Healthcare Reform

For Discussion: From where do we start reforming health sector in poor countries? What would be entry points? What countries can be considered best practice- Thailand, Estonia, Rwanda? What lessons can be drawn from OECD countries?

Risk: A Very Short Introduction

Table of Contents
1. Risk decisions
2. Defining risks
3. Analyzing risks
4. Risk perceptions
5. Risk communication
6. Reconciling risks
7. Risk, culture and society

Authors: Baruch Fischhoff and John Kadvany

Recently from GAO

International Monetary Fund: Lending Programs Allow for Negotiations and Are Consistent with Economic Literature;

IMF-supported programs in the four countries GAO reviewed--Liberia, Zambia, Hungary, and Iceland--include different sets of objectives, targets, and conditions that reflect country circumstances, based on negotiations between the IMF staff and country officials. In postconflict Liberia, the program focuses on rebuilding capacity and contains a target for maintaining a balanced budget with no borrowing. In Zambia--a country negatively affected by the recent economic crisis--the IMF-supported program is designed to increase economic growth, reduce poverty, and improve governance. Hungary, which faced a rising risk of default, has a program that focuses on restoring investor confidence while reducing debt and expenditures. A banking and currency collapse in Iceland precipitated the IMF-supported program, which contains some controversial approaches to monetary policy and banking reform. All four countries are making progress but face challenges in implementing conditions or achieving targets in their IMF-supported programs. The macroeconomic policies in IMF-supported programs are broadly consistent with the findings of the empirical literature GAO reviewed, although this literature lacks precise guidance for setting policy targets. For low-income countries, empirical evidence generally suggests inflation is detrimental to economic growth after it exceeds a critical threshold, which is broadly consistent with the inflation targets included in the IMF-supported programs we reviewed. For middle- and high-income countries, the literature identified specific policy weaknesses in advance of crises, including high inflation, high public indebtedness, and low international reserves. These weaknesses are consistent with the policies upon which the IMF focuses in the 13 programs in middle- to high-income countries GAO reviewed.

2010 Census: Census Bureau Has Made Progress on Schedule and Operational Control Tools, but Needs to Prioritize Remaining System Requirements

Operation Iraqi Freedom: Preliminary Observations on DOD Planning for the Drawdown of U.S. Forces from Iraq;

DOD has yet to fully determine its future needs for contracted services. Second, the potential costs and other concerns of transitioning key contracts may outweigh potential benefits. Third, DOD lacks sufficient numbers of contract oversight personnel. Fourth, key decisions about the disposition of some equipment have yet to be made. Fifth, there are longstanding incompatibility issues among the information technology systems that may undermine the equipment retrograde process. And sixth, DOD lacks precise visibility over its inventory of some equipment and shipping containers.

Millennium Challenge Corporation: MCC Has Addressed a Number of Implementation Challenges, but Needs to Improve Financial Controls and Infrastructure Planning

Industry best practices and past GAO work have shown that conducting design reviews and updating cost estimates prior to contract solicitation help to ensure that projects can be successfully bid and constructed.

Bureau of Prisons: Methods for Cost Estimation Largely Reflect Best Practices, but Quantifying Risks Would Enhance Decision Making;

BOP uses three general steps to estimate costs for its annual budget submission: (1) estimating cost increases to maintain service levels, such as inmate medical care and utilities; (2) projecting inmate population changes for the budget year and for several years into the future using a modeling program that incorporates data on the current inmate population and estimated incoming population and associated sentences; and (3) estimating costs to both provide additional capacity to house projected inmate population growth and implement new programs, such as activating new prisons. BOP's methods for cost estimation largely reflect best practices outlined in GAO's Cost Estimating and Assessment Guide

Troubled Asset Relief Program: Continued Stewardship Needed as Treasury Develops Strategies for Monitoring and Divesting Financial Interests in Chrysler and GM

U.S. Government Accountability Office: Performance and Accountability Report Fiscal Year 2009

Animal Spirits

In October 1989, I attended a conference at the National Bureau of Economic Research organized by Martin Feldstein, the Harvard economist, on “The Risk of Economic Crisis.” The conference still sticks in my mind because of a paper delivered there by Lawrence H. Summers, now the head of the president’s National Economic Council and the dominant economic intellectual at the White House. During the Clinton administration, Mr. Summers was Treasury secretary and backed legislation that helped deregulate financial markets; many analysts say the policies helped lay the foundation of the subsequent financial crisis. But back in 1989, because of his imaginative work, I came away with a recognition that a severe contraction, even a depression, could indeed come again....

Mr. Summers told a fictional but vivid story of a big financial crisis, complete with examples of specific events and how people might react to them. Seeing it concretized as an imaginary history, and placed in the near future — in just two years, in 1991 — made it seem more real and familiar.

He said that this crisis would be preceded by an enormous stock market boom, bringing the Dow to the unimagined high of 5,400 by October 1991. (The Dow was at 2,600 on the day of the conference; 5,400 would be 13,000 today if scaled up in proportion to gross domestic product.)

Euphoria gripped the investors of his fictional universe. “The notion that recessions were a thing of the past took hold,” Mr. Summers said. He added that over a 15-year period through 1990 — a time that included the 1987 crash — investors earned an average real return of 11 percent. The popular view was that “with a reduced cyclical element, the future would be even brighter.”

Furthermore, he said, “lawyers and dentists explained to one another that investing without margin was a mistake, since using margin enabled one to double one’s return, and the risks were small given that one could always sell out if it looked like the market would decline.”

Today, this sounds like a description of thinking that led to the 2000s boom, although the leveraging of investments tended to take a form other than that of traditional margin credit on stock purchases.

His fictional account went on to describe the early signs of the crisis, “In October 1991, problems began to surface,” he said, adding that a “major Wall Street firm was forced to merge with another after a poorly supervised trader lost $500 million by failing to properly hedge a complex position in the newly developed foreign-mortgage-backed-securities market.” He went on to describe how this provocation led to a change in psychology and a market crash and problems in banks and credit markets.

His fiction concluded, “The result was the worst recession since the Depression.”...

Ultimately, the record bubbles in the stock market after 1994 and the housing market after 2000 were responsible for the crisis we are in now. And these bubbles were in turn driven by a view of the world born of complacency about crises, driven by views about the real source of economic wealth, the efficiency of markets and the importance of speculation in our lives. It was these mental processes that pushed the economy beyond its limits, and that had to be understood to see the reasons for the crisis.

-It Pays to Understand the Mind-Set, Robert Schiller

A Conversation with George Akerlof and Robert Shiller

Animals Spirits discussion at Zocalo.

A review of the book from The Economist;

NO TWO economic crises are identical. But the same questions recur. How did we get into this mess? How can we get out of it? How do we avoid another? Some answers repeat themselves too. You can be pretty sure that sooner or later someone, quite possibly an anguished economist, will declare that economics itself has gone astray. The wisdom of some past master, whether celebrated (John Maynard Keynes, for example) or neglected (Hyman Minsky, perhaps), has been forgotten, and the economy is paying the price.

A new book*, “Animal Spirits”, by George Akerlof of the University of California, Berkeley, and Robert Shiller of Yale, follows this rule to the letter. The authors seek to answer the first of those three old questions and thus to provide some pointers about the other two. They do indeed believe that economics has lost its way. And their chosen economist is Keynes.

Assorted

Singapore's Stimulus Package

The Fed Didn't Cause the Housing Bubble

Fed Paper: Currency Crashes Can Have Good Economic Effects

Assessing the Trade Finance Situation

Antonio Fatas and Ilian Mihov on the Global Economy

The Ideal Stimulus Package

Understanding well-being

Why You Need Devaluation - An Open Letter To The People Of Estonia

The Looting of America’s Coffers

They Tried to Outsmart Wall Street

Revenge of the nerds

Book Recommendations

House of Cards: A Tale of Hubris and Wretched Excess on Wall Street
By William D. Cohan

The Life and Times of Raúl Prebisch, 1901-1986
By Edgar J. Dosman

Initial Lessons of the Financial Crisis- IMF

• Not all booms are alikeWhat may matter is not so much the asset price boom in itself, but who holds the assets and the risk, how the boom is financed, and how an eventual bust may affect financial institutions. The degree of leverage associated with the funding of a boom and the degree of involvement of banks and other financial intermediaries will determine the magnitude of balance sheet effects and the dangers to the supply of credit in a bust.

• The case for policy intervention depends on how a boom is financed and how risk is held. Asset price booms supported through leveraged financing and involving financial intermediaries should be dealt with, since they entail risks for the supply of credit to the economy; other booms could more likely be left to themselves.

• The mandate of monetary policy should include macro-financial stability, not just price stability. To the extent that the build up of systemic risk can portend a sharp economic downturn, and to the extent that regulation cannot fully prevent such a buildup, it is now clear that policy makers cannot neglect asset-price and credit booms. That said, prudential measures provide a more targeted and less costly policy solution than interest rate changes and should be a central element of an integrated policy response

• The crisis also highlights two important lessons for fiscal policy. The first is that, in many countries, budget deficits were not reduced sufficiently during the boom years when revenues were high, which limits the fiscal space needed to fight the crisis. The second has to do with the structure of taxation. In most countries, the tax system is biased toward debt financing through deductibility of interest payments. This bias to higher leverage increases the vulnerability of the private sector to shocks, and should be eliminated.

-IMF Executive Board Discusses "Initial Lessons of the Crisis"


Initial Lessons of the Crisis
Initial Lessons of the Crisis for the Global Architecture and the IMF
Lessons of the Global Crisis for Macroeconomic Policy

Lessons of the Financial Crisis for Future Regulation of Financial Institutions and Markets and for Liquidity Management

Video
Press Briefing on Lessons of the Financial Crisis, IMF

PPPs- Back to Basics

Public-Private Partnerships: In Pursuit of Risk Sharing and Value for Money

Economic Geography of the Military Industrial Complex

An excellent talk on economic geography of Pentagon's secrete programs-



Highly Recommended the first 10 minutes.

Book recommendation

The Long and the Short of it: A Guide to Finance and Investment for Normally Intelligent People Who Aren’t in the Industry
John Kay

Many friends over the years have asked me - ‘what can I read that tells me about finance and investment in a non-technical way but doesn’t insult my intelligence?’ Few books do this. I have often recommended Burton Malkiel’s A Random Walk down Wall Street, but that book is now old (first published in the 1970s) and very American. So I thought I would have a go myself. And the credit crunch made it all the more topical.

South Asia-Indicators and Analysis of the Commercial Banking Sector;

Getting Finance in South Asia 2009: Indicators and Analysis of the Commercial Banking Sector;

On January 27th, 2009, the World Bank in association with the Info Shop, presented an event and panel discussion in honor of the new book by Kiatchai Sophastienphong and Anoma Kulathunga, entitled Getting Finance in South Asia 2009: Indicators and Analysis of the Commercial Banking Sector . This new volume of literature, accompanied by a CD-ROM, has provided indicators about the commercial banking sector in Bangladesh, India, Nepal, Pakistan and Sri Lanka. Additionally, the book analyzed data in area such as access to finance, performance and efficiency, financial stability, capital market development, marketing concentration and competiveness and corporate governance.

Event Chair Ernesto May opened the event by commenting on the importance of this volume in relation to the current world financial crisis as a vehicle for better understanding the health of financial sectors within these countries and the region as a whole. Next, author Kiatchai Sophastienphong presented on the objectives, background, and findings of the study. Sophastienphong commented that the study actually began in 2002 as a stop-gap measure; however, the project has evolved ever since. He also explained that concerning the next edition, the team plans to expand their data collection to include Afghanistan, Bhutan and Maldives. Co-author Anoma Kulathinga then presented on the methodology concerning data collection and how the information was divided into six separate dimensions.

Economic Gangsters

Economic Gangsters

The Role for Counter-Cyclical Fiscal Policy in Singapore

The Role for Counter-Cyclical Fiscal Policy in Singapore

Summary: Singapore's policymakers have often used fiscal policy as a counter-cyclical tool. Empirical results based on a structural autoregression framework suggest that fiscal policy can be used for demand management, although the impact may be somewhat short lived. The short-lived impact could reflect a number of factors, including the absence of credit-constrained economic agents, a high propensity to save among households, monetary focus on price stability, and leakages due to economic openness. Notwithstanding, fiscal policy should still play a key stabilizing role in the current downturn given the downside risks to growth and the vast fiscal space.

Book Recommendation

People Factor: Strengthening America by Investing in Public Service
by Linda Bilmes , W. Scott Gould

The Best of the Day

Slain Sri Lankan journalist pens final column;

As for me, I have the satisfaction of knowing that I walked tall and bowed to no man. And I have not travelled this journey alone. Fellow journalists in other branches of the media walked with me: most of them are now dead, imprisoned without trial or exiled in far-off lands. Others walk in the shadow of death that your Presidency has cast on the freedoms for which you once fought so hard. You will never be allowed to forget that my death took place under your watch. As anguished as I know you will be, I also know that you will have no choice but to protect my killers: you will see to it that the guilty one is never convicted. You have no choice. I feel sorry for you, and Shiranthi will have a long time to spend on her knees when next she goes for Confession for it is not just her owns sins which she must confess, but those of her extended family that keeps you in office.

On expanding balance sheets and inflationary policy

Ireland’s Doctor Doom

The Number-Cruncher-in-Chief

An expert on the Great Depression?

Christina Romer's challenge

Christina Romer, the Chair-designate for the Council of Economic Advisers, discusses a new report about what kinds of jobs and which types of workers will benefit from the proposed American Recovery Act.

Related;
Is Government Spending Too Easy an Answer?
Obama's Multipliers

Romer and Bernstein on stimulus
Risks of deflation (wonkish but important)

The Obama Fiscal Boost: A Note
David Brooks: Mendacity on Fiscal Policy

How Romers' Research Undercuts Obama's Fiscal Policy
Even Nobel Economists Can Be Intellectually Dishonest

Book Recommendation- Animal Spirits

Animal Spirits:How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
George A. Akerlof and Robert J. Shiller

Assorted

Obama's Multipliers

Why there's so little good evidence that fiscal (or monetary) policy works

No Instruction Manual as Stimulus Bill Takes Shape

Assorted Must Reads

Risk Mismanagement

My Genome, My Self - Steven Pinker

Data Analysts Captivated by R’s Power

What You Don’t Know About Gaza

R You Ready for R?

The rise of R

Some Thoughts for Boards of Directors in 2009

What Is Seigniorage?

Federal Reserve balance sheet

Is the Implementation Lag for Infrastructure Investment a Problem?

The Analysis of Household Surveys: A Microeconometric Approach to Development Policy