Hillary Clinton on The Daily Show

Would Jacob Frenkel agree with Krugman

Krugman writes;

There’s an old joke that Jacob Frenkel, formerly of Chicago and then the Bank of Israel, used to tell to illustrate the fallacy of thinking that you always have to do the opposite of what caused the initial problem. A driver runs over a pedestrian; he looks back, realizes what he’s done. “I’m so sorry,” he says. “Let me fix the damage.” So he backs up, running over the pedestrian a second time.

What we have now is a spending slump. It’s the consequence of easy credit that led to reckless spending in the past — but the problem now is how to sustain spending; trying to encourage austerity at this point will just make things even worse. Keep cutting, Ben!

Related;
Frenkel of AIG Says U.S. Housing Market `Will Adjust Itself' (Bloomberg Podcast)

NBER Working Papers by Jacob Frenkel

Interview with Jacob Frenkel;

Region: Donning your University of Chicago hat for a moment, the Federal Reserve System has aimed its policy at the stabilization of prices. What are your thoughts on the Fed's efforts?

Frenkel: Well, I cannot remove all my hats at the same time, so therefore, I will not comment specifically on the performance of the Fed, except to say that I have no doubt that the primary responsibility of the monetary authority should be the attainment of price stability. The greatest contribution that monetary policy can make to growth, the standard of living, employment and the like, is by ensuring that there is an environment in which stability prevails and inflation is as low as possible...

Region: I would like your views on the various exchange rate regimes. Our bank has expressed a considerable interest in fixed exchange rates.

Frenkel: Well, I think that the debate about the choice of the exchange rate regime has been with us for many, many years and it will continue to be with us for many, many years. The real issue is not so much the choice of the exchange rate regime, but the choice of the policies that are capable of sustaining whatever regime one chooses to adopt. My gut feeling is that we will continue to have a relative degree of flexibility of exchange rates between the three major poles, namely the U.S. dollar, the European currencies, call it the Deutsche mark, and the Japanese yen. The other smaller countries will probably find it useful to hook themselves to one of these blocks.

So, within Europe we saw the exchange rate mechanism design, but we also saw how it has faced significant difficulties during the past few months. These difficulties have taught us an important lesson, which is exchange rate intervention in and of itself cannot be a substitute for fundamental conversions of economic performance and economic policies. It makes no sense to try to peg the wrong exchange rates because in the present as we have huge capital markets and very well integrated capital markets, there is no way the authorities through foreign exchange intervention can overcome the flows that are determined in the marketplace. Therefore, what we are probably going to see is the European exchange rate mechanism learning some lessons concerning the need to have conversions on the inflation front before they solidify again their exchange rate into a more rigid formula.

I think that the real issue is what exchange rate mechanism is capable of generating the inflation path that each country wishes to have. There is no way that a country that does not have its own house in order can in a sustainable way import this stability through the exchange rate. The exchange rate is a manifestation of policies rather than the policies themselves.

Region: Milton Friedman reportedly discouraged you from leaving the University of Chicago to join the IMF, arguing that you could make more of an impact through research. Any regrets for having left?

Frenkel: Well, I obviously miss the academic career that I had at the University of Chicago. It was one of the most stimulating places that I could imagine. And, I owe practically all of my human capital, as far as understanding economic theory and developing my economic philosophy, to my colleagues and the atmosphere at the University of Chicago.

As for myself, I found the move from the University of Chicago to the International Monetary Fund a natural progression in the development of my own human capital. Having been involved many years in teaching and research, primarily in the field of international economics and international economic policy, it was very challenging and indeed natural to try to apply these concepts within the context of the International Monetary Fund, where I was asked to not only head its research department but also to be very directly involved in the policy coordination efforts of the G7 countries. I have found this experience rewarding. I have learned a lot about how economic theories feed into economic policy advice. I definitely do not regret having made this particular move. Needless to say, one always misses his good colleagues and the atmosphere at the University of Chicago, but I guess that is the way life goes on.

McCainomics

McCain's Economy Platform: Big Tax Cuts, With Caveats

An Isreali Dutch Disease

Stanley Fischer is a different kind of Bank of Israel governor. His worldview does not resemble that of his two predecessors, Jacob Frenkel and David Klein. While his goal, too, is price stability, he also takes growth and employment into consideration.

For Klein and Frenkel, price stability was the only goal. They used to say that the Bank of Israel has only one tool, that of interest rates, with which only one issue can be addressed: inflation. It should be remembered that they held their posts during a more difficult period, when a strict monetary policy was needed to bring down inflation. That approach is suitable for the European Central Bank, which also sees its only purpose as dealing with inflation.

But Fischer was educated in the United States, where the approach is different. There, the head of the Federal Reserve (parallel to Israel's central bank governor), weighs the state of inflation as well as growth and employment trends. That is how legendary Fed chief Alan Greenspan acted in lowering interest rates sharply after the attack on the World Trade Center in 2001. He left it very low (1 percent) for a long time to fight the danger of the American economy sliding into a recession.

The current Federal Reserve head, Ben Bernanke, did the same in January, sharply lowering U.S. interest rates by 1.25 percent to a low 3 percent - to fight the unfolding economic slowdown.

Let there be no confusion: Fischer's primary goal is still price stability. But the moment interest rates can be lowered without compromising stability too greatly - he will do it.

Fischer should have actually lowered interest rates a month ago. It was a mistake to leave the February rate at 4.25 percent. Even then it was clear that inflation is declining and the world economy is slackening. In a meeting at that time one senior director voted to lower rates, but the majority was against it. Thus the reduction was put off until March, and will only go into effect today.

Fischer decided to lower rates in one fell swoop by half a percent because he did not want to do it piecemeal; that would only cause unnecessary pain. Many were surprised at the news, but Fischer knows that Bernanke will lower interest rates again on March 18 by another half a percent and he does not want to widen the gap with U.S. rates.

The governor also knows that the forces working against inflation have grown stronger in recent weeks. There are signs of recession in the U.S., as well as in Europe and Japan, which will slow growth and lower inflation in Israel.

The weakening of the dollar and the euro since mid-December has lessened economic pressures. It is also reasonable to assume that the actions and pressure by Shraga Brosh, president of the Manufacturers Association, to lower interest rates also had their effect on the governor and his people.

Nevertheless, interest rates are an instrument that is limited in its effect. Real factors have a greater impact. The economy is still growing, exports are flourishing and the balance of payments is in the black. A steady stream of foreign investments and unilateral transfers also continues. All this means a surplus of foreign currency, leading to a weakening of the dollar and the euro.

We seem to be suffering from "Dutch disease." This is what happened to Holland in the 1960s when large reserves of natural gas were discovered offshore. After the discovery, Dutch exports increased and the local currency grew stronger. This damaged the country's traditional export industries, which is what is happening to us.

But we have no natural gas. We have high tech and the Internet, which are our natural resources. They have buoyed exports in recent years, leading to a surplus in the balance of payments.

Therefore, a major devaluation will not be the outcome of a small change in interest rates, but rather the outbreak of a third intifada or a missile from Tehran landing in the middle of Tel Aviv. If that happens, the flow of capital to Israel will cease, exports will suffer, and the exchange rate will soar back toward NIS 5 to the dollar.

-Our Dutch disease

Headline from Down Under

Corruption council to be sacked today

NSW Governor Marie Bashir will sign off on Wollongong City Council's dissolution following the corruption watchdog's recommendation it be sacked.

A cool graphic

Oil Prices Reach a Symbolic Mark

Border security- from a Mexican Perspective

Gaza after six days

The real Middle East (peace) process

A "smart strategy" against drugs ?

Responding to Afghanistan's Opium economy challenge : lessons and policy implications from a development perspective

Summary: Opium, Afghanistan's leading economic activity, lies at the heart of the challenges the country faces in state building, governance, security, and development. With their narrow law enforcement focus and limited recognition of development, security, and political implications, current global counter-narcotics polices impose a heavy burden on Afghanistan. This paper first provides a summary overview of Afghanistan's opium economy and the factors determining rural households' decisions on cultivating opium poppy. It then discusses the dynamic evolution of the Afghan drug industry in recent years, in particular its consolidation around fewer, powerful, politically-connected actors and the associated compromising of parts of some government agencies by drug industry interests. The paper reviews the experience with different counter-narcotics interventions, analyzes some proposals not yet tried in Afghanistan, and draws lessons and policy implications. Unfortunately there are no "silver bullets"-easy, quick, or one-dimensional solutions, and a longer-term horizon along with sustained commitment and resources will be required in order to phase out the opium economy over time. The paper concludes by putting forward some broad principles and approaches of a "smart strategy" against drugs in Afghanistan.

The development impact of the illegality of drug trade

Summary: This essay reviews many of the less considered consequences of the war on drugs, particularly the consequences for developing countries, and weighs them against the evidence that exists regarding the likely efficacy of current strategies to curb drug use and trade. The most important unintended consequences of drug prohibition are the following. First, the large demand for drugs, particularly in developed countries, generates the possibility of massive profits to potential drug providers. Since they cannot be organized freely and under the protection of the law, they resort to the formation of organized crime groups, using violence and corruption as their means of survival and expansion. In severe cases, the challenge to the state is such that public stability and safety are severely compromised. Second, prohibition and its derived illegal market imply the expropriation of endowments and resources used to produce and trade drugs. In many instances, this entails the transfer of wealth from poor to rich countries and from poor peasants to rich (and ruthless) traders. Third, criminalization can exacerbate the net health effects of drug use. These consequences are so pernicious that they call for a fundamental review of drug policy around the world.

Assorted Start of the Week

The Audacity of Data

s a young economics professor in the late 1970s, Richard Thaler began noticing small but nagging ways in which ordinary people defied the predictions of economic theory. A friend confided that he mowed his lawn to save $10, but winced at the suggestion that he mow someone else's to make $10. A colleague confessed that he'd never go out and buy a $50 bottle of wine for a family meal, but that he'd recently opened up a $50 bottle at dinner because it happened to be lying around. The textbooks assumed people would behave identically when equal amounts of money were at stake. But here they were doing completely different things depending on the context.

By the late '80s, Thaler had begun recording these observations in a column for a leading academic journal. The column laid the groundwork for a book, called The Winner's Curse, published in 1994. And the book widely signaled the arrival of a previously obscure sub-field known as behavioral economics. Behaviorists like Thaler believed that the perfectly rational, utterly selfinterested maximizers of economists' imaginations had little in common with actual human beings, who frequently err when making simple calculations, who have trouble with self-control, who often act out of altruism or spite.

But what's really interesting is how Thaler and his fellow behaviorists responded to this fairly critical insight. Though rational self-interest was the central tenet of neoclassical (i.e., modern) economics, they didn't take a wrecking ball to the field and replace it with some equally sweeping theory of human behavior. Instead, they labored to bring economics closer in line with how the world actually works, one small adjustment at a time. "'Discovery commences with the awareness of anomaly,'" Thaler wrote in the introduction to The Winner's Curse, quoting the philosopher Thomas Kuhn. "I hope to accomplish that first step--awareness of anomaly. Perhaps at that point we can start to see the development of the new, improved version of economic theory."

As it happens, Thaler is revered by the leading wonks on Barack Obama's presidential campaign. Though he has no formal role, Thaler presides as a kind of in-house intellectual guru, consulting regularly with Obama's top economic adviser, a fellow University of Chicago professor named Austan Goolsbee. "My main role has been to harass Austan, who has an office down the hall from mine, " Thaler recently told me. "I give him as much grief as possible." You can find subtle evidence of this influence across numerous Obama proposals. For example, one key behavioral finding is that people often fail to set aside money for retirement even when their employers offer generous 401(k) plans. If, on the other hand, you automatically enroll workers in 401(k)s but allow them to opt out, most stick with it. Obama's savings plan exploits this so-called "status quo" bias.

And, yet, it's not just the details of Obama's policies that suggest a behavioral approach. In some respects, the sensibility behind the behaviorist critique of economics is one shared by all the Obama wonks, whether they're domestic policy nerds or grizzled foreign policy hands. Despite Obama's reputation for grandiose rhetoric and utopian hope-mongering, the Obamanauts aren't radicals--far from it. They're pragmatists--people who, when an existing paradigm clashes with reality, opt to tweak that paradigm rather than replace it wholesale. As Thaler puts it, "Physics with friction is not as beautiful. But you need it to get rockets off the ground." It might as well be the motto for Obama's entire policy shop.

The Case for Foreclosures- Landsburg

Foreclosures: How to save America’s family equity
Michael S Barr and Laura D Tyson

With colleagues at the Center for American Progress, we’ve developed the Saving America’s Family Equity (SAFE) loan plan to achieve these two objectives. SAFE is inspired by the successful Home Owner’s Loan Corporation introduced in 1933 to deal with an unprecedented wave of foreclosures in the Great Depression.

Under the SAFE loan plan, Treasury and the Federal Reserve would run auctions, in which Fannie Mae, Freddie Mac and Federal Housing Administration originators would purchase mortgages from current investors at discounts determined by the auction process. Investors would take a hit, trading a reduction in asset value and yield in exchange for liquidity and certainty. The Federal Housing Administration, Fannie Mae, and Freddie Mac would work with responsible originators to restructure the loans they acquire to stem defaults, foreclosures, and liquidations. Only loans on owner-occupied homes would be eligible for restructuring and speculators would be excluded.

Capital Budgeting and Public Financial Management

Obama’s free-trade credentials top Clinton’s
By Jagdish Bhagwati

While Barack Obama and Hillary Clinton are locked in combat for the Democratic party’s presidential nomination, commentary on the front-running Mr Obama’s policy agenda, especially on trade, has become faintly ludicrous.

On the one hand, David Wessel declared in the Wall Street Journal recently, as others have, that the two had no disagreements on trade policy. On the other hand, Mrs Clinton has assaulted Mr Obama for having no policy agenda at all, a charge that John McCain, the Republican frontrunner, has eagerly embraced. Both views are wrong. Mr Obama has specifics and they differ in important respects from those offered by Mrs Clinton.

The Russian proverb goes that, if you are looking for a good son-in-law, you would not ask whether he drank but only how he behaved when he was drunk. Similarly, no Democratic candidate during the primaries can be anything but a protectionist. The only question is: of the two, which is likely to be friendlier as president to the cause of multilateral free trade? Careful scrutiny suggests that the odds are in favour of Mr Obama.

To be sure, all Democratic candidates must face the reality that their party has gravitated towards protectionism, overt and covert, in the past decade. The number of Democrats voting for trade deals has steadily declined. The North American Free Trade Agreement was a turning point that deeply divided the party and then a succession of bilateral free trade agreements, many paltry, has steadily eroded the political capital of free-trade Democrats as they were forced repeatedly to go in to bat for trade in sceptical constituencies. The Democrats have also had to face the problem that the antiwar groups that have helped lift the party’s fortunes also overlap often with anti-globalisation and hence anti-trade groups, so the party tends to be propelled into an anti-trade position willy-nilly.

Wrong About Mexico

China's New Intelligentsia


Can "strengthening/clarifying language" save jobs in Ohio?

"On NAFTA, Goolsbee suggested that Obama is less about fundamentally changing the agreement and more in favour of strengthening/clarifying language on labour mobility and environment and trying to establish these as more 'core' principles of the agreement."

Podcasts;
Stiglitz Says Iraq War Totally Financed With Borrowing

Advancements in Contemporary Islamic Finance: from practice to scholarship

The Logic of Life

Vernon Smith on Rationality in Economics

What Makes a Terrorist?
Alan B. Krueger

The Mind of the Market

Human Organs for Sale?

The New Asian Hemisphere: The Irresistible Shift of Global Power to the East

The Great Experiment

This Psychologist Might Outsmart the Math Brains Competing for the Netflix Prize

Fake Memoirs

In “Love and Consequences,” a critically acclaimed memoir published last week, Margaret B. Jones wrote about her life as a half-white, half-Native American girl growing up in South-Central Los Angeles as a foster child who went on to live a gang-banger’s violent life, wielding guns and running drugs for the Bloods.

The problem is that none of it is true.

Margaret P. Jones is a pseudonym for Margaret Seltzer, who is all white and grew up in well-to-do Sherman Oaks, in the San Fernando Valley of California, with her biological family. She graduated from the Campbell Hall School, a private Episcopal day school in North Hollywood. She has never lived with a foster family, nor did she run drugs for any gang members. Nor did she graduate from the University of Oregon, as she had claimed.

Riverhead Books, the unit of Penguin Group USA that published “Love and Consequences,” is recalling all copies of the book and has canceled Ms. Seltzer’s book tour, which was scheduled to start on Monday in Eugene, Ore., where she currently lives.

In a sometimes tearful, often contrite telephone interview from her home on Monday, Ms. Seltzer, 33, who is known as Peggy, admitted that the personal story she tells in the book was entirely fabricated. She insisted, though, that many of the details in the book were based on the experiences of close friends she had met over the years while working to reduce gang violence in Los Angeles.

“For whatever reason, I was really torn and I thought it was my opportunity to put a voice to people who people don’t listen to,” Ms. Seltzer said. “I was in a position where at one point people said you should speak for us because nobody else is going to let us in to talk. Maybe it’s an ego thing — I don’t know. I just felt that there was good that I could do and there was no other way that someone would listen to it.”

The revelations of Ms. Seltzer’s mendacity came in the wake of the news last week that a Holocaust memoir, “Misha: A Mémoire of the Holocaust Years” by Misha Defonseca, was a fake, and perhaps more notoriously, two years ago James Frey, the author of a best selling memoir, “A Million Little Pieces,” admitted that he had made up or exaggerated details in his account of his drug addiction and recovery.

-Gang Memoir, Turning Page, Is Pure Fiction

Impact of the highly improbable.

Nassim Nicholas Taleb talks about his favorite topic on BBC's Start of the Week (podcast available for a limited time);

Samantha Power on the life of UN activist Sergio Vieira de Mello; screenwriter Ronan Bennett discusses his TV series 10 Days to War; novelist Louis de Bernieres on his latest book A Partisan's Daughter; and Nassim Nicholas Taleb talks about the impact of the highly improbable.

Download the podcast.

What is India's top development Think Tank?

Your comments welcome-

Some of its leading Think Tanks.

The Institute of Economic Growth

National Institute of Public Finance and Policy

The Centre for Good Governance

The bold and beautiful structural reform programs

May be Fazeer could explain this 'bold and comprehensive' trade adjustment program;

Mauritius- Second Trade and Competitiveness Development Policy Loan
IBRD Loan: USD$ 30 Million
TERMS: Maturity= 15 years; Grace= 5 years
PROJECT DESCRIPTION: The objective of the project is to support a bold and comprehensive structural reform program which the Government of Mauritius is implementing in response to two major challenges: (i) the “triple trade shock” of trade preference erosion and high oil prices and (ii) the transition from low wage, low skill sugar and apparel exporter to innovative, knowledge and skill based services economy.

Obama, can he really win?

If Mr. Obama secures the nomination, the honeymoon will be over as he faces an opponent whom much of the press loves as much as it hates Mrs. Clinton. If Mrs. Clinton can do nothing right, Mr. McCain can do nothing wrong — even when he panders outrageously, he’s forgiven because he looks uncomfortable doing it. Honest.

Bob Somerby of the media-criticism site dailyhowler.com predicts that Mr. Obama will be “Dukakised”: “treated as an alien, unsettling presence.” That sounds all too plausible.

If Mr. Obama does make it to the White House, will he actually deliver the transformational politics he promises? Like the faith that he can win an overwhelming electoral victory, the faith that he can overcome bitter conservative opposition to progressive legislation rests on very little evidence — one productive year in the Illinois State Senate, after the Democrats swept the state, and not much else.

-Deliverance or Diversion?, Krugman

Kiss of Death vs eating GDP

You get the sense that politicians these days are racing to match Bill and Melinda Gates, Warren Buffett and the rest of the private sector in charity spending. Historians talk about the old scramble for Africa. That was a scramble to get -- European monarchs took land for colonies. Now we are witnessing a scramble to give.

The new scramble is as much a shame as the old one. Foreign aid can be the kiss of death for poor regions, as a former World Bank official, William Easterly, demonstrated in his recent book, ``The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good.''

Growth Distraction

Easterly's research found that $2.3 trillion in aid the U.S. and allies have spent over the past half-century has been a counterproductive distraction from achieving stable growth. And people die from the absence of growth -- the poverty-related malaria kills thousands a day.

This idea seems tailored to drive Gates crazy, and it has. A year ago at Davos, the usually affable Gates sputtered back at Easterly: ``When we put people on AIDS drugs, we don't say to them, `Hey, unless you raise the GDP we have wasted our money.'''

Plenty of others, though, agree with the Easterly thesis. In a recent paper, scholars Simeon Djankov, Jose G. Montalvo and Marta Reynal-Querol surveyed data from more than 100 countries over four decades. They also found that aid tends to supplant growth and makes countries quantifiably less democratic. They compared aid with petroleum wealth. Based on their research, they determined, ``aid is a bigger curse than oil.''

Losing Ground

The scholars monitored the quality of courts and other government institutions and assigned countries a democracy rank from zero to 10 for a given year. They measured foreign aid's influence on a country by quantifying its share of gross domestic product.

Over time, the countries that were most saturated with aid drop almost a full point, or 10 percent, on the democracy meter. Countries less dependent on aid also experienced weaker democracy, but less so. From the 1960s until 1980, more aid meant less democracy in Africa. From the late 1980s to the current period, the average level of aid dropped, while democracy increased. The same trends were visible in the rest of the world.

This makes sense when you consider that both oil and aid obviate the need to tax. Governments that don't need to collect taxes don't need voter support either. They also don't need to produce an environment friendly to business. Those who benefit from a windfall turn to autocrats.

-Obama, Bush Offer a U.S. Kiss of Death to Africa

Related;
Why Bill Gates Hates My Book- Easterly

Bill Gates Was Creative at Microsoft

Bill Gates Issues Call For Kinder Capitalism

To a degree, Mr. Gates's speech is an answer to critics of rich-country efforts to help the poor. One perennial critic is Mr. Easterly, the New York University professor, whose 2006 book, "The White Man's Burden," found little evidence of benefit from the $2.3 trillion given in foreign aid over the past five decades.

Mr. Gates said he hated the book. His feelings surfaced in January 2007 during a Davos panel discussion with Mr. Easterly, Liberian President Ellen Johnson Sirleaf and then-World Bank chief Paul Wolfowitz. To a packed room of Davos attendees, Mr. Easterly noted that all the aid given to Africa over the years has failed to stimulate economic growth on the continent. Mr. Gates, his voice rising, snapped back that there are measures of success other than economic growth -- such as rising literacy rates or lives saved through smallpox vaccines. "I don't promise that when a kid lives it will cause a GNP increase," he quipped. "I think life has value."

Brushing off Mr. Gates's comments, Mr. Easterly responds, "The vested interests in aid are so powerful they resist change and they ignore criticism. It is so good to try to help the poor but there is this feeling that [philanthropists] should be immune from criticism."

More on India's budget

Finance Minister Palaniappan Chidambaram's budget speech on Friday once again reflected the government's mounting concern that a vast majority of Indians are not benefiting from the economic boom. The budget was laced with populism, involving giveaways systematically targeted at major vote banks. Spending hikes were announced in education, health care and a rapidly expanding employment guarantee program. Tax concessions were thrown in to keep the middle class engaged, and the manufacturing sector also got some relief in the form of a 2% reduction in the value-added tax.

But this budget will be most remembered for a massive $15 billion loan waiver that covers a large part of all outstanding farm loans -- and constitutes 3% of the entire banking system's credit portfolio. Apart from being the single biggest write-off in recent memory, this one measure also reveals a lot about the government's current mindset. It shows how eager the government is to reach out to a vote bank of 40 million workers at any economic cost and also demonstrate how keen it is to co-opt the communist parties' slogan of "compassion" towards the poor.

More importantly, the loan waiver suggests that the few reformers at the helm of economic affairs can no longer keep out bad ideas. From the outset of this government's formation in May 2004, it was clear that the main agenda of the reformers in power -- and the finance minister has to count as one of them -- was to prevent spending from spinning out of control rather than to usher in any new reforms. This is partly because of the way the last national election results were interpreted. Just because the then-ruling Bharatiya Janata Party's "India Shining" campaign line didn't work with voters in 2004 -- the first year of a step-up in India's growth trajectory -- the political class impulsively came to the conclusion that economic performance doesn't matter.

The strident call from political quarters following that election was to engage in a tax-and-spend policy mix. Mr. Chidambaram was largely able to keep spending under control by repackaging old plans, giving the impression to his political masters that the government was indulging in pursuing more inclusive growth. Consequently, India's total fiscal deficit continued to narrow to 7% last year, from a peak level of 10% in 2002. Such consolidation was largely achieved by strong revenue growth of 25% over the past four years, running well above the nominal gross domestic product growth of 14%.

But over the past year, fiscal discipline began to show signs of some serious cracking, and the biggest sign of slippage was this Friday's budget. Even though Mr. Chidambaram projected a decline in the central government's headline deficit to less than 3% of GDP, it has become routine in India to fund oil, food and fertilizer subsidies outside of the budget by issuing separate government bonds and not including them in the budget calculations. Subsidies on these items have been rising rapidly due to the sharp increase in international prices. The government has only passed a small part of the price increases to the consumer. By most estimates, the budget deficit would be higher by more than 2% of GDP after incorporating these off-budget subsidies.

The budget deficit is likely to come under further pressure if India's growth rate moderates even slightly in line with global trends. The torrid pace of expansion over the past few years has led to robust corporate profitability and in turn strong revenue growth. Typically, corporate revenues tend to be very sensitive to cyclical changes in GDP growth. Given the prospect of a global slowdown, the finance minister would have served the local economy and finances better by cutting India's corporate tax rate, which at a peak level of nearly 34% is much higher than levels in East Asia.

The economy could have also done with some further supply-side stimulus to ease infrastructure bottlenecks with a cut in customs duties. A spirited supply-side response is the best antidote to stagflation -- the whiff of which is currently in the air across the world. As in many other emerging markets, Indian monetary authorities are more consumed with fighting inflation, leaving the onus of ensuring continued economic momentum to other policy tools.

It would have been helpful to buy some insurance against the souring of global business sentiment caused by all the negative news emanating from the United States. Mr. Chidambaram could have kept alive the animal spirits by announcing further economic liberalization. Interestingly, the finance ministry released its annual economic survey just a day before the budget. The document listed many potential reform measures for the government, ranging from private participation in coal mining to further opening up retail and insurance sectors to foreign investors.

-Budget Binge

The End of Great Moderation- Econ Talk of the Week

Alex Leijonhufvud on great moderation, inflation targeting, cybernetics and economic theory.

Related;
Axel Leijonhufvud and a Bit of Autobiography

Some further search uncovered a book in distinguished blue binding, and an intriguing title in golden letters, On Keynesian Economics and the Economics of Keynes: A Study in Monetary Theory by an author with a familiar Scandinavian name, Axel Leijonhufvud. I was completely captivated by this book, and it became my economics bible until I graduated from the University of Copenhagen.

Leijonhufvud presented macro economics in way that made sense (of course, my professors considered him a "minor verbalist" although some admitted, when pressed, that he had a "fine intuition"). He had — with Robert Clower — been one of the first economists to make a reasoned call for micro-foundations in macro-economics, stressing that micro-foundations should be built on rationality assumptions but with great attention to information assumptions. He argued that aggregation was something highly problematic. Implied in this was a break with the general equilibrium model. Modelling should be done, not by postulating ad hoc rigidities, but by examining adjustment processes, "false prices", "rationing," etc.

Leijonhufvud claimed in the book to be able to re-construct Keynes as following exactly such a program. This "economics of Keynes" was a far cry indeed from the "Keynesian economics" that I hated. Leijonhufvud had a great style and he made a provocative argument. Naturally, I became a diehard Leijonhufvudian. Leijonhufvud's book also led me to discover the work of Hayek, and later Kirzner and Mises, as well as Shackle and Loasby. I think it also led me in the direction of Herbert Simon, and therefore ultimately towards the muzzy management stuff that I currently do.

Axel Leijonhufvud: Life Among the Econ

The uses of the past

Kosovo independence – a threat to Balkan stability?

Implications of an independent Kosovo for security in the Balkans?

Culture Podcast for the week

KING LEAR

Around the turn of 1606, a group of London theatre-goers braved the plague to take in a new play by the well-known impresario, Mr William Shakespeare. Packed into the Globe Theatre, they were treated to a tale of violence, hatred and betrayal so upsetting that it languished among Shakespeare’s less popular plays until re-written with a happy ending.

The play was King Lear – a drama on the folly of age, the cruelty of families and the futility of ambition, set amidst the wilderness of Ancient Britain. A place where, as the Duke of Albany declares in the play, “Humanity must perforce prey on itself, Like monsters of the deep.”

But why did Shakespeare take a story from the deep history of Britain and make it so shockingly his own and when, from the Civil War to the Second World War, did this powerful and confusing tragedy emerge as Shakespeare’s greatest?

from BBC's In Our Time

Readings for the Day

How a Bubble Stayed Under the Radar- Schiller

Global Warming Paradox?

Graduate programs in development

A level playing field for cities

Why Risk Aversion Isn't

More Evidence That Andrei Shleifer Is the Most Insightful Economist of His Generation

Economics of suicide

Non-doms: move to New York City and pay more

Just how badly is the United States really doing?

Sovereign wealth is a force for stability

Jim Hamilton: There Is No More Macroeconomic Balance

Jevon's Contribution to Index Number Theory

Still Stocks Rather than Bonds for the Long Run

Fiscal Policy Surveys and the "Mueller Test"

The Virginia School

Weekend Reading List - from The Numbers Guy

China up close: understanding the Chinese economy and financial system

A brief history of central banks. -- Michael D. Bordo

Liquidity, Monetary Policy, and Financial Cycles

Are We Underestimating the Gains from Globalization for the United States?

U.S. Jobs Gained and Lost through Trade: A Net Measure

Recent concerns about the transfer of U.S. services jobs to overseas workers have deepened long-standing fears about the effects of trade on the domestic labor market. But a balanced view of the impact of trade requires that we consider jobs created through the production of U.S. exports as well as jobs lost to imports. A new measure of the jobs gained and lost in international trade flows suggests that the net number of U.S. jobs lost is relatively small—2.4 percent of total U.S. employment as of 2003.

Cool and funny film recommendations

Tarsem Singh's The Fall


Love Guru


via Sepia Mutiny

Best jazz and rock drummer in India

Ranjit Barot

'I maybe Indian but I dream in English'

Book Recommendation

Predictably Irrational

Voting for Dummies

Assorted on Parenting

How Dangerous Is the Internet for Children?

The Modern Nursery, Batteries Required

How I tried to cure my son's fingernail biting.

Inside the Mind of the Boy Dating Your Daughter

Lessons From the Family Bathroom

Mostly via Game Theorist

Singaporeans to get a bit more sexual freedom

Singapore says may loosen law on oral sex;

"One option being considered is to decriminalize consensual oral sex between a male and female so long as it is done in private and both of them are above 16 years of age," Ho said.

But a lingering ban on homosexual fellatio could stoke controversy at time when Singapore is emerging as an Asian gay entertainment hub following the opening of a number of gay-friendly cafes and clubs.

Prime Minister Goh Chok Tong made a low-key acknowledgement last year that gays now worked in the public service.

Critics have pointed out the irony of the law in a country where prostitution remains legal. Ho said the law was mostly used to prosecute cases involving minors, or mentally and physically handicapped people.

Singapore is relaxing other laws such as rules on bungee-jumping, bar-top dancing and chewing gum in a bid to shake off its stuffy image and lure foreign professionals.

via Tim Harford

Quote of the Day

"A visit to Iraq without the dictator [Saddam Hussein] is a truly happy one".
-Mr Ahmadinejad

Illegal Immigation and the US Election

The Border and the Ballot Box;

Immigration has a fantastically complicated political history in the United States. It has produced enough populist anger to elect Know Nothing mayors of Chicago, Philadelphia, Washington and San Francisco, all in the 1850s and, more recently, to help Lou Dobbs reinvent his television career and become a best-selling author. But when national politicians have tried to seize on such anger, they have usually failed — and failed quickly. “While immigration has always roiled large sections of the electorate,” said Eric Rauchway, a historian at the University of California, Davis, “it has never been the basis for a national election, one way or the other.”

That appears to be truer than ever in 2008. Mr. McCain will all but clinch the Republican nomination on Tuesday with victories in the Ohio and Texas primaries. In the Texas campaign, except for a couple of obligatory questions about a border fence during a Democratic debate, immigration has been the dog that didn’t bark. The candidates who would have made an issue of it exited the race long ago.

There is, however, one more historical parallel to consider: as a political matter, immigration probably won’t go away on its own. The anti-immigration movements of the past may not have created presidents, but they did change the country. The Chinese Exclusion Act helped cut the immigration rate by more than 40 percent at the close of the 19th century. The Nativist movement of the 1910s and 1920s had even more success passing laws to reduce the flow.

Unlike those earlier immigration waves, the current one includes a large number of illegal immigrants, which creates its own political dynamic. The subject also plays into the economic anxiety of today that stems from decades of slow wage growth and is now aggravated by the possibility of a recession. Perhaps most important, this immigration wave could turn out to be the biggest of them all. Last month, the Pew Research Center reported that the percentage of Americans born overseas would break a century-old record sometime before 2025, if current trends continued.

Cycle of Madness in Middle East

Angry Arab writes;

The New York Times refers to Israeli occupation killings of unarmed Palestinian civilians as "clashes." Yesterday, the New York Times hoped to provide Israel with the necessary propaganda boost by claiming that violence "dips." Notice that this article from yesterday with that headline was removed from the list of articles on the Middle East on the NYT's site. Abu Mazen expresses sorrow not for the murdered Palestinian civilians but for "the peace process", or what Sa'ib `Urayqat calls "the vision of president Bush." Al-Arabiya TV barely covered the carnage in Gaza preferring to devote time to a security-police conference in UAE. Gizelle Khuri, I am sure, will interview gangster, Dahlan,--she calls him Abu Fadi--in order to absolve Israel of responsibility for the crimes. The secretary-general of the UN--the most pathetic in the history of the organization--blamed the dead Palestinian children for their own deaths. I am sure that Hillary, Obama, and McCain will all agree this week that Israel did not kill enough Arabs, and that it showed too much restraint.

A very disturbing documentary

Are economists subject to diminishing returns?

Your economic history exam for the weekend.

Here are some questions to test your knowledge of the useful history of economic thought. Some of them are only slightly impossible. While answering these questions, keep the following simple points in mind:

-If you don.t know the answers, just make them up, but only if they are outrageous and difficult to check.
-It is alright to cheat flagrantly, but do not on any account repeat yourself. If you are caught doing either of these things, become aggressive and threaten legal action, while claiming that no one told you that stupidity is stupid.
-Your answers may be allusive, but certainly not affected (well, only slightly).
-Above all, remember at all times the economist’s motto: don’t allow facts to get in the way of a good story.

Attempt as many questions as possible until you fall asleep, indicating the time and place.

1. Was Say closer to Malthus than Ricardo was to Marshall? You may prevaricate noisily, but remain seated at all times.

2. Was Adam Smith as important as is generally thought? Feel no obligation to stick to the subject.

3. Could William Petty have counted on the support of AdamSmith? And if not, how often?

4. How many Irish economists does it take to change Galbraith’s mind? You are allowed to scoff knowingly.

5. Who invented Pareto optimality? If not, who did? And was it the best he could come up with?

6. Can economic laws be effectively policed? If so, what is the opportunity cost? (Carefully avoid mention of Robert Peel).

7. Why didn’t Ricardo invent Political Arithmetic? Was he constructing one of his many numerical examples at the time?

8. Are there any economic subjects you regard as too boring to mention? Yawn loudly, but politely, as you think of them.

9. Is it true that Mirabeau was a handsome but narcissistic Frenchman who kept looking at his own reflection? How does this reflect on the Physiocrats?

10. Discuss vaguely, paying special attention to rumours to the contrary, the suggestion that economists don’t know any better.

11. Cantillon was baked by his cook after an argument. What has this got to do with Economics?

12. Deplore the failure of effective demand. You may place an order for more paper at this point in the exam.

13. Stigmatise Malthus’s theory of population growth. How did he conceive it? And who put him up to it?

14.Why did J.S. Mill find so many questions unsettling? Did he neglect to revise before his final exams, or did he just have a nervous disposition?

15. Economics is full of stylised facts without theories and theories without facts. Is this a fact or a theory? If so, how would a linguistic philosopher answer this question? (You are only allowed to use .it ‘all depends on what you mean’ fifty three times).

16. Who was right, Malthus or Ricardo? If so, does it matter? And what if it did?

17. Expatiate briefly on the idea that the utility of the calculus to utilitarians is decreasing at the margin. What does it all add up to? And what is the greatest number? (Does it exceed xy?).

18. Can apples give rise to theories that bear fruit? Did Edgeworth say .’cor blimey’. when he stumbled across the core of an economy? And did it drive Marshall nuts?

19. Is Ricardo.s theory of rent any use to landlords? Restrict your answer to illegible scribble in the right hand margin of the exam script.

20. Be mercifully brief about the labour theory of value. Do adherents invariably measure prices properly?

21. Comment abrasively on the suggestion that you don.t know what you are talking about in your answers to questions 3(b) and 7(c).

22. Complain loudly that economics was ever invented. What should take its place?

23. If all economists were placed end-to-end, would it be an unstable equilibrium? Would there be multiple equilibria?

24. Why are Smith and Marshall generally referred to as Adam Smith and Alfred Marshall, while Jevons and Edgeworth are know merely by their last names? Only deep philosophical and politically correct answers are permitted to this question.

25. What does it mean in the end to say that ends can’t be distinguished from means, and would Robbins agree or even care?

26. Did Mill and Cairnes form a non-competing group, and if so, against whom?

27. Is it realistic to assume that economists don't care about the realism of assumptions? And is this an example?

28. Comment elliptically on the suggestion that if Keynes was a post-Keynesian then Ricardo was a Sraffian and Smith was a general equilibrium theorist, and pigs really can fly.

29. Are economists subject to diminishing returns? Be careful, as this might be a trick question.

Thanks to Gabriel

Hillary vs. Obama debate that you didn't see

Live, From New York...It's Hillary Clinton!

Meanwhile,

Investment advice from Pascal

A bit old, but interesting interview with Peter Bernstein;

Q: What are the important lessons about risk from your book Against the Gods?

A: Two things. First, in 1703 the mathematician Gottfried von Leibniz told the scientist Jacob Bernoulli that nature does work in patterns, but "only for the most part." The other part—the unpredictable part—tends to be where things matter the most. That's where the action often is.

Second, Pascal's Wager [see the box above]. You begin with something that's obvious. But because it's hard to accept, you have to keep reminding yourself: We don't know what's going to happen with anything, ever. And so it's inevitable that a certain percentage of our decisions will be wrong. There's just no way we can always make the right decision. That doesn't mean you're an idiot. But it does mean you must focus on how serious the consequences could be if you turn out to be wrong: Suppose this doesn't do what I expect it to do. What's gonna be the impact on me? If it goes wrong, how wrong could it go and how much will it matter?

Pascal's Wager doesn't mean that you have to be convinced beyond doubt that you are right. But you have to think about the consequences of what you're doing and establish that you can survive them if you're wrong. Consequences are more important than probabilities.

Q: Is Pascal's Wager only a guide for minimizing losses, or can it help you maximize gains?

A: In the late 1950s a grubby-looking guy asked us to take him on as a client. He had a huge portfolio, at least $200,000 on margin in just three stocks—AT&T, [aerospace company] Thiokol and U.S. Steel. He'd been a reporter for the Brooklyn Eagle and lost his job when the paper folded. He'd had $15,000 in the bank plus his wife's salary as a schoolteacher. So he'd decided to shoot the moon. If he lost it all, they'd just go broke one year sooner. But if it paid off big, it would change their entire life. So, for him, the consequences of being right dominated the probabilities.

Q: What happened to him?

A: He came to us because he could not bring himself to unwind the tremendous gains in his portfolio. His wife, meanwhile, had been very calm and supportive on the way up. But now that they had made it big, she was terrified of losing it. So we diversified the portfolio for them. By the way, when I managed money we had clients who saved, and clients who used capital. And I always seemed to find that the ones who spent it were nicer and more enjoyable than the ones who squirreled it away.

Q: What investing and personal advice do you offer your great-grandchildren?

A: As they are four and two (and about three months in the womb), they are not likely to take much of my advice, nor should I be giving them the kind of advice you have in mind. But I would teach them Pascal's Law: the consequences of decisions and choices should dominate the probabilities of outcomes. And I would also teach them about Leibniz's warning that models work, but only for the most part. I would remind them of what the man who trained me in investing taught me: Risk-taking is an inevitable ingredient in investing, and in life, but never take a risk you do not have to take. I guess I would also tell them not to worry if they lose the little gifts Barbara and I give them, because Daddy is there to bail them out. So they should be willing to take big risks with those little gifts. If they win, they will be off Daddy's back. If they lose, well, they are on his back anyway.

Q: You've often written that something important happened in September 1958. What was it?

A: [For the first time in history,] stocks began to yield less than bonds, and it was not something tentative. The lines crossed without any period of hesitation and just kept on going. It was just, zzzoop! All my older associates told me that it was an anomaly and it could not last. To understand why that happened and what that meant -- and to recognize that what was accepted wisdom for a couple hundred years could turn out to be wrong -- was very important. It really showed me that you don't know. That anything can happen. There really is such a thing as a "paradigm shift," when people's view of the future can change very dramatically and very suddenly. That means that there's never a time when you can be sure that today's market is going to be a replay of a familiar past.

Markets are shaped by what I call "memory banks." Experience shapes memory; memory shapes our view of the future. In 1958, younger people were coming in who had a different memory bank. That's also what happened [in 1999] when tech stocks were enormously exciting; most of the new participants in the market had no memory of what a bear market is like, and so their sense of risk was muted.

How strong is the memory of the inflationary nightmares of the 1970s? Anybody under 50 did not really experience it, in the sense that they were [then] too young to be decision-makers. I believe sustaining that memory is more important to the future than all the vivid memories of the bubble and its aftermath.

Why would you want to believe a politician

AMY GOODMAN: We turn to a clip of Andrew Natsios, the former administrator of USAID, the Agency for International Development. During an appearance on Nightline with Ted Koppel in April of 2003, Natsios predicted it would cost the United States $1.7 billion to rebuild Iraq.

TED KOPPEL: I think you’ll agree, this is a much bigger project than any that’s been talked about. Indeed, I understand that more money is expected to be spent on this than was spent on the entire Marshall Plan for the rebuilding of Europe after World War II.

ANDREW NATSIOS: No, no, no, no. This doesn’t even compare remotely with the size of the Marshall Plan.

TED KOPPEL: The Marshall Plan was $97 billion.

ANDREW NATSIOS: This is $1.7 billion. There have been—

TED KOPPEL: Alright, this is the first. I mean, when you talk about 1.7, you’re not suggesting that the rebuilding of Iraq is going to be done for $1.7 billion.

ANDREW NATSIOS: Well, in terms of the American taxpayers’ contribution, I do. This is it for the US. The rest of the rebuilding of Iraq will be done by other countries who have already made pledges—Britain, Germany, Norway, Japan, Canada—and Iraqi oil revenues. Eventually, in several years, when it’s up and running and there’s a new government that’s been democratically elected, will finish the job with their own revenues. They’re going to get in $20 billion a year in oil revenues. But the American part of this will be $1.7 billion. We have no plans for any further-on funding for this.

TED KOPPEL: I want to be sure that I understood you correctly. You’re saying that the top cost for the US taxpayer will be $1.7 billion, no more than that?

ANDREW NATSIOS: For the reconstruction. And then there’s $700 million in the supplemental budget for humanitarian relief, which we don’t competitively bid, because it’s charities that get that money.

TED KOPPEL: I understand. But as far as reconstruction goes, the American taxpayer will not be hit for more than $1.7 billion no matter how long the process takes?

ANDREW NATSIOS: That is correct. That is the plan, and that is our intention. And these figures of these outlandish figures I’ve seen, I have to say, there’s a little bit of hoopla involved in this.

Linda Bilmes- Public Finance detective

From Democracy Now;

LINDA BILMES: That’s right. And last year, after I published a paper on the cost to veterans, the then-Assistant Secretary for Health at the Pentagon phoned me and phoned my dean and said, “Where did you get these numbers?” And I said, “I got them from your website, which we now have access to.” And he said, “Oh, that can’t be.” And I said, “Well, look at your website.” And he said, “Well, fax me my own website.” So I literally faxed him his own website. And then he said, “Oh.” But—

AMY GOODMAN: Who was this?

LINDA BILMES: This was the Assistant Secretary of Health at the DOD, Winkenwerder, who left, was retired around the time that Gates came in. A number of people from that department were retired. He—

JOSEPH STIGLITZ: Then they took down those websites.

LINDA BILMES: Yeah, but then, I mean—yeah, then they took down the websites, and there were websites at the Department of Veterans Affairs that were keyed into those websites, and then they directed the Department of Veterans Affairs to change the Veterans’ websites. And we only found out about this, because hundreds—hundreds—of veterans from all over the country started emailing me and calling me and saying, “Have you seen what’s going on?” So, I mean, we were in the situation where we were academics doing this research, veterans from all over the country watching these websites were coming to tell us this information.

But this kind of trickery has extended both to the budget and to the numbers in the war. And we see it right now in the President’s proposal for the FY09 veterans’ budget, where ostensibly the budget is being increased by $5 billion, but in fact, if you look at the fine print, they’re hoping to recoup over $3 billion by increasing the co-pays and all the fees on the veterans who need to use the services. And so, if you actually netted out, it’s only a $2 billion increase, which is less, when you consider the cost-of-living adjustment, than they had last year.

JUAN GONZALEZ: And you also detail in your book the same kind of flimflam going on with the soldiers who are recruited into the military, a bonus pay that they get that then, if they happen to be injured too soon when they get on the battlefield, they then have to pay back?

JOSEPH STIGLITZ: Yeah. I found that just absolutely astounding. You know, you’re doing this research, and you find things that—I say, “Linda, are you sure? This can’t be!” But they said—you know, the view is, they signed a contract to serve for three years. The fact that they get blown up after one month means they haven’t fulfilled their contract.
…
JOSEPH STIGLITZ: Exactly, like, I mean, one of the things—you know, they check out helmets and other equipment, because they want them to be responsible. But they get—then they lose their helmet in an explosion. You know, they’re shipped out, they’re disabled, they’re in concussion. Somebody in the military will send them a bill for their helmet.

LINDA BILMES: It was the GAO study on that, which is unbelievable, about veterans being—hundreds and hundreds of veterans being chased around the country for small amounts of money that they allegedly owe, mostly related to pieces of equipment that they lost during serious injuries...

LINDA BILMES: This raises one of the other real problems with the war, which is how it has been financed. The administration has—and this is the first war that has ever been financed in this way—has financed the entire war with these so-called emergency supplementals. Now, emergency supplementals circumvent the normal budget process and the normal budget caps, and they’re intended for situations like Hurricane Katrina, where you want to get the money so quickly to the area that you don’t have time to actually scrutinize the money in detail. But we’ve had now five years, twenty-five emergency supplementals. Now, what does this mean? This means that the budget folks of both parties in the Congress and in the Congressional Budget Office and other places don’t have time to actually look at, well, for this particular task, how much does it cost to get it done? So it’s absolutely inevitable that you would have profiteering, corruption, cost overruns for these huge contracts, which are let with virtually no scrutiny whatsoever...

JOSEPH STIGLITZ: Well, there are actually a whole set of reforms. We divided them into two categories: one, in terms of how we treat our veterans; the other one is how we approach the budgetary process, the information process. So, for instance, one of the recommendations is, you know, if you’re going to go fight a war that lasts for more than a year, you can’t use emergency appropriations. If you’re using emergency to statement things aren’t going the way you planned, you ought to give a statement to Congress: why were we wrong? Where did we go wrong in our plans?

Secondly, we think it’s absolutely imperative that Americans have the information to know what this is costing them. It doesn’t determine whether you make—how you—you know, whether you go to war or not, but it’s a critical piece of information, and it has to be comprehensive, It has to be based on not only the cost today, but the cost in the future, the cost to the veterans, disability, the costs hidden in all of the other departments. Social Security Disability payments are going to be going up by tens of billions of dollars. So you want a comprehensive budgetary cost. But you also want to know what are the costs to the rest of the economy, because there’s an incentive to push costs from the budget to the rest of society. If the VA doesn’t have enough money, people are going to wind up, if they can afford it, buying some of this themselves. Because you save money on body armor, families that could have went out and bought the body armor. The cost to our society is the same. In fact, the cost to society is worse, forcing it onto individuals, because some of them couldn’t afford it.

An Econ PhD Thesis Without Tears and other advice

All from Professor John Creedy;

A Guide to starting and writing research

A Guide to publishing in economics

A PhD Thesis Without Tears

How to be a jack of all development trades

You need to go to Harvard’s MPAID program according Chris Blattman;

For all other development careers, I would endorse the ID program with gusto. Yes, a PhD program has its benefits, but the opportunity cost in terms of alternative experience (and foregone earnings!) is enormous. A PhD makes you a one-trick pony. An MPA or MPA/ID plus three or four years of work experience makes you a handy jack of all development trades.

It is great advise- just one thing in terms of the benefits, I wouldn't count too much on the following;

Job placement has been outstanding, especially if you are interested in working for one of the IFIs (international financial institutions like the World Bank or IADB). The ID brand is exceptionally strong there. I think this is a reflection of great screening and selection of students, but also a superb network and a terrific environment and teaching.

But is Harvard’s MPAID program the ‘best development curriculum in the world’. I give some alternatives below;

1- Princeton’s MPAID

2- Columbia's MPA in Program in Economic Policy Management. The Director of the program is an eminent economist, Guillermo Calvo.

The program, which started in 1992 as a cooperative effort of Columbia's School of International and Public Affairs (SIPA), Graduate School of Business, and Department of Economics, draws upon the considerable faculty and other resources of these and other divisions of the University. In addition, the program has operated as a partnership with the World Bank. Funding for 15 students is granted by the Joint Japan / World Bank Graduate Scholarship Program. Students who successfully complete all requirements of the Program in Economic Policy Management will be awarded the degree of Master of Public Administration (MPA) from the school.

3. Williams College MPA in Development Economics

The Center for Development Economics (CDE) at Williams College offers an intensive, one academic year, master's degree program designed for economists from low and middle-income countries who have some practical experience. The goal of the program is to provide students with a thorough understanding of the development process, emphasizing analytical techniques helpful to policymakers. The result is an effective mix of theory and policy application that enables students to be more objective in their home environment.

So what are the other similar programs? Dani Rodrik may want to comment on the Columbia program- I understand he was involved in starting that program?

The coolest campaign ad so far

Send in the Celebrities

Blog of the Day

Financial Philosopher

Gaza Burning

At Least 45 Killed in Israeli Strikes in Gaza

Help Sufei decide whom to vote

Sexy Beijing: The Beijing Caucus

Whither Goes Housing- Podcast

A podcast from NABE on the Housing Market

David Berson, Senior Vice President, Chief Economist and Strategist, The PMI Group, Inc.
Dowell Myers, Professor and Director, Population Dynamics Research Group, University of Southern California
Moderator: Kathryn Kobe, Director, Price Wage & Productivity Analysis, Economic Consulting Services LLC

The housing sector is an important end-use market for manufacturing and the decline of housing activity has directly affected a number of industries, especially those involved in supplying construction materials but also those supplying consumer products (appliances, furniture, carpeting, etc.) typically associated with a home purchase. Falling home prices characterize this business cycle and are now affecting manufacturing industries indirectly as consumers retrench, moderating the demand for durable and non-durable goods and then feeding back to orders and production.

How Iraq War caused the sub-prime crisis, oil price hike, recession, etc

Give me a break Professor Stiglitz.


The Three Trillion Dollar War: Nobel Laureate Joseph Stiglitz and Harvard Economist Linda Bilmes on the True Cost of the US Invasion and Occupation of Iraq

War at Any Cost? The Total Economic Cost of the War Beyond the Federal Budget

How Far Will America's Subprime Virus Infect Europe?

How Far Will America's Subprime Virus Infect Europe?

Related;
Intergovernmental Finance System Reform in Germany
Summary Germany Article IV Consultation

Geopolitical Implications if the US $ Loses Its Role as Top International Currency
Interview with Bundesbank President Axel Weber

'I hate International Trade more than you' edition

Ohio workers would pay a heavy price for pulling out of Nafta. Canada and Mexico are the top two markets for exports from Ohio, accounting for more than half of the state's exports in 2006. According to the Ohio Department of Development, 283,500 workers in the state earn their living in the export sector, with machinery, car parts, aircraft engines and optical/medical equipment among the leading exports. A trade showdown would put those good-paying jobs at risk.

Since Nafta took effect on Jan. 1, 1994, the U.S. economy has added a net 26 million new jobs. The average real hourly compensation (wages and benefits) of workers has climbed 23%. Real median household net worth has increased by a third. Of course, Nafta was not the primary driver of all that good news. But it is a useful counterpoint to the sense that large numbers of Americans have been "devastated" by Nafta and other trade agreements.

In recent years, U.S. manufacturers have enjoyed record output, revenue, exports and profits. Since Nafta, U.S. manufacturing investment in Mexico has averaged a modest $2 billion a year -- a tiny fraction of the $150 billion or more those same companies invest annually in domestic manufacturing capacity. American factories actually added a net half-million new manufacturing jobs in the five years after Nafta.

The loss of manufacturing jobs in Ohio and elsewhere since 2000 is the result of increased automation and our own domestic slowdown. U.S. factories are producing more and better stuff with fewer workers because their workers have become so much more productive.

-Ohio Needs More Foreign Trade

Related;
The Politics of Trade in Ohio
Trade bashing today, but what tomorrow?

Democrats' cheap shots at Nafta

On balance, Nafta was a good agreement - though far from perfect, and oversold in a way that exposed it to the current backlash. It has expanded trade and improved efficiency across the region. But too many advocates of Nafta said that it would create jobs. This was as false as the new argument that says it has destroyed them. Trade policy has no effect on net employment: you can as easily have full employment, or chronic unemployment, under autarky as under free trade. The purpose of liberal trade is not to "create jobs" - the term is a badge of economic illiteracy - but to change the pattern of work and raise living standards overall. As with new technology, there are winners and losers. The right policy is not to turn back integration, any more than it would be to ban the fork-lift truck. It is to ensure that the overall gains are widely shared and the victims get help.

Paul Krugman: Trade and Wages, Reconsidered

Economists are tired of trade bashing

Hillary Clinton and NAFTA

India's Budget Highlights

Budget Speech

Links and coverage
The Economic Times

See also Ajay Shah's, Amol Agrawal's blogs and Indian Economy blog

IMF's views on Indian Economy

My Favorite Economics Blog for March

Real Time Economics from WSJ

Together with Econbrowser - they are the best team in the blogosphere if you're interested in the current macroeconomics situation.

And the blog to look out for this month - Jeff Frenkel's Blog

A movie from Europe

via A Fistful of Euros

Personally, I am really getting fed up with people issuing death threats, or worse, just because somebody expressed an opinion they find offensive even when I understand that some people, like Wilders, really seem to be ‘begging for it’. Consciously stirring up resentment under the guise of freedom of expression, by asking to ban the Koran in The Netherlands for example, is idiotic and makes a mockery of that very same freedom. There is a grain of truth in that the Koran is used by some Muslims factions and individuals as an inspiration/excuse for violence, but these problems are extremely complex and are not going to be solved by a simple, cinematographic book burning session. On the contrary. Still, Wilders is no Hitler and as far as I know he has not been inciting violence against Muslims. And, more importantly, the movie has not even been shown yet.

Photos of the Day

via NYT

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