are stories about politics and bizarre conspiracies. No one knows if these stories are true, but they take on a life of their own. Sometimes they go viral. When one has a heart-to-heart talk with many seemingly rational people, they turn out to have crazy theories. These people influence markets, because all other investors must reckon with them; and their craziness is not going away anytime soon.”

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Richard Thaler on Keynes and Financial Markets:

http://www.ft.com/cms/s/0/6149527a-25b8-11e5-bd83-71cb60e8f08c.html [gated]

Keynes had a very keen and sophisticated understanding of financial markets. Thaler notes:

“Keynes thought markets had been more “efficient” at the beginning of the 20th century, when managers owned most of the shares in a company and knew what it was worth. As shares became more widely dispersed, “the element of real knowledge in the valuation of investments by those who own them or contemplate purchasing them . . . seriously declined”. By the time of The General Theory, Keynes had concluded that markets had gone crazy. “Day-to-day fluctuations in the profits of existing investments, which are obviously of an ephemeral and non-significant character, tend to have an altogether excessive, and even an absurd, influence on the market.””

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Why Investing Is So Complicated, and How to Make It Simpler by By SENDHIL MULLAINATHAN

http://www.nytimes.com/2015/07/12/upshot/investing-in-the-dark-the-biggest-cost-of-fear-is-paralysis.html

Harvard economist Mullainathan observes:

“What distinguishes the market for investments is our inability to judge whether we have chosen well. Once I’ve used a phone for a few weeks, I can tell whether it was worth the money. By contrast, I may not know for decades (if ever) whether an investment was wise or foolish. Does a low return signal a prudent choice or a missed opportunity? And by the time the answer becomes clear, it’s already too late. You’ve got to live with your bad choice. What’s more, the invisible hand of competition does not do well by consumers with limited understanding. Rather than eliminating biases, markets often cater to them. For example, many consumers choose a mutual fund by looking at last year’s returns, despite warnings that they should not do so. This creates a winner-take-all situation with the highest-performing funds getting most of the investors. You might think this encourages funds to produce higher returns, and that might seem to be a good thing.”

Measuring Innovation

Patents and Innovation – A Need for a Better of Innovation

http://www.washingtonpost.com/blogs/innovations/wp/2015/07/14/patents-are-a-terrible-way-to-measure-innovation/

Innovation in China
http://www.washingtonpost.com/blogs/innovations/wp/2015/07/15/chinas-stock-market-is-falling-but-its-innovators-are-still-rising-fast/

Tuesday, July 14, 2015

Investment - Seeking Higher Yields

Barron’s piece - Modi’s India Offers Rich Pickings for Yield Hunters
http://online.barrons.com/articles/modis-india-offers-rich-pickings-for-yield-hunters-1436847408

US, China and the Global Economy

An interesting speech on critical global economic issues from the Federal Reserve Bank of San Francisco President John Williams:

http://www.frbsf.org/our-district/press/presidents-speeches/williams-speeches/2015/june/nber-east-asia-seminar-labor-market-data/John-C-Williams-Speech-NBER-Asia-Conference.pdf

Forbes magazine piece – Globalization with Chinese Characteristics
http://www.forbes.com/sites/jplehmann/2015/06/29/globalization-with-chinese-characteristics-what-are-the-prospects/

Monday, July 13, 2015

Best American Cities for Skilled Workers

Forbes magazine – The Cities Creating The Most White-Collar Jobs

http://www.forbes.com/sites/joelkotkin/2015/07/13/the-cities-adding-the-most-white-collar-jobs/

Africa Economic Development

Telecom Sector in Africa

http://www.economist.com/news/business/21657378-two-african-business-giants-go-head-head-over-mobile-telecoms-and-payments-new-east-africa

Oil and Development in Africa

http://www.economist.com/news/middle-east-and-africa/21657384-wild-ancient-and-oil-rich-turkana-shows-how-fast-continent-changing

Climate, Conflict and Economic Development in Africa (Berkeley Economist Edward Miguel on African Economic Development)

Greek Crisis - Reading List

The latest deal

http://www.telegraph.co.uk/news/worldnews/europe/greece/11735901/The-new-Greece-deal-could-split-Syriza-in-two.html

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/13/explainer-6-big-questions-about-the-deal-to-save-greece-and-what-comes-next/

Berkeley economist Eichengreen on the Greek Crisis

http://www.project-syndicate.org/print/greece-debt-agreement-risks-by-barry-eichengreen-2015-07

Columbia economist Calomiris on the Greek Crisis

http://www.forbes.com/sites/charlescalomiris/2015/07/05/a-way-out-for-greece-after-the-no-vote/

Greece’s recent economic travails standout even in comparison to the Great Depression:

http://www.nytimes.com/interactive/2015/07/09/business/international/is-greece-worse-off-than-the-us-during-the-great-depression.html

Debt Forgiveness and Greece

http://www.newyorker.com/business/currency/why-europe-needs-to-offer-greece-debt-relief

Background on Greek Crisis: http://vivekjayakumar.blogspot.com/2015/07/the-greek-crisis.html

Causes of the Eurozone Debt Crisis: The Eurozone Debt Debacle: A Crisis Foretold?

Sunday, July 12, 2015

A Good Reason to Oppose TPP

Big Pharma driving the agenda of trade negotiators:

http://www.bloomberg.com/news/articles/2015-07-10/obama-pushes-trade-partners-to-add-drug-rules-he-opposes-in-u-s-

““The USTR’s drug proposals are an astonishing effort to require other countries to adopt policies that aren’t in their best interests and lock in policies here that the Obama administration doesn’t support,” said Frederick Abbott, a Florida State University law professor and veteran consultant to the World Health Organization and the United Nations on health and trade issues.”

An excellent survey article on patents:

Boldrin, Michele, and David K. Levine. 2013. "The Case against Patents." Journal of Economic Perspectives, 27(1): 3-22.; Open Access: https://research.stlouisfed.org/wp/2012/2012-035.pdf

Abstract

The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless productivity is identified with the number of patents awarded—which, as evidence shows, has no correlation with measured productivity. Both theory and evidence suggest that while patents can have a partial equilibrium effect of improving incentives to invent, the general equilibrium effect on innovation can be negative. A properly designed patent system might serve to increase innovation at a certain time and place. Unfortunately, the political economy of government-operated patent systems indicates that such systems are susceptible to pressures that cause the ill effects of patents to grow over time. Our preferred policy solution is to abolish patents entirely and to find other legislative instruments, less open to lobbying and rent seeking, to foster innovation when there is clear evidence that laissez-faire undersupplies it. However, if that policy change seems too large to swallow, we discuss in the conclusion a set of partial reforms that could be implemented.

World's Best Hotels - Ranikings

Rankings from Travel & Leisure magazine

World’s Best Hotels

http://www.travelandleisure.com/worlds-best/hotels-top-100-overall

Free Markets – Only in Theory

FT’s Edward Luce has an excellent piece on America’s domestic airline industry –

http://www.ft.com/cms/s/0/2c750472-2892-11e5-8db8-c033edba8a6e.html

“Whether it is shrinking legroom, rising fares or cancelled flights, the home of aviation is now synonymous with bad service. Gulf carriers are wiping the floor with their US competitors. Asian airlines are in a different league. While US skies remain closed to others, that gap will only widen. Global aviation’s centre of gravity is shifting eastward with Washington’s passive collusion.

The continued decline of US airlines is no mystery. Wherever competition is restricted, the US economy does badly — and vice versa. With four big carriers carving out 80 per cent of domestic travel between them, service is substandard. The same applies to the US cable internet industry, which is dominated by a clutch of behemoths.”

Rankings from Travel & Leisure magazine

World’s Best Airlines

http://www.travelandleisure.com/worlds-best/airlines#international

World’s Best Airports

http://www.travelandleisure.com/worlds-best/airports#international

China’s Demographic Challenges Are Overstated

An interesting piece in the Foreign Affairs magazine - China Will Get Rich before It Grows Old by Baozhen Luo

https://www.foreignaffairs.com/articles/china/2015-04-20/china-will-get-rich-it-grows-old

Luo notes:

“Although China’s working-age population has indeed shrunk, its employment rate has increased. In 2014, China’s active work force consisted of 772.5 million people, 2.8 million people more than in 2013. This growth, despite a smaller working-age population, suggests that many underemployed Chinese, especially in rural areas, are being drawn into the work force.”

Fertility Rates in China

http://www.economist.com/news/china/21657416-china-has-relaxed-its-one-child-policy-yet-parents-are-not-rushing-have-second-tales

Friday, July 10, 2015

William Dalrymple on India

Recent writings of historian and Indologist William Dalrymple:

Dalrymple has an excellent piece on Tamil culture in the FT: The poet-preachers of Tamil Nadu

http://www.ft.com/cms/s/2/a01a138c-20b2-11e5-ab0f-6bb9974f25d0.html

The Great & Beautiful Lost Kingdoms

http://vivekjayakumar.blogspot.com/2015/05/history-lesson-indias-golden-age.html

William Dalrymple on the history of Yoga:

http://www.nybooks.com/articles/archives/2014/mar/06/under-spell-yoga/

India’s ancient cave monasteries

http://vivekjayakumar.blogspot.com/2014/08/ancient-caves-of-india.html

Dalrymple on the British Empire

http://www.guardian.co.uk/commentisfree/2013/feb/23/apologising-amritsar-teach-british-empire

College Majors and Spousal Choice

An interesting post - The college majors that are most likely to marry each other

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/10/the-college-majors-that-are-most-likely-to-marry-each-other/

Thursday, July 9, 2015

Financing Economic Development

The Role of Taxation

http://www.economist.com/news/finance-and-economics/21657433-poor-countries-need-get-better-raising-tax-and-multinational-firms-need

http://www.economist.com/news/leaders/21657389-unheralded-meeting-africa-way-get-beyond-sterile-arguments-about-development-beyond

http://www.project-syndicate.org/commentary/international-tax-system-multinational-companies-by-jose-antonio-ocampo-2015-07

Globalization of the Textile Industry and India

The story of Welspun – a leading producer of cotton towels:

http://www.economist.com/news/business/21657375-story-indias-biggest-maker-towels-and-their-journey-cotton-field-big-box

IMF and the International Monetary System

Princeton historian Harold James on reforming the IMF and the international monetary system:

http://www.project-syndicate.org/print/chinese-renminbi-in-currency-basket-for-imf-sdr-by-harold-james-and-domenico-lombardi-2015-07

IMF’s Latest Global Growth Projections

Once again, IMF admits its earlier forecasts were off the mark:

http://www.imf.org/external/pubs/ft/weo/2015/update/02/pdf/0715.pdf

Compare July 2015 forecast (above link) with January 2015 forecast:

http://www.imf.org/external/pubs/ft/weo/2015/update/01/pdf/0115.pdf

A previous post on over-optimistic growth forecasts:
http://vivekjayakumar.blogspot.com/2014/08/official-economic-forecasts-will-they.html

Wednesday, July 8, 2015

Minimum Wage versus Earned Income Tax Credit

UK might be embarking on a fascinating real world experiment:

http://www.telegraph.co.uk/finance/budget/11726159/Budget-2015-George-Osborne-gives-Britain-a-pay-rise.html

http://www.theguardian.com/uk-news/2015/jul/08/budget-2015-uk-gdp-other-rich-nations-george-osborne

Land Acquisition and Economic Development

A major challenge facing fast growing emerging markets is the lack of land for urban and industrial use. In India, this is an especially challenging problem – as a recent FT piece highlights:

http://www.ft.com/cms/s/0/2bba915c-18fa-11e5-a130-2e7db721f996.html#axzz3fJipRiXb

“As Prime Minister Narendra Modi has tried to accelerate India’s transformation from a predominately rural, agrarian society to an industrialised, urbanised economy with smart cities and industrial corridors, the question of how to manage competing demands for land, and ensure a fair, efficient and transparent conversion of farmland to non-agricultural uses is one of his most vexed political challenges.”

Densely populated advanced economies are not immune from challenges associated with land acquisition for economic activities. The long running dispute surrounding the plan to expand Heathrow airport is a good example:
http://www.economist.com/news/britain/21656620-why-building-another-runway-heathrow-will-be-tricky-decision-time

Tuesday, July 7, 2015

Family Income and Choice of College Majors

An intriguing article from The Atlantic:

http://www.theatlantic.com/business/archive/2015/07/college-major-rich-families-liberal-arts/397439/

“Once financial concerns have been covered by their parents, children have more latitude to study less pragmatic things in school. Kim Weeden, a sociologist at Cornell, looked at National Center for Education Statistics data for me after I asked her about this phenomenon, and her analysis revealed that, yes, the amount of money a college student’s parents make does correlate with what that person studies. Kids from lower-income families tend toward “useful” majors, such as computer science, math, and physics. Those whose parents make more money flock to history, English, and performing arts.”

The Mechanics of Life

The origins of life

http://www.nybooks.com/articles/archives/2015/jul/09/how-you-consist-trillions-tiny-machines/

According to the NYRB article –

“As we ponder life’s origins, Ward and Kirschvink warn against thinking in simplistic terms like life and death, instead encouraging us to consider the “newly discovered place in between.” Life’s most distant origins lie in the nonliving precursor molecules for RNA, organic compounds known as amino acids. They have been found in meteorites, are presumed to be widespread in the universe, and their origins must greatly predate Earth’s origins. The nanomachines possess attributes of life, and when brought together in a cell they clearly cross the threshold into the self-regulating, replicating entity that we recognize as a living thing.”