In The Media ⁽⁴⁰⁰⁾

This year's economics laureates — economist Vernon Smith of George Mason University and psychologist Daniel Kahneman of Princeton University — have both been pioneers in the field of experimental economics. But the similarity between their contributions ends there. MONDAY, OCTOBER 14, 2002 This year's economics laureates — economist Vernon Smith of George Mason University and psychologist Daniel Kahneman of Princeton University — have both been pioneers in the field of experimental economics. But the similarity between their contributions ends there. Vernon Smith has used experiments to test and essentially validate existing theories of market. Daniel Kahneman, on the other hand, has applied experimental data to question the assumption of rationality in the traditional theory of decision-making under uncertainty and constructed an alternative theory. To be sure, several economists including his teacher at Harvard, late Edward Chamberlin, preceded Smith in applying the experimental approach to testing theories. But having made the most important early contributions and trained a large number of young researchers, Smith remains the undisputed central figure in the field. Smith's most celebrated contribution, made in 1962, tested the…

Does evidence point to ISI leading to a golden age of growth in developing countries and liberal trade policies, deregulation and privatization going no where? Economic Times, September 25, 2002 Taking issue with my conclusion in the May 22 column that the Indian industry needs further trade liberalisation, labour-market reforms, an end to the small-scale industries reservation, effective bankruptcy laws and privatisation to catch up with China, my friend Professor Dani Rodrik of Harvard University writes in a personal note: “Most of the countries of Latin America did all of that, and the result was a rate of industrial growth (and TFP expansion) that is way below the levels experienced under ISI [import-substitution industrialisation]. The least that India can do is to learn from this experience and not assume that all the good things will follow as soon as trade liberalisation, deregulation and privatisation takes place.” Rodrik is among a handful of thoughtful critics of trade liberalisation and deregulation who ground their views in serious scholarly research. Therefore, one cannot summarily dismiss his advice. So how does one respond to…

RBI foreign exchange reserves now exceed $60 billion. Must it keep accumulating or there are other alternatives? Read on for some answers. Economic Times, August 28, 2002 The foreign exchange reserves held by the Reserve Bank of India have crossed the $60-billion mark. They are now sufficient to cover 10 months worth of imports of goods and services. Since we have almost never accumulated reserves of this magnitude, they raise some important questions. What led to this accumulation? Is it desirable? If yes, why and how much more reserves must we accumulate? If not, why not and what is the best way to arrest the process? Answers to these questions are technical but can be understood provided one is willing to work through some mundane balance-of-payments statistics. These statistics relate to a country’s international transactions such as imports, exports, remittances, foreign investment and other capital flows that give rise to inflows and outflows of foreign exchange (dollars, for short). Therefore, consider the accompanying table, which offers a crude summary of India’s balance of payments during the year 2001-02. In that…

(Full text and external link unavailable) Are the calls for raising aid flows to 0.7 percent of the industrial countries' GDP grounded in proper analysis? Have those making the calls offered a roadmap of how they can use this larger amount effectively to promote the Millennium Development Goals?

(Full text and external link unavailable) Under the Generalized System of Preferences (GSP), developed countries grant one-way tariff preferences to developing countries. But the experience with these preferences has been even less encouraging than that with aid.