Been at the Indian Institute of Management at Bangalore for the last five days and will be here for another five days – teaching a second-year PGP elective course titled, ‘Concepts and Current Issues in International Finance’. Student participation in the class is slowly picking up. The campus is great with its tall trees, shades and sounds of nature. Bangalore weather is fabulous – especially inside the campus – an island without vehicular pollution. Mornings are fresh and days are warm. No sweat.
Was fortunate to listen to some great artists at the Yamini dusk-to-dawn concert organised by the SPIC-MACAY at the Institute. This was their 10th edition. Malavika Sarukkai spoke beautifully. She said that dance was her sadhana, a meditation to align her body and mind. She clarified, pointedly, that sadhana is not the same as practice. It is much more than that. I was reminded of Rajiv Malhotra’s ‘Being Different’ – I have not read it yet. But, the point is that certain Sanskrit words have no English equivalent. She then dedicated the last piece – Vande Mataram – to the nation, as a note of thanks to the nation for the depth of her civilisation! Touching.
Apparently, this takes place on Jan. 25th night from 7:00 PM up to 6:30 AM on 26th morning, every year. May it continue.
On the 26th January, attended a Takshashila panel discussion on how the Republic will be, in certain aspects, by 2030. I heard of the unfortunate remarks made by Professor Joseph Stiglitz while in India, extolling ‘Right to Food’, cautioning on FDI and on India having a big internal market to concentrate on. Even if his remarks were nuanced, that is what the headliners picked up. I wish he had read Ashok Gulati’s papers on the costs of ‘Right to food’ before making his remarks to please his hosts. I have made this the theme of my article in MINT tomorrow.
It was also nice to go back to the colourful and useful slanging match between him and Ken Rogoff in 2002. The Economist too had weighed in. I could not recall seeing this response of Stiglitz in FT in 2002.
The debate between stimulus and austerity is a relevant one now and in many places: US, Europe and India. Policy prescriptions must be relevant to the context and political and economic history specific to that country. Others should not wade in loosely just to be courteous to their hosts.
I wish Stiglitz had read Dr. Pratap Bhanu Mehta in IE. His piece (‘Liberal DNA’) published on the Republic Day was a gem. I liked this sentence, in particular:
unlike the left and the right, liberals, in many matters of economic policy, do not presume to give the same answer to every question even before the question is asked.
Forget about left or right, this is the hallmark of evolved intelligence in any human being.
To his credit, Rogoff has tried to move beyond the sterile left vs. right postures on this issue. In this note, he recognises that, even if government spending has to be curbed, the public continues to expect the same level of service and services. Therefore, he has tried to go beyond the headline level analysis of how governments should respond.
Elsewhere on the issue of the sudden rush of unbridled optimism in world financial markets, John Hussman has a characteristically good piece (a long one this time since it has also a full speech of Martin Luther King, Jr.) on the state of euphoria in financial markets. This was written on January 22, 2013. There is one more after that and I am yet to read it. In his January 22nd piece, he has a particularly good explanation for the drastic fall in initial jobless claims. I think seasonal adjustment factors have played havoc with data considering the exceptionally warm December weather.
David Rosenberg, on his part, pointed out that the University of Michigan consumer sentiment – both current conditions and expectations – have dropped for two months in a row. I did not realise that. Also, the National Association of Home Builders’ Index for Single family detached homes – next six months ahead – has dropped for two months in a row in December 2012 and January 2013. I had not noticed that either.
Of course, I had noticed that all the regional manufacturing indices in the US are contracting. Also, while I was on the flight to Bangalore, it suddenly struck me that the United States’ CPI (and that of many countries now) is subject to hedonic quality adjustments. That is, even if absolute prices rise, if the good has a better quality, its price may be deemed to have declined on a quality-adjusted basis. When investment in software and technology was all the rage in the 1990s, this hedonic adjustment played no small part in boosting US real GDP figures in the 1990s as price changes were understated. Hence, real growth gets to be overstated.
This issue has been forgotten. I did an internet search on ‘US CPI without hedonic adjustments’ – I could not find the time-series that I was hoping to find.
using a hedonic adjustment to tell me the price is unchanged is like relieving yourself on my head and telling me it’s raining.