INET grants for New Schoolers

[Cross posted from the New School Economic Review – Original here]

Rejection is a standard – if frustrating – part of academic life, but with INETs (Institute for New Economic Thinking) Spring 2011 grant money just being announced there is much to celebrate from a New School side of things. From 400 submissions and a selected 23 grants, the New Shool economics faculty picked up one grant and the alums got another. Not too shabby for a global competition!

Prof. Anwar Shaikh’s proposed book on Turbulent Dynamics and Hidden Patterns wants to look at the world from a perspective of ‘magnificent dynamics’… I have to be honest and say that I am not entirely sure what that means, but a quick browse revealed this review article which helps. I hope we won’t lose Anwar for too long as he attempts the full manuscript, for which an outline is provided:

The book’s aim is to demonstrate that a revived form of the “magnificent dynamics” of the classical economists can explain the actual patterns of developed economies involving relative industrial prices, stock prices and interest rates, exchange rates, growth, cycles and inflation. The book develops a classical theoretical approach to these and other fundamental economic issues which it then contrasts to the corresponding theoretical arguments in the neoclassical and Keynesian traditions. It also confronts all theories with the relevant empirical evidence. It is my hope that this will encourage others to analyze the “two-sidedness” of markets: strong patterns achieved through turbulent processes.

Also in the list is one of our recent alumni Ph.D. Students, Stephen Kinsella currently at Limerick University in Ireland where he is collecting a lot of (well deserved) accolades. He wants to build a stock-flow consistent model of Ireland. It looks like an exciting and ambitious project, which I suspect follows on from other work in this area which Steve has been doing and is forthcoming in EEJ among other places (see the stock-flow-consistent model papers here).

No model helped predict or understand why Ireland’s economy has collapsed so spectacularly since 2007. This is because the real and financial sides of the economy aren’t modeled using current tools. Using INET funds, we will build a stock flow consistent model for Ireland to solve this practical problem, as well as a theoretical problem in the estimation of large stock flow consistent models highlighted in the literature. The project is important because previous modeling methods have largely failed, and because small open economies in an era of globalization all over the world face the same challenges as Ireland.

All in all good news, and I hope that we can continue this kind of success going forward. I wonder if any of the grad students submitted a proposal or worked with the faculty on one? It’s good experience and a great opportunity to get a yes.

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Forget the Big Mac index, try penguin books instead

[Cross-posted from the New School Economic Review – original here]

Wandering about New Delhi I am always struck by the way that the markets are organised. Special areas are set aside in each residential quarter (or ‘colony’ in the vernacular) and people know what markets are good for what. So off we went to get some books at Aurobindo Market, and if you want price disparities, forget about the Big Mac index and have a look at the price of books. Books are homogenous products, they are easy to replicate (so piracy is usually easy) and global publishers sell the same good in all markets under the same rules (unlike McDonalds who will need to consider rent prices, franchise costs, hygiene regulation and local tastes).

I ended up buying a very large Penguin Classic, Kautilya’s The Arthashastra – think Macchiavelli meets Adam Smith but anno 300 BC in India, preceding and influencing Greek writers such as Xenophon. The total price was 599 rupees, or $13.36 US. That seemed a bit steep to me, but turns out that the same Penguin edition is $42.95 in the US. Of course $14 buys  you a lot more here than at Barnes & Noble on Union Square, but a quick check on the PPP rates suggested that what I paid for The Arthashastra was about $33 in PPP terms. It seems that Penguin is pricing this very academic book a little below par value for the world. But academic special interest books can be very expensive so I had a look at Stieg Larson’s The Girl with the Dragon Tattoo on the next shelf. 499 rupees, so $11.19, and how much for the same book on Amazon? $14.95 RRP, but yours on-line for $8.25… The nominal price on Union Square is lower than the price in Delhi??  The PPP price of this fiction work is around $27.

That only seems really mad if you consider that the average wage of well-paid, albeit low to medium skilled, labour in Delhi (lets take a driver) is around 10,000 rupees a month: So a paperback would constitute  5% of the monthly wage.  That is almost a full days wage to buy a book. Most New Yorkers can earn the price of a book in an hour or two. So where does that leave the market? Targetting a very small niche group for educational texts – with a global price point – and an even smaller niche for fiction and general reading material, which costs more than the global price. I am told similar patterns emerge for CDs, DVDs and other entertainment material. I wonder what the founder of Penguin Books would make of this, given that:

The first Penguin paperbacks appeared in the summer of 1935 and included works by Ernest Hemingway, André Maurois and Agatha Christie. They were colour coded (orange for fiction, blue for biography, green for crime) and cost just sixpence, the same price as a packet of cigarettes. The way the public thought about books changed forever – the paperback revolution had begun.

A pack of smokes costs above $11 in New York and 100 rupees in Delhi (although the local rolled variety are much less). Book prices have a long way to go in one of these locations, if Mr. Allens intentions are to be realised.