Financial loss and best soccer goals in 2008

From the NYT:

All told, about $7 trillion of shareholders’ wealth — the gains of the last six years — was wiped out in a year of violent market swings.

Billionaire blowups of 2008:

More than 300 of the 1,125 billionaires we tallied on our annual list last March have since lost at least $1 billion; several dozen lost more than $5 billion. The 10 richest from our 2008 rankings dropped some $150 billion of wealth, dragged down by steel tycoon Lakshmi Mittal, estranged brothers Mukesh and Anil Ambani and property baron K.P. Singh, who together dropped $100 billion. America's 25 biggest billionaire losers of 2008 lost a combined $167 billion.

This video is quite amazing!

 

Now, the best 2008 football goals:

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Nepali economy in 2009

My former colleague Prem Khanal writes:

The year 2008 ended further cementing historic changes in the political front but little enthusiasm the economy saw to turnaround deepening economic woes. Instead, topsy-turvy policy often contradicting with market-based economic principals, acute power shortage and shattered private sector’s confidence all have emerged as major headwinds that the Maoists-led government will be confronting to lay groundwork to achieve a ‘double-digit growth’ in 2009.

My main worries: gradual wiping off of the industrial base due to load-shedding, negative impact on the service sector, rising general price level (14% inflation rate is one of the highest in South Asia) and stalemate in hiring (low-skilled jobs abroad) by foreign companies. All could lead to social unrest!

Eight best economists of the next generation

The Economist magazine names the eight best economists of the next generation:

1. Esther Duflo, MIT
2. Jesse Shapiro, University of Chicago
3. Roland Fryer, Harvard University
4. Amy Finkelstein, MIT
5. Raj Chetty, Harvard University
6. Ivan Werning, MIT
7. Xavier Gabaix, New York University
8. Marc Melitz, Princeton University

Clearly, Esther Duflo is the star in the list!

Esther Duflo of the Massachusetts Institute of Technology (MIT) received more recommendations than any other economist. Some who didn’t nominate her thought she was too established to count as “new”.

With her colleague, Abhijit Banerjee, Ms Duflo and Mr Kremer have remade development economics, nudging it away from its concern with policies, towards a preoccupation with projects. They study economic development as seen from the field, clinic or school, rather than the finance ministry. They might be called the “peace corps” of economists, bringing the blessing of their investigative technique to the neglected villages of India or the denuded farms of western Kenya.

Ms Duflo has made her name carrying out randomised trials of development projects, such as fertiliser subsidies and school recruitment. In these trials, people are randomly assigned to a “treatment” group, which benefits from the project, and a “control” group, which does not. By comparing the average outcome of each group, she can establish whether the project worked and precisely how well.

More about Duflo here. She answered my question here in September.

Possibilities of global recession and regime change in Zimbabwe in 2009

The FT sketches some of the main upcoming events in 2009. Hot in the list are recession in 2009, rock-bottom interest rates, exchange rate renminbi vs. other currencies, price of oil, the role of state, New Deal, Cuba, Mugabe, and artificial life, among others.

Will the recession end in 2009?

No, as far as the US, the UK, Spain and Ireland are concerned; possibly Yes for other European economies and Japan. Whatever happens, 2009 will not be pleasant. For all the cuts in interest rates and taxes, higher unemployment will be the dominant issue of the first half of the year, outweighing gains to real incomes from these policies and lower commodity prices. Uncertainty will be the watchword for the year, making any prediction precarious, but there is still a good chance that rising incomes will become powerful forces in the continental European and Japanese economies later in the year. For those economies that need much bigger rises in household savings rates to adjust for the recession, recoveries will be delayed. There is also a good chance the world will enter a debt-deflation trap, although I hope the authorities will do everything to avoid this. But even if we experience genuine green shoots of recovery, as I expect, 2009 will be a year to forget. Chris Giles

Will Mugabe go in 2009?

“Only God who appointed me will remove me.” Thus spoke Robert Mugabe after refusing to bow to the ballot box earlier this year. Tragically, there is no reason yet to think he is wrong.

No amount of huffing and puffing in London and Washington will bring about regime change. Nor will southern Africa take decisive action, although images of starving Zimbabweans stumbling across the border will force Pretoria to toughen up its talk.

Starving people, though, make poor revolutionaries and Mr Mugabe still exercises a mesmerising authority over the better fed members of his own coterie, which militates against a palace coup. Low as it is already, Zim­babwe can fall much lower in 2009. Only natural or divine causes will remove the man so determinedly taking it down. William Wallis

Liquidity trap and optimal fiscal policy

Following New Keynesian Economics models, Krugman sketches out a model where he shows the optimal fiscal policy (increasing government expenditure up to the point where full employment is maintained) when the economy is in a liquidity trap.

…when the economy is in a liquidity trap government spending should expand up to the point at which full employment is restored. That’s not a guess or a statement of personal preferences, it’s a result.

The basic intuition behind this result is that when the economy is in a liquidity trap, the social marginal cost of government spending is low, because there isn’t enough private demand to fully employ the economy’s resources. This means that we would normally expect more government spending to raise welfare, right up to the point that full employment (a concept that needs a bit of explanation here) is restored. At that point the marginal cost of government spending jumps up, because it’s diverting resources from private spending.

What I’ve illustrated here is the marginal cost and benefit of government purchases of public goods in and near a liquidity trap. The marginal benefit is presumably a downward-sloping
curve. If G is low, so that monetary policy cannot achieve full employment, the marginal cost of an additional unit of G is low, because the additional government purchases don’t crowd out
private spending. Once G is high enough to bring full employment, however, any further rise in government purchases will be offset by a rise in the interest rate, so that extra G does come at the expense of C, implying a jump in the marginal cost.

As the figure suggests, there should be a fairly wide range of situations in which the optimal level of G is precisely the level at which the marginal cost jumps – that is, the optimal fiscal
expansion is one that brings the economy right to full employment.

…The bottom line here is that while we usually think of Keynesianism as the preserve of ad hoc models, in this case doing it “right” – using a macromodel with maximizing agents and a proper concern for intertemporal constraints – actually suggests a very strong case for big government spending in the face of a liquidity trap. When the economy is depressed and monetary policy can’t set it right, the true opportunity cost of government spending is low. So let’s get those projects going.

The year 2008 in review- the WB version

Here is WB’s review of the year 2008

YCL and load-shedding fall heavy on the industrial sector

The Maoists militant youth force, YCL, and 13 hours of load-shedding in Nepal is taking toll on the industrial sector. Lack of energy and YCL’s campaign to close down industries by putting unjust demands that are beyond the rich of the fledging industrial sector are forcing industries to close down.

Global economics crisis, moribund garment and textile industry, energy crisis, threats to property rights, lack of appropriability (private), high inflation rate…the list of problems in the Nepali economy is never-ending…The last thing Nepal needs now is YCL’s politically motivated rage and labor unrest.

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UPDATE: THT reports that the industrial sector is in fact feeling the heat of YCL’s excesses pretty intensely!

With increase in load-shedding hours in the country, up to 50 per cent of the productivity has been cut. “Serious alternative measures should be taken immediately to prevent the collapse of industries,” he recommends to the government.