The law of diminishing marginal utility being inexorable, the trick is to exit before it turns negative.
This is going to be the last Okonomos written by me. Over the 10 years that I have been writing this column, many people have asked me whether I had mis-spelt the Greek word for economics, oikos (house) and nomos (custom or law). Actually, what I had in mind was a paper by Edmund Phelps on growth, published eons ago, in which he talks about growth on an island called Okonomos.
When, back in 1998, I had mooted the idea of writing a weekly commentary on research in economics I had suggested that it should be written by different people each week. But the editor thought differently, and I ended up writing it every week.
The aim, originally, was to write only about Indian research. But after only a few weeks I ran into a problem: There just wasn’t enough of high quality research going on. The theoretical stuff from places like the Indian Statistical Institute and the Delhi School of Economics was good, no doubt, but hardly the sort of thing one could write about in a newspaper.
The universities were comatose and the think tanks, which had had to go commercial over the 1990s, produced status reports, which was not really research. As such they were more suited for the news columns, rather than the Okonomos. The empirical stuff was limited by the fact that there just wasn’t enough data around. The exception was the RBI and its publication, Occasional Papers. But that was mainly because the staff had the data. Sadly, it has become too occasional now. The website link was last updated in February and the last volume is dated Monsoon 2007.
Those were also the days when the Internet hadn’t quite become what it has now. It was really a problem finding — on a weekly basis — something interesting enough to write about. I started visiting the think tanks about then, and although nothing much resulted in professional terms, there was an important positive externality: I made some very good friends.
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One of the most striking things was the frequent assertion by the economists I met was that they didn’t read the business papers. This strange approach doesn’t seem to have changed much. Just two days ago, I met a university professor who said the same thing. I wondered about the point of the research they did. If, like their counterparts in the US and the rest of the west, they didn’t address live problems, what did they do then? And why?
That was not all. I also discovered how easy it was for very powerful interests, both vested and wannabes, to use naive but competent economists to further their cause. The whole “reform the financial sector now, at once, now, now now” campaign then fell into proper perspective.
It was in 2001, I think, that I discovered the NBER site. It was a real eye-opener in at least three ways. First there was the idea itself, of letting it all hang out on a free website (no longer free, though). Second, there was the sheer volume of American research. And third was its extraordinary variety. You can find some guidance on practically any subject on the NBER website. How I wish the Planning Commission or some other agency would promote something similar in India as well.
But the law of diminishing marginal utility is inexorable. It always comes into play and by about 2005 I had begun to tire of the NBER website also. The reason was that the method of research posted on it was numbingly uniform, frozen as it were in a template: find a data set, run a few regressions, and come up with some fairly banal conclusions. Moreover, you never, ever find a theoretical insight at NBER. Also, the rapid increase in the number of posts on it seemed to have diluted the standards somewhat.
One thing that needs mentioning is the amazing preponderance of research on financial markets and the scarcity of research on the real sectors. Good microeconomics research is almost non-existent and the great Indian rope trick called macroeconomics dominates. There is a lot of pointless development economics research, probably because the World Bank funds so much of it. In my view it is complete bollocks.
I should also mention that of the nearly 600 Okos I wrote, I received less than 10 submissions from Indian economists. I finally had to conclude that the people for whom it was originally meant — economists — were not interested in reading about what other economists were saying. I would be remiss, though, if I did not mention that non-economists did find it useful.
I understand the column will continue, which is great news. Now I can sit back and let someone else bring me up-to-date on what’s going on in the confused world of economists. Better do a good job of it, lads.