THE STARS IN ECONOMICS

THE STARS IN ECONOMICS

Stanley Fischer, central bank governor extraordinaire, by Prakash Loungani

During his tenure in academia, Fischer established himself as a preeminent macroeconomist before taking on the job as chief economist at the World Bank. As the IMF's deputy in the 1990s, he dealt with economic, financial, and debt crises in countries the world over.
Stanley Fischer on Charlie Rose show

Solving History’s Puzzles
Carmen Reinhart, Harvard economist, by James L. Rowe Jr.
The profession’s most-cited female and co-author of one of the most important economics books of the past decade, Reinhart relies on empirics to solve economic puzzles.
The $787 Billion Question
Christina Romer, former chair of the U.S. Council of Economic Advisers, by Maureen Burke
Taking up the role of chair of the U.S. Council of Economic Advisers in 2009—in the midst of unprecedented economic uncertainty—Romer grappled with the most severe downturn since the Great Depression. Now back at Berkeley, she continues to advocate decisive government action to boost employment.
Romer on monetary policy
A Project in Every Port
Jeffrey Sachs, peripatetic development economist, by Prakash Loungani
Sachs played key economic advisory roles in governments the world over—offering solutions on transitioning to capitalism or fighting hyperinflation, but he has become more widely known and recognized for his tireless crusade against poverty.
Angelina Jolie travels with Jeffrey Sachs
The Man with the Patience to Cook a Stone
Justin Yifu Lin, first World Bank Chief Economist from a developing or emerging economy
From humble beginnings, Lin’s talent and tenacity helped him rise to success as one of China’s top economists. His “New Structural Economics” has spurred dialogue and a rethinking among development economists as to how governments can strategically target industrial development.
Lin’s book launch
Minder of the Gaps
Laura Tyson, first woman to head the U.S. Council of Economic Advisors, by Jeremy Clift
As an architect of President Clinton’s economic policy, Tyson promoted “aggressive unilateralism” in trade. Now, based at the University of California, Berkeley, she continues to identify ways to promote growth in the face of global competition and technological change.
Tyson on gender equality
Tyson on education
An American Globalist
C. Fred Bergsten, Peterson Institute founder, by Prakash Loungani
From positions in the Nixon and Carter administrations in the 1970s to inaugurating and heading up what would become one of the preeminent economic think tanks world-wide, Bergsten has devoted much of his life to furthering global economic integration.
Bergsten on video
Second Time Around
Ngozi Okonjo-Iweala, former World Bank Managing Director, by Jeremy Clift
Okonjo-Iweala returned to Nigeria in 2011 to take on the role of Nigeria’s economic czar. Growing up in the midst of a civil war instilled a sense of determination and hard work that she has taken with her throughout a successful career in development economics.
The Master Artisan
Elinor Ostrom, first woman to win economics Nobel, by Maureen Burke
Heralding a cooperative and interdisciplinary approach herself, Ostrom has amassed a body of work examining social norms and what makes people cooperate—including to the extent that they avoid “tragedy of the commons” outcomes, situations previously accepted by many economists as unavoidable.
The Human Face of Economics
George Akerlof, Berkeley professor and founder of identity economics, by Prakash Loungani
Well known for his early work on the economic consequences of information asymmetries, Akerlof’s long career at Berkeley also yielded a body of work in which he used innovative ways to look at unemployment. He has also been a perennial voice calling for sensible government regulation in the banking sector.
George Akerlof on Identity Economics
Residual Brilliance
Robert Solow, giant in the field of economic growth theory, by Atish Rex Ghosh
Solow looked at the sources of growth—capital, labor, and technological progress, finding the latter to be the main driver of long-term growth. For decades, his work has influenced governments’ policies across the world as they look to increase funding for technological research to spur economic growth.
Robert Solow on reshaping economics
Fun & Games
Avinash Dixit, economic theorist, by Jeremy Clift
Dixit’s work on modeling economic behavior under the conditions of “monopolistic competition” became a foundation for research in the field. As a long-time professor at Princeton, Dixit pursued research interests ranging from game theory to international trade to the role of democratic institutions in economic development.
Undercover Operator
Maria Ramos, academic-turned-Treasury mandarin, by Simon Willson
From key positions in the South African finance ministry, Ramos adeptly charted the policy options needed to help the country attain fiscal stability in the 1990s following its transition to democracy. Later as a bank chief executive, she applied the same brand of pragmatism and vigor as she had during her government years.
The Unlikely Revolutionary
Jang Hasung, Dean of Korea University, by Hyun-Sung Khang
Business professor, but activist at heart, Jang established himself as a crusader for corporate reform seeking greater accountability and transparency in the giant, family-run conglomerates of Korea.
Breacher of the Peace
Daron Acemoglu, Istanbul-born economist, by Simon Willson
Beyond economics, Acemoglu’s varied research interests have included a wide spectrum of political economy subjects. Raising questions on how economics and politics intersect, he often takes unique approaches by explaining topics, such as democracy, from an economic perspective.
The People’s Professor
Joseph Stiglitz, former World Bank Chief Economist, by Prakash Loungani
Having amassed a body of work examining the rather profound effects that the adequacy and availability of information has on economic transactions, Stiglitz also played a key role as chairman of the U.S. Council of Economic Advisors in the 1990s.
Stiglitz on Iceland
Stiglitz on reshaping economics
Michael Spence on reshaping economics
Questioning a Chastened Priesthood
Daniel Kahneman, psychologist who helped build the field of behavioral economics, by Jeremy Clift
Well known for his pioneering work integrating aspects of psychological research into economic science, Kahneman’s work is regarded as having laid the foundation for a new field of economic research—behavioral economics.
Still the Bottom Billion
Paul Collier, Director for the Center for the Study of African Economies at Oxford University, by Glenn Gottselig
Eternal advocate for the “bottom billion” living in the world’s poorest countries, Oxford University professor Paul Collier offers a prescription for helping lift low-income countries to higher levels of economic development.
Seeing Crises Clearly
Nouriel Roubini, founder of RGE Monitor, by Prakash Loungani
As one of the few voices that predicted many of the events leading to the 2008-09 global economic crisis, Roubini captured the attention of the economics profession. A professor at New York University, he also heads a global economic and market strategy research firm.
From Visionary to Innovator
Robert J. Shiller, best-selling author, by Paolo Mauro
Well known beyond the worlds of finance and economics thanks to the indices on home prices that bear his name, Yale professor Robert Shiller has studied and written extensively on the factors leading to bubbles in the economy.
The Catch-Up Game
Michael Spence, former Dean of Stanford Graduate School of Business, by Archana Kumar
Spence, best known for his groundbreaking work explaining how employees and employers interact, also served as Chair of the Commission on Growth Development, which had been tasked with determining strategies for sustainable growth.
Rise of the Undaunted Empiricist
Beatrice Weder di Mauro, first woman on Council of Economic Experts, by Simon Willson
Known for her direct and persistent style of inquiry and research, Weder di Mauro brought to the German Council of Economic Experts a record as a pathfinder in exploring the role of banks in transmitting financial contagion.
A Legacy of Model Elegance
Jacques Polak, former IMF chief economist, by James L. Rowe
A student amidst the Depression era and later signing on to work at a newly-created IMF, Polak became an economic force of the 20th century, pioneering the research that would become the basic economic approach of the IMF.
The Quest for Rules
John Taylor, former member of the Council of Economic Advisors, by Prakash Loungani
Best known for his namesake rule that described the response of the U.S. Federal Reserve’s interest rate target to inflation and business cycles, Taylor gained notoriety as the result of his simple equation‘s wide acceptance among central banks as a useful guide for policy.
Harnessing Ideas to Idealism
Michael Kremer, innovator on public policy problems, by Arvind Subramanian
Kremer, who helped pioneer the creation of a new instrument to boost the development of vaccines by securing advance promises to pay for them, also helped introduce a major methodological innovation in empirical development economics: the randomized evaluation of public policy interventions.
Topping the Charts
Robert Barro, one of the founders of new classical macroeconomics, by Prakash Loungani
As one of the ringleaders of the Chicago School–led revolution, Barro and his work became well known to scholars and policymakers in the 1970s, who were at that time reconsidering the Keynsian approach that centered on a government's ability to smooth out business cycles.
A Master of Theory and Practice
Guillermo A. Calvo, former chief economist at the Inter-American Development Bank, by James L. Rowe
As one of the preeminent scholars of both modern macroeconomic theory and the economics of emerging markets, Calvo contributed to the critique that incorporated people's expectations about policy, provided insights into time inconsistency and credibility issues, and sought better modeling of the economy to account for such distortions as "sticky prices."
Navigating Unchartered Waters
Otmar Issing, first chief economist of the European Central Bank, by Camilla Andersen
Issing helped set the course for the European Central Bank to become one of the most credible and powerful central banks in the world, adeptly navigating uncharted waters as the institution sought to implement inflation goals for the newly created euro area.
Ahead of His Time
Robert Mundell, former advisor to the UN, IMF, and World Bank, by Laura Wallace
A pioneer of modern international economics and inspiration to a generation of researchers, Mundell has been lauded for his analysis of monetary and fiscal policy under different exchange rate regimes and his analysis of optimum currency areas.
Economist as Crusader
Paul Krugman, winner of both the Nobel and Pulitzer Prizes, by Arvind Subramanian
Economics made Krugman famous; punditry made him a celebrity. As a hard-hitting political columnist Krugman has made influential contributions to both international trade theory and international macroeconomics.
The Quiet Integrationist
Haruhiko Kuroda, head of the Asian Development Bank, by Jeremy Clift
As President of the Asian Development Bank, Kuroda set in motion an ambitious agenda for a new financial architecture for Asia, all the while addressing the risks of a bird flu pandemic, the effects of the Asian tsunami, and a deadly earthquake in Pakistan.
Economics with a Social Face
Nora Lustig, Latin American development economist, by Conny Lotze
Lustig has been in the vanguard of development economists who not only insisted on the link between poverty reduction and macroeconomic policy, but also advocated well-targeted social policies to help the poor break out of poverty for good.
The Globalization Guru
Jagdish Bhagwati, founder of the International Journal of Economics, by Arvind Subramanian
Abandoning law for economics at when he began his studies at Cambridge University, Bhagwati went on to become a leading economist in the area of trade and development and a tireless opponent of protectionism and advocate of free trade.
Super Mario and the Temple of Learning
Mario Monti, former President of Bocconi University, by Jeremy Clift
As the EU’s former Commissioner for Competition, Monti left a lasting legacy on both the corporate world and competition policy. As the first chairman of Bruegel, he continued to shape European and global economic policymaking.
Managing the Currency of an 'Out' Country
Bodil Nyboe Andersen, former Denmark central bank governor, by Camilla Andersen
After her stint as a lecturer at Copenhagen University, Andersen went on to serve on the management board of Unibank, Denmark’s second largest bank. As central bank governor of Denmark, she presided over the bank during a tumultuous time.
In on the Ground Floor
Linah Mohohlo, Botswana central bank governor, by Jacqueline Irving
Beyond her achievements in managing Botswana's monetary policy, Mohohlo also played a role in the private sector, sitting on the boards of several major companies, and has been an influential voice calling for action from the international community on issues such as development aid, fair trade, and debt relief.
Freedom as Progress
Amartya Sen, inventor of better measures of poverty, by Laura Wallace
Known for restoring “an ethical dimension” to the discussion of vital economic problems by combining tools from economics and philosophy, Sen’s contributions to social choice theory, welfare economics, and economic measurement have been seminal.
Budget Guru Takes a Stand
Alice Rivlin, former vice-chair of the Fenderal Reserve, by Elisa Diehl
With more than 30 years in service in the U.S. government, Rivlin was the founding director of the Congressional Budget Office and also served in the Office of Management and Budget and the U.S. Federal Reserve.
Getting There First
Martin Feldstein, former chair of the Council of Economic Advisors, by Prakash Loungani
Feldstein made a lifelong study of the effects of taxes and social insurance while also pioneering the new field of health economics. In his tenure as president of the National Bureau of Economic Research, he led in the revitalization of the Bureau as a top-notch think tank.
Hearing the Dogs Bark
Hernando de Soto, best-selling author, by Jeremy Clift
As founder of the Lima-based think tank, the Institute for Liberty and Democracy, de Soto argued that the key to both defeating international terrorism and securing capitalism is enabling poor entrepreneurs across the developing world to become part of the system rather than excluded from it by bureaucracy and red tape.
Putting Economic Policy to the Test
Esther Duflo, Massachusetts Institute of Technology economics professor, by Asimina Caminis
As a development economist and one of the co-founders of the Poverty Action Lab, Duflo challenges some of the cherished assumptions on which many development policies are based.
Concentrating the Mind
Allan H. Meltzer, expert on development and applications of monetary policy, by Jeremy Clift
Meltzer, who briefly served in the U.S. Treasury during the presidency of John F. Kennedy and later was an advisor to Ronald Reagan, is regarded as one of the icons of American economics.
The Lab Man
Vernon Smith, senior fellow at Cato Institute, by Jeremy Clift
As a pioneer in the use of experimenting in the controlled environment of a laboratory to test economic theories, Smith’s work helped shift the perception of economics as a nonexperimental science that had to rely on observation of real-world economies rather than the controlled experiments.
Challenges of the New Millennium
John Kenneth Galbraith, former president of the American Economic Association, by Asimina Caminis
Longtime professor of economics at Harvard University, Galbraith offers his views on the inherent instability of capitalism, why democracy is important for economic growth, and how financial crises offer the opportunity to “clean up” incompetence in the banking system, the industrial system, and, to some extent, in government.

Reforming Energy Subsidies

Reforming Energy Subsidies

---IMF

Subsidies are intended to protect consumers by keeping prices low. But they also come at a high cost.

Subsidies are expensive for governments—and therefore taxpayers—to finance and can hinder governments’ efforts to reduce budget deficits. They also compete with other priority public spending on roads, schools, and healthcare.
All consumers—both rich and poor—benefit from subsidies by paying lower prices. Governments could get more “bang for their buck” by removing or reducing subsidies and targeting the money directly to programs that help only the poor.
Subsidies encourage excessive energy consumption, which accelerates the depletion of natural resources. They also reduce the incentive for investment in other forms of cleaner energy.
Measuring subsidies
Producer subsidies often arise because energy producers—usually state-owned enterprises (SOEs)—are inefficient and have high costs of production. In the electricity sector, producer subsidies can also arise because of non-payment of bills and power distribution losses which weaken the revenues of SOEs.
Consumer subsidies can include two components: a pre-tax subsidy and a tax subsidy.
Pre-tax subsidies exist when energy consumers pay prices that are below the costs incurred to supply them with this energy. Taking gasoline as an example—and remembering it is internationally traded, the pre-tax subsidy is simply the international price of gasoline less the final price paid by consumers at the pump.
Tax subsidies exist if taxes for energy are below their efficient level. This has two components. First, energy should be taxed the same way as any other consumer products. If energy taxes are lower than this, there is a tax subsidy. Second, some energy products contribute to pollution and global warming—efficient taxation requires that the price of energy should reflect these adverse effects on society. In most countries, taxes on energy fall far short of this, implying the full costs of consuming energy are not reflected in its price, as it should when energy is priced right.
Post-tax subsidies are the sum of pre-tax and tax subsidies. Post-tax subsidies are four times larger than pre-tax subsidies, and advanced economies account for 40 percent of post-tax subsidies. But as a share of gross domestic product, post-tax subsidies are roughly eight times larger in the Middle East and North African region than in advanced economies.

Reform efforts

In 2009, the Group of 20 advanced and emerging market economies called for a phase out of inefficient fossil fuel subsidies in all countries, and reaffirmed this again in 2012.
Despite the potential gains, many countries have had difficulty reforming subsidies. When reforms are made, prices increase, and this has often led to widespread public protests.
The absence of public support for subsidy reform is in part due to a lack of confidence in the ability of governments to shift the resulting budgetary savings to programs that would compensate the poor and middle class for the higher energy prices they face.
This problem is particularly challenging in oil-exporting countries, where subsidies are seen as a mechanism to distribute the benefits of natural resource endowments to their populations and where the capacity to administer targeted social programs is typically limited.
Governments are also often concerned that higher energy prices will contribute to a higher rate of inflation and adversely affect their competitiveness. Subsidy reform can also be complex when it includes trying to reduce inefficiencies and production costs, as is often the case for the electricity sector.

A plan for reform

While there is no single recipe for successful subsidy reform, country experiences suggest that the following ingredients are needed:

• a comprehensive energy sector reform plan with clear long-term objectives with an analysis of the impact of reforms;
• transparent and extensive communication and consultation with stakeholders, including information on the size of subsidies and how they affect the government’s budget;
• price increases that are phased-in over time;
• improving the efficiency in state-owned enterprises to reduce producer subsidies;
• measures to protect the poor through targeted cash or near-cash transfers or, if this option is not feasible, a focus on existing targeted programs that can be expanded quickly; and
• institutional reforms that depoliticize energy pricing, such as the introduction of automatic pricing mechanisms.

ADB on Inequality

Inequality in the Asia and Pacific Region: 12 Things to Know

Despite Asia's remarkable economic progress over the last decades, inequality remains a problem in the region.

Inclusive growth, defined as economic growth with equality of opportunity, is one of the three strategic objectives of ADB. Source: ADB document Framework of Inclusive Growth Indicators 2013

From 1990 to 2010, Asia and the Pacific has halved extreme poverty and seen an annual rise in average per capita income of nearly 6%. However, data shows a worsening of the rich/poor gap in many economies. Source: ADB document Framework of Inclusive Growth Indicators 2013

The best improvements have been seen in poverty reduction (at the $2 a day measure), under-five mortality rates, and in average years of schooling. Source: ADB document Framework of Inclusive Growth Indicators 2013

Countries with high Gini coefficients (inequality measure) where the poorest quintile of the population had the lowest shares of national income or consumption included the People's Republic of China, Malaysia and several Pacific Islands. Source: ADB publication Key Indicators for Asia and the Pacific 2013

Child mortality has been cut in half over the last two decades but progress on reducing the number of underweight children has been poor. Source: ADB document Framework of Inclusive Growth Indicators 2013

Many workers earn too little to lift their families out of poverty and the number without formal work exceeded 40% of the total employed in 18 economies, with the proportion being over 80% in India and Bangladesh. Source: ADB publication Key Indicators for Asia and the Pacific 2013

Electricity consumption over the last two decades has more than tripled but wide disparities still exist between rural and urban areas, while cellular phone subscriptions have grown in all economies. Source: ADB document Framework of Inclusive Growth Indicators 2013

The region has seen an increase in the average number of years children stay in school and most economies have improved gender parity in primary education. However, gender parity in the labor force has deteriorated. Source: ADB document Framework of Inclusive Growth Indicators 2013

The People's Republic of China and 15 other economies had youth (aged 15-24) literacy rates of at least 99% but 11 economies had rates below 95%, including Pakistan with 71%. Source: ADB publication Key Indicators for Asia and the Pacific 2013

Social security spending on health as a percentage of government expenditure has risen but there are sharp disparities amongst countries. Source: ADB document Framework of Inclusive Growth Indicators 2013

Migrant workers' remittances are now a major source of foreign exchange across Asia and the Pacific region. Source: ADB publication Key Indicators for Asia and the Pacific 2013

Migrant workers' remittances is now a major source of foreign exchange across Asia and the Pacific region. Source: ADB publication Key Indicators for Asia and the Pacific 2013