The Moorish Wanderer

Wandering Thoughts Vol.3

Posted in Dismal Economics, Flash News, Read & Heard, The Wanderer by Zouhair Baghough on October 27, 2010

It’s starting to clear up. I have found a tutor for my final year paper. It should be something about game theory and monetary policy. Very early days indeed, but I have great hopes that it will bring some goods news afterwards.

Plus this year is turning out to be quite important for the future. Well, in any case I’ll be putting some posts on the subject from time to time, it is good practise for the ultimate chore. Obviously, I would like to write something about Moroccan politics, but in our case, silly season took over a long time ago home politics. Of course, troubles down under and Tangier’s imbroglio are all very well, but the barycentre of power remains the monarchy acting as a core, and tribal interests gravitating around. Nothing perhaps that legislative elections are now less than 2 years ahead, and I am increasingly making my mind up about abstention. I would very much like to devote some pieces about it, but that would be too soon, and even I have to comply with media agenda from time to time.

Part of the assignment is to read papers and prepare one that says what others -very bright and quite famous- have written about subjects that are but widely discussed. And I, little voice of would-be PhD holder, comment -elegantly of course- on these illustrious scholars’ work. It looks and sounds a boring job, and up to a point, it is. But the delightful trouble with economics is that under seemingly unadorned papers, interesting facts and theories are read-worthy.

Reading: Barro and Gordon’s paper (1983). In monetary policy, whatever subject one wants to discuss. “we often observe high and variable rates of monetary growth, and a tendency for monetary authorities to pursue countercyclical policies. This behaviour is shown to be consistent with a rational expectations equilibrium in a discretionary environment where the policy-maker pursues a reasonable objective, but where pre-commitments on monetary growth are precluded.” is the part of their abstract I am interested in: how do other players, especially commercial and investment banks, react to monetary policies. These policies are countercyclical indeed, and I will elaborate on that, just as the paper does so on “equilibrium rates of monetary growth/inflation [and how they] depend on various parameters, including the slope of the Phillips Curve”. For the time being, unemployment is not the prime concern (well not that I aver it to be secondary, it’s just that it is of minor interest to my subject)

There’s a bit I am quite interested in, the pre-commitment policy to set an inflation target and stand by it. Indeed, findings are such that under these conditions, players tend to play by the rules. In Game Theory Gibberish, the core of all possible coalitions (or combinatory allocations) is non empty (players find a settlement they prefer to any other outcome).  On the other hand, since we are conjecturing in terms of game theory,  if the policy is sequential (meaning implemented in different time periods) then players make up their mind along – following their own backward inductions, and the achieved equilibrium would be so when actual policy and the anticipated one converge to one. What is anticipated is of course up to the players themselves. Then there’s some stuff about rational expectations and so on. Really engaging, I’m telling you !

jovial Peter Mandelson and Gordon Brown. rare picture where the former British PM is caught smiling. Mandelson's account was not very kind to Brown

Oh, I was meant to write about it too, but then I fear I will not be up to expectations for it. Still, one has to give it a go. I’ve just finished Lord Mandelson’s book “The Third Man”. I don’t know, but between Moroccan politics as full of palpitations as our Prime Minister is charismatic (and yes, I am referring to the real PM, not the Gov’oma one), and French politics polarized into a civil war -short of large-scale violence hopefully-, I got on very keenly to British politics. Not that they are saints, but there is a certain touch of “grown-ups” compared to the others.

So, back on the Third Man, Mandelson gives his own account of the rise and dismay of New Labour, his years in office, near power and in the wilderness, all of that through the Shakespearian relationship Blair, Gordon and him had since they met till Blair resigned his premiership in 2007. To a certain extent, his account is very touching: The guileless reader would be charmed by the talent and intellect he displays through his memories and past actions as one of New Labour’s architects. One could almost feel sorry he was dubbed “Prince of Darkness” or “Lord Vador”… I still laugh at the puns BBC broadcasts like The News Quizz or the Now Show; Behind the pleasant caricatures and witty apophthegms, he remained throughout a key player in the strategy -a word that comes very often in his book- Labour designed and followed in media and power management.

Spin doctors? his pals Jonathan Powell and Alistair Campbell, his pro-Brown bitter opponents like Charlie Whelan are but the tip of an iceberg of what British, US and soon to be European politics is about. Researchers, advisers and party officials that are increasingly taking over party machines in the UK- the current Labour leader was an economic adviser to Gordon Brown when he was Chancellor, and the current Chancellor spent most of his career as a researcher at the Conservative HQ. Anyway, back on the book, Mandelson’s story is a fascinating one. I do hope Andrew Rawnsley’s own account would prompt the reader to have a look at it.