Tag Archive: Economics

Development as Freedom

I rarely recommend textbooks as good reads. Not that they aren’t, of course, but they often tend to be academic in nature and therefore of little interest to anyone other than academics (and unfortunate students).

However, I’m taking a class by Professor Stephen P. Marks on World Poverty & Human Rights this Spring, and one of the textbooks is Amartya Sen’s rather excellent book Development as Freedom.

The book was such an engaging read that I finished reading it even before the start of my semester. Sen’s writing is very humanist in nature, peppered with a wry sense of humor in parts, all the while maintaining a tone that is at once both philosophical and pragmatic to the world’s problems.

Amartya Sen: Development as Freedom

Sen starts out addressing the question of whether or not freedom is conducive to development. He feels that such a question is at best defectively formulated, for reasons given below.

Sen ponders over how freedom is often dissociated from development, and considered a pleasant consequence thereof. However, Sen counters that freedom in itself should be the goal of development, and it is both constitutive and instrumental to development. He makes the argument that freedom (political, economic or societal) is central to achieving development; while freedom may result from such development, it would be unwise to ignore the inverse relationship, and true development will only happen through the proliferation of such freedoms. Furthermore, if the definition of development is to move beyond GNP and include freedom, unfree societies aren’t really quite developed.

Sen also argues against the “Lee Hypothesis”, named after the first Prime Minister of Singapore, Lee Kuan Yew. The idea behind the “Lee Hypothesis” is that democracy and freedom are luxuries that only developed societies can afford, and to become developed, less-developed societies will need to push forth agendas that may be at odds with democracy and freedom. Furthermore, a more ardent view would be that “non-democratic systems are better in bringing about economic development” for such societies.

In the same vein, he also takes to task the interpretation that “Asian Values” are inherently unsuitable and unfit for democracy, where Asia is defined not by region but through culture. The argument goes that discipline and obedience are critical traits to the Asian cultural psyche and as such, democracy is at odds with such a principle. This particular notion has had the unfortunate reputation of being exploited by authoritarian governments across Asia.

Sen counters both the “Lee Hypothesis” and the “Asian Values” argument by offering the example of the biggest democracy in Asia — India. While India has made several economic mistakes through the years, the fact that it continues to be free democracy hsa helped its economy grow while preserving the freedoms of its citizens. Sen also counters that the “Asian Values” argument isn’t necessarily unique to Asia, and that even within Asia, there have been differing schools of thought, including those that question blind allegiance to the state.

And of course, this book also touches upon Sen’s (now-famous) insight on famines and democracies.  He argues that famines are not necessarily caused by lack of  declines in food production but rather due to instability in the political, economic, or societal structures that leaves sections of the population unable to fend for themselves. Sen further proposes that countries that are “free” in the economic sense would have citizenry with a consistent income flow, and this income can be used to borrow or import basic necessities in times of need.

But at the end of the day, Sen concludes that true development cannot be measured through mere tangibles (e.g. GNP). Freedom remains the only true measure of development, and when there is freedom, development will follow.

(Cross posted from my International Relations blog.)

IPE Research Paper: Asian Financial Crisis & Exchange Rate Regimes

The topic and abstract for my IPE term paper that I had originally planned turned out to be a little too broad in its scope. As a result, my final paper had a much tighter focus.

Fluctuation & Flexibility: A Case Study of Exchange Rate Regimes from the 1997-1998 East Asian Crisis

The choice between fixed and flexible exchange rate regimes has long-lasting impacts on a nation’s economic security, and consequently, its political outlook. However, such a freedom of choice is almost always limited by the fiscal and monetary health of the nation. This paper evaluates the extent of such a freedom, and how choices in exchange rate regimes affect a country’s economic performance. Specifically, this paper uses the East Asian economic crisis as a case study to examine the effects of exchange rate policies.

The case study was performed on the basis of an exchange rate regime model by Patrick Osakwe, and was built using data before and after the Asian Crisis. The data and the results from the model were then utilized to review the original assumptions, and this laid the foundation for the conclusions drawn from the case study.

You can find my paper and the referenced Patrick Osakwe’s paper on choice of exchange rate regimes in emerging markets.

Finally, a quick caveat that this was a class term paper that’s effectively going to be a working paper to extend and validate Osakwe’s model. So, please treat it as such.

(Cross posted from my International Relations blog.)

Visualizing Bank Failures

Fascinating visualization of US bank failures by the folks at Computational Legal Studies.

The interesting thing to note, of course, are the three key takeaways:

  1. Acceleration: There were four failures in the first six months of 2008, followed by another 22 failures in the next six months. By January of 2009, there were 21 failures in the first three months of the year, followed by 138 from April to last Friday.
  2. Magnitude: Failures in the past two years have cost the Depositors Insurance Fund an estimated $57B. The IndyMac failure of July 2008 accounted for $10B alone, followed by BankUnited at $4.9B and Guaranty Banks at $3B.
  3. Spatial Correlation: There is a significant amount of spatial correlation in California, Georgia, Florida, Texas, and Illinois. These states account for 77% of the total costs to the Depositors Insurance Fund. Furthermore, most of the losses in California and Georgia were concentrated highly around a few urban centers.

(Link du jour Paul Kedrosky)

50 Years of Global Nominal Spending History

Excellent (and controversial) summary chart of the global macro-economic history of the past ~50 years by David Beckworth.

OECD_Nominal_Spending

Of course, the chart has sparked some interesting takes by Paul Krugman and Alex Tabarrok, amongst others.

Credit Crisis in Graphs

I’ve been meaning to post this for a while now.

Some time ago, the WSJ had an excellent interactive graphic that chronicled the timeline of credit crisis by stacking the 6 key financial indicators through these two years.

The key indicators were DJIA, Treasury Yields, Libor, Commercial Paper Yields, CDS Spreads & Mortgage Backed-Securities Spreads.

WSJ: Timeline of the Two Years in the Credit Crisis

Microfinance Heat Map of Average Yield

Here’s a slightly better attempt at creating a heat map, this time with the Google Gadgets API.

The heat map below is that of the Average Gross Yield (Nominal) of MFI institutions from various countries in the world. The yield is in percentage (i.e. .06=6% and .85=85%).

Data was sourced from MIX Market.

Predicted Average Inflation for G8 & BRIC Economies

Here’s a fun visualization created using Google’s Visualization API.

The data was queried from International Monetary Fund’s World Economic Outlook Database, October 2009.

Debt vs GDP Percentage

Debt as GDP % for the top 20 debtor nations — if you notice, despite our high debt, we are quite a bit lower on the totem pole.

Debt vs GDP %

Debt & GDP Data for Top 20 Debtor Nations

Data was sourced from Index Mundi.

India’s Merchandise Trade (redux)

I have talked about India’s merchandise trade here before. Looking at the First Quarter Review for 2009-2010 published by the RBI, things don’t seem to have improved a whole lot (although the markets certainly are showing some signs of an upturn).

India's Merchandise Trade 09-10

Debt Over Time: US/China/World

So, more debt stuff. Here’s a chart showing the comparison of debt between the US, China and the World, with percentages.

Debt Comparison: US/China/World

Debt Comparison Data: US/China/World

Data was sourced from Index Mundi.

World Debt (External)

Here’s a comparison of world debt by percentage. Data is sourced from Index Mundi.

Comparison of World Debt by Percentage

Gender Demographics in Unemployment

A friend sent along this comparison of gender breakdown in terms of payrolls and job loss — Mancession! An Illustrated Analysis.

Unemployment Rate: Male vs Female (2006 - 2009)

Percentage Men & Women on Nonfarm US Payrolls

Age & Unemployment

Rather interesting chart in the WSJ on older people staying unemployed for long.  Now what would have been even more interesting if this data had also accompanied the demographic distribution of each of these age-groups.

Average number of weeks spent unemployed, by age

Game Theoretic Problems in Network Economics and Mechanism Design Solutions

One of my good friends from college, Hastagiri Prakash, recently published an interesting book (as a co-author) on applying the concept of mechanism design in game theory to network economics.

The overview slides shed some more light on the details of the book, and I just started reading it. From what I could tell, extremely interesting applications and some really cool ideas – albeit a bit too arcane and academic to be of interest to the general masses.

That said, I am particularly eager to see if there are some interesting new applications of incentives and incentive compatibility to my favorite area – economics (since all life is one giant incentive, any way).

India’s Merchandise Trade

Scary looking merchandise graph from a recent Reserve Bank of India publication.

India's Merchandise Trade 07-08

[Source: RBI: Macroeconomic and Monetary Developments - Third Quarter Review 2008-09]

PIMCO folks on the economy

Two great pieces by the wonderful folks at PIMCO -

(via Paul Kedrosky)

Picture du jour

Hurry!  Offers valid only until recession lasts (which will not be much longer, cause then the depression would set in).

(Pic courtesy Akshay)

Bill Clinton: I should have better regulated derivatives

CNN just had an interesting interview with Bill Clinton, where he talks about his many mistakes.

Gramm-Leach-Bliley Act, the Commodity Futures Modernization Act, repealing Glass-Steagal etc. – bad, yes.

But the worst of the lot? Giving Alan Greenspan a free reign.

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