Thursday, December 28, 2006

Bin Laden wants Bush re-elected

Most of us are familiar with all kinds of conspiracy theories. This one takes the cake for best imagination. It is not as much a conspiracy theory, as it is a propoganda theory. Whoever would have even imagined that Bin Laden's motives were to get President Bush re-elected, and that the former's propoganda suggests the same. Well, this guys Kilcullen who lectures a course on counter terrorism at Johns Hopkins is the fountain of this idea. Where did I find this?, in a film critic's blog!!

Just as the Bush administration misunderstood Saddam's motives (Why is he acting like he's hiding something? Is it because he's hiding WMD -- or because he knows he'd be gone in a second if anybody knew he didn't have them?), they have also misread the nature of Osama bin Laden's motives, power and strategy for Al Quaeda and global jihad:

Just before the 2004 American elections, Kilcullen was doing intelligence work for the Australian government, sifting through Osama bin Laden’s public statements, including transcripts of a video that offered a list of grievances against America: Palestine, Saudi Arabia, Afghanistan, global warming. The last item brought Kilcullen up short. “I thought, Hang on! What kind of jihadist are you?” he recalled. The odd inclusion of environmentalist rhetoric, he said, made clear that “this wasn’t a list of genuine grievances. This was an Al Qaeda information strategy.” Ron Suskind, in his book “The One Percent Doctrine,” claims that analysts at the C.I.A. watched a similar video, released in 2004, and concluded that “bin Laden’s message was clearly designed to assist the President’s reĆ«lection.” Bin Laden shrewdly created an implicit association between Al Qaeda and the Democratic Party, for he had come to feel that Bush’s strategy in the war on terror was sustaining his own global importance. Indeed, in the years after September 11th Al Qaeda’s core leadership had become a propaganda hub. “If bin Laden didn’t have access to global media, satellite communications, and the Internet, he’d just be a cranky guy in a cave,” Kilcullen said.

Read the article here.

Saturday, December 23, 2006

Basic Micro Questions

Oligopoly and Monopolistic competition markets seem to assume either Constant Marginal Cost or zero Marginal Cost. Is there an economic reason for it or is it simply mathematical ease? We do not assume something like that with Perfectly Competitive markets. We always have a normally shaped MC curve. Are the aggregate of firm demand curves and market demand curves the same? They are different for the Supply curves because of the input price effect, and a similar effect does not apply with demand curves. So technically the market demand curve and the aggregate of the firm demand curves are the same. Can any individual firm demand curve be more elastic than the market demand curve? Why or why not?
Could someone give me answers to these questions?

Thursday, December 21, 2006

Made us cry

The Yield Curve was by far the single most difficult thing to understand in Macro last year, and here's the guy who's paper gave me nighmares (John Campbell)!!

I also found this on youtube!! The very last statement of the video is so common in grad school! I myself have said it several times!!

Following in a similar vein, here's how someone else reacted to Ben Bernanke as the Fed Chairman!!

Tuesday, December 05, 2006

Respect for property rights

This evening I was jarred to reality within the Economics department. There is no respect for property rights. For over a year, I have done all I could to keep people from using my coffee mug and leaving it unclean at the Mercatus Centre, to the extent that I have hidden it in the most unlikely places. Inspite of it people have found it used it and left it lying around without cleaning it. The very people who scream property rights are good everytime you are around them have no sense for others' property. They feel free to use it.
Today I was especially ticked off. I spent 20 minutes packing some left-over food which no one else wanted after a seminar and spent another 20 carrying an especially heavy box of food despite my injured back, and leave it at my desk. When I get back from class, I find that half my food is gone, although it sits at my desk and the lid says clearly Triya's Food!! It was taken by complete strangers who had no right to even be around my desk in the first place. I will go ahead and mention that these students are in the Religion and Economics class. I may have even offered to share some of my food with them if they had only asked. To believe that anything that lies on a desk is public property is preposterous.
The question is not about stolen food it is about respecting others' property and knowing before you use something if indeed you have a right to use it. I am sure this is how books get stolen from the department, because people do not respect property rights, and we expect such students to go on and become great economists?? Fat chance if they cannot practice what they preach through their papers and animated talk.

Wednesday, November 22, 2006

Santa Claus Entrepreneurship

Santa Claus seems to be very popular in Germany. Not only is he popular he is also in high demand, enough for a Santa to make 55 Euros for 20 minutes of improvisation with kids on Christmas Eve. Why the short supply? I am guessing that is what keeps the wages so high. Even accounting for high opportunity costs of spending time away from family and loved ones for 6 hours on Christmas Eve these wages seem high to me. Other jobs (store counter, waiting tables or at parties) apparently pay less than half of the above mentioned per hour. Is it any specific skills? Well, women can't apply, so can't alcoholics. The Santas currently employed seem to be University students, and they need to be willing to work with kids and big groups, that would disqualify a few more people. They also need to be willing to spend time away from their family Christmas Eve which would clear out a few more people from applying. Alexander's explanation is that the families that request for a Santa do not know that 55 Euros is a lot of money for students, because their own incomes are very high. That does not seem like a very economic argument. I can understand if they value Santa so much as to pay a lot for him. Even so that does not explain the low supply in the specific job market, or competition from others who see the profit opportunity. Apparently a similar Government venture failed, and that makes a lot of sense, because they were trying to employ the unemployed in such activities, and the group of unemployed presumably is biased towards older people and those tend to alcoholism. But why isn't another senior in college starting a Santa business of his own. It seems to me that there is a windfall to be made in this segment of the market. Something is fishy!! Any ideas??

Thursday, November 16, 2006

Milton Friedman (July 31, 1912 – November 16, 2006)

One of the greatest economists of the 20th century Milton Friedman passed away today. He was 94. Friedman was the reason I became so interested in economics and macro economics in particular. I wish I had had a chance to meet him or interact with him. His model of economics teaching is the model I wish to emulate. He was the foremost champion of free markets and brought about a huge and radical revolution in the field of economics. He was intellectually active even at his age and I found his interviews in Commanding Heights as fun to watch as his PBS series Free to Choose. I am sad at his passing, but celebrate his life which was ripe with his intellectual contributions. We shall miss this short man who could convince even the most fanatic communist to believing in free markets with his smiling face but strong arguments. His contributions to the field will live forever and he has his place in the Economics Hall of Fame.

Monday, November 13, 2006

The entrepreneur in economics

It is the case of the missing entrepreneur. He is missing from mainstream economics texts and journals. I have been thinking about a term paper idea and went hunting for literature on entrepreneurs in economics journals. I was surprised that a simple search turned up no recent economic journal articles. There were a few in the 60s and 40s but none since then. The business journals on the other hand seem to have done a lot of work on the entrepreneur. There's even a book by Barreto which talks about the missing entrepreneur. I was really surprised to see this. Of course, I am at a college where the entrepreneur is talked about constantly and apart from Austrian or such leaning economists no one seems to talk about entrepreneur and one historian I read blames Ricardo and his following for the disappearance of the entrepreneur from mainstream economics. The idea is that Ricardo's emphasis on equilibrium concepts and static analysis took-off in mainstream economics. Until then Cantillon, Say and others had been talking a lot about the entrepreneur. Did Adam Smith really talk about the entrepreneur? He talked about the undertaker which I means one who undertakes rather than the common English meaning we associate it with. I am not sure Smith paid a lot of attention to the entrepreneur. Ricardo, Malthus and others did take off from Smith. So did the entrepreneur disappear with Smith? What is surprising is that sociologists are talking about the demand and supply of entrepreneurship and economists do not seem to be. Kirzner did, but he is not cited by the Sociologists. The top business school economists do quote Schumpeter and Kirzner and Baumol even compares Knight and Schumpeter with Kirzner. Well! This is my current quest, to find the elusive entrepreneur in economics journals that are not Austrian.

Wednesday, November 08, 2006

Minimum wages

How does something as logical as the effect of minimum wage on employment escape even the most intelligent individuals? Businesses seem to know and understand that raising minimum wages leads to higher unemployment. I have seen a lot of my students who do believe that when minimum wages are increased it leads to more employment. However, once they see the effect on the demand and supply diagrams they are amazed that it indeed leads to not only a reduction in employment but also unemployment of the low skilled workers the minimum wage legislation is meant to protect. The minimum wage issue is not as political in India as it is here in the US, although I am sure there is similar legislation somewhere. I wonder what reason is behind people supporting the minimum wage legislation. I am in a very libertarian school and do not know how undergrads are taught in other Universities here. Most Universities are more left leaning. Do they teach wrong economics? If they teach correct economics then how do students end up believing that minimum wage is good? I can believe that the other social sciences that emphasise a more human approach may teach the minimum wage legislation was good, but why would they talk about minimum wages in the first place? Atleast economics students should come out with the right idea about minimum wages. Then again we have proof of brilliant economists of not only promoting minimum wage legislation but showing inaccurate research of minimum wage increasing employment.

Lets take a minute to think this through. Lets say you and I run a small business employing about 20 people. The different tasks require varying levels of skills and that is the kind of employment we have; i.e., employees with diifferent levels of skills. We pay them based on their skills, and give bonuses once a year or so to those who perform exceptionally well. We also know that if we pay them lower than a certain amount they are going to find employment elsewhere. So we pay them enough and more to keep them happy in their current jobs. As owners of the business we have obligations to pay creditors, overheads and other expenses in addition to paying our employees. If we are prudent businessmen (which we need to be to remain in business) we will try to minimise our costs and maximise our profits. Now lets assume that due to minimum wage legislation we are forced to pay a higher amount that what we are currently paying to each employee. However our other costs remain the same and employees' capacity does not increase significantly because they are given 50 cents or so more every hour. Lets say on an average each individual gets $20 more every week, which means the additional cost to us owners is $400 a week. We are not producing more, so we are not making any more money than we did before the minimum wage was imposed. This means we are making less profits than before or maybe even making losses. So to remain in business, we have to cut costs, and the easiest thing to do would be to fire a couple of people or so and divide their work among the rest. Who would be fired? Those that contribute least to the company, in other words those with the lowest skills, because the ones with higher skills can take up additional responsibilities. The result, minimum wages which is intended to protect low skilled workers has infact led them to unemployment. Was it malice or greed that led us owners to fire those people? No!! We just wanted to remain in business. By doing so, we managed to provide employment for 20 people initially, and 18 after the minimum wage was imposed or increased. Who are the real losers? Those individuals the legislation intended to protect.

Why does this simple logic escape even the most brilliant minds?

Tuesday, October 31, 2006

Writers Block

I have been battling the worst writers block I have known for a while. The past few months or so, I have been following Pete's suggestion, slightly modified, of writing 2-3 pages every other day. The ideas and examples usually bombard me such that by the time I finish typing them I lose some of them. The last week, the maximum writing I have done is 3 sentences for Wagner not including Levy's exam which was about 5 pages double spaced. The result is that I missed presenting my paper today. I had a few sentences on path dependency of expectations and I wonder if that renders it easy or difficult to model in the walrasian framework. Certainly, if expectations are assumed to be constant and exogenous then we can model them in a comparative static model. What if as is observed some expectations are not just spontaneous, but implicit? If lets say we try to model them in the neo classical or a game theoretic framework what happens? Of course I do not want to model it, but is it feasible in an alogorithm or something like Potts' formulation? I know that at some point we have to concede defeat to ignorance in itself and due to uncertainty. In the absence of the latter there is no action. My mind is churning but my muse has abandoned me!! Hopefully she will grace me soon!!

Sunday, October 22, 2006

Criminalization of Politics in India

The Constitution of India needs to be amended to prevent those with criminal records from being nominated to stand in any elections. It is a shame that we allow individuals like Phoolan Devi who was a notorious dacoit, Lallo Prasad Yadav, who ruled Bihar while in prison, and now Abu Salem, who is in jail accused in the 1993 Bomb Blasts and who had to be extradited from Portugal, to be in political power. How can we expect the country to prosper when we elect criminals to power? The problem is not with the government, the problem is with us who elect such people to decide on our behalf. How many of our politicians are actually qualified to hold the ministries they do? What qualification does Lallo have to be the Railway Minister? What qualification did George Fernandes have to be the Defence Minister? Democracy in India is in ruins. We have a highly qualified scientist as a President, but he has no powers to do anything. We have two extremely intelligent economists as the Prime Minister and Finance Minister, but they can do nothing better than promote regressive socialistic policies and nod their heads to the communists who they have to appease to be in government. I can understand an ideologically polarised country like the US; however, I fail to understand a pathologically callous population like Indians. These are supposed to be some of the brightest minds in the world, but within the country they choose to elect Phoolan Devi and let Abu Salem contest elections.

The Association for Democratic Reforms was started by a few professors at IIM. The one election year that I was there I knew they published the criminal records of all contestants. Here is an interview with Prof.Trilochan Sastry. Here is their webpage. Despite Prof. Sastry's interview statistics, Modi is still Chief Minister of Gujarat. Who in the population reads such reports and acts on it. Even if they want to act on it what options do they have? Do we have better candidates? The whole political lot in India is brimming with criminals and the choices are between those that have a foot long rap sheet and those that have a mile long rap sheet!! Sometimes I wish I could wipe it all clean and start with a fresh slate and do it right!!

Saturday, October 21, 2006

My personal blog

I finally decided to go ahead with a second blog for personal stuff. In the process I decided to upgrade to blogger beta powered by google and lost all my beautiful fonts from the original. I still like the colours and looks so I kept the template and emailed google about the loss of fonts. Hopefully they will fix the bug soon. Iam the Non Resident Alien, so those of you who just want to keep up with my experiences here (and skip my rants on the economy and politics) can just go to the other blog. I will update the blog instead of sending you long emails and that way you do not have to bother with unsubscribing ;-). Have a great Diwali!!

Wednesday, October 18, 2006

Don't let your child run!! He could get hurt

A Massachusets school has banned kids from playing any chase games during recess because they could get hurt!! (Read the story here) Well!! Time to arrest those parents, who let their kids run, for child endagerment and gross neglect!! What are the next age kids going to be like? A couple of weeks back we had a similar discussion in Prof.Wagner's class where he told us his experiences as a kid when he could get into fights at school and it was just the natural process of socialisation of kids. My brother and I used to fight a lot when we were kids. We have beat each other, wrestled each other and he even gave me a purple ear from boxing once. That hasn't made us violent as adults, nor has it made us love each other less.

However, this latest development in the MA school has me concerned on one more front about how much government control over our personal lives has increased and continues to increase. I am not comfortable with the government telling me what I should do and not do with my kids. I would want to bring my kid up the way I want. What is surprising is the lack of protest by parents against this latest move. Why are parents taking this quietly? Should we let the school system dictate that our kids cannot play tag and chase each other in the school yard during recess, because of their perceived safety issues?

Tuesday, October 17, 2006

CBI's crowning achievement

The justice system in India is so shoddy that it is considered a great achievement when the CBI closes a case in 10 years and 10 months. The famous Priyadarshini Mattoo case is not over yet. Santosh Singh will now appeal in the Supreme Court and woo politicians and bureaucrats alike to be aquitted of the charges. All of this despite having genetic evidence linking him to the rape and murder of the above mentioned. The case was sensational because the accused is the son of a senior police officer, and justice cranked away because of constant pressure from media and other groups. Imagine the thousands of similar cases that just fall through the big gaping holes in the justice system. All of this is the legacy left behind by the adamantly stupid socialist regime of the dynastic rule of the Nehru family (Tullock calls them a monarchy of sorts) who run the country aground with stupid policies. I am not saying any single party is responsible for liberalization. But 16 years since liberalization we are still a very poor country with goat herd's trails for roads even in big cities like Bangalore, and a murder case with clear evidence takes 10 years to be closed.
to the untiring officers at CBI who think their job is done!!

Monday, October 16, 2006

Guess What!!

I am thrilled to know that my blog is worth $3951.78. I will have it in $100 bills please!! Here's the link.

My blog is worth $3,951.78.
How much is your blog worth?

Yogis and Swamis

Who the heck is Baba Ramdev? If he is well known how come most people I interact with have no clue who he is? Maybe I interact with the wrong circles. It is annoying to see well educated people conned by such people calling themselves Swamis and Yogis. To the latter its just a time tested way to mint money and travel the world at others' expense. Why is Baba Ramdev in Times Square campaigning to eradicate poverty? Why does he not go to any big city in India and try to do something progressive there? I have no respect for such characters, nor for people that fall at their feet. Here is Atanu Dey's post on the same topic.

Sunday, October 15, 2006

Urban Riversi

Almost a month ago I was in Birmingham, Alabama visiting friends. Coincidentally, the weekend that I spent there was also the annual Sidewalk festival and there were several events organised for the public. One such interactive event was Urban Riversi. Basically its like a huge tic-tac-toe game played by two teams on urban streets. Street corners had codes we had to find and punch into a special blackberry phone. The organisers in Head Quarters would accept our code and we would get three phrases which we had to enact, take pictures and mail back. Once they were accepted we would have gained control of the street corner and effectively placed our black or white coin in the corner. It was terrific game of skill and speed, and I did not understand many of the rules. I just had fun with Balaji and my new friends in Birmingham. Here are pictures of us doing crazy things. Yeah! We lost!! But it was so much fun running around the city. In one place we had to convince people in a shop that we were just part of a game. They were so shocked to see a bunch of foreigners acting strangely. Thank God it was the South, anywhere else the FBI would have come looking for us acting on anonymous calls from locals. :)

Sunday, October 08, 2006

Varna and Division of labour

I have been thinking of my term paper for Levy's class and the idea of Division of Labour in Ancient India seems like a good one. I have always explained the caste system in India as that of people classified based on their profession. Although thinking the same way I never attributed the word division of labour to it untile Levy's lecture a couple of weeks back. I have been reading a translation of the Manu Sastra, and to the extent that I have read it, it seems as if caste was decided not completely by birth. The individual could move up and down the caste system through his profession. Although there are strict laws against immoral behaviour, there is not anything in what I have read till now to suggest that caste was binding upon an individual based on birth. Here is my two penny's worth theory. The caste system existed in India fom Ancient times and although there were some arrogant and ignorant people in the upper caste who interpreted the scriptures to fit their needs there were enough learned among them to offset the corruption. At some point this balance was tipped in favour of the corrupt, but the society still thrived. However, when the British and other foreigners came into the country, for obvious reasons they could not understand the way the caste system worked and made their own interpretations about it and made it widely known through their writings and preachings. The word shudra was given the meaning untouchable and the rest is well known history.

The Varna system was sorely a division of labour story in my opinion. Even the skin colour associated with the varnas is descriptive of the individual's profession. People have taken it too literally in terms of an individual's actual complexion. The Brahmins were devoted to learning the scriptures and teaching them, since they spent most of their time indoors they were pale in complexion (not exposed to enough sunlight). The Kshatriyas were devoted to governance and warfare and so their skin was brown. The Vaishyas were merchants and travelled a lot and were prone to disease and so their skin colour was yellow. The Sudras were labourers who spent most of their time toiling away in the fields or outside in the sun and were black because of that.

I think the aspiration to become as learned as the Barhmins is the reason for the fascination with being fair complexioned. In the very long gone past being 'fair' would have been a metaphor for being learned; therefore, when the British and other foreigners came into the country people were fascinated by them because they may have associated their complexion with great learning. During the British administration, when they set up the huge bureaucracy the people with most education would have been the Brahmins so they were obviously picked for the more important posts. This may have seemed to some people of the other castes as discrimination against them due to their caste. Since independence atleast people from all castes go to school and are educated. Therefore any advantage that Brahmins had has disappeared. Therefore, the claim that the forward caste has undue advantage in educational institutions is baseless. It could be true that students from rural areas and economically backward families are discriminated against. Although I am opposed to any kind of reservation or quota system, if there was atleast such logic in the arguments for it I could grit and bear; however, the logic seems to be caste which makes no sense. Even under such circumstances the kids who really do well are the ones that work hard regardless of their caste. These kids (if they are for the forward caste) know they have no chance of getting a government job, and the private sector provides them ample opportunities. Decades of reverse discrimination has left government offices populated with incompetent people, and now when they see that those in the private sector are indeed earning better salaries they now want to turn against the private sector and say that they are discriminating against the backward caste and that there needs to be a certain quota in the private sector as well for the under provided.

Well!! I have gone off on enough tangents and have enough paper ideas to last me a lifetime and gain me a permanent ban from India. More on this as I develop my paper.

Friday, October 06, 2006

F1 Status

Higher education in the US has changed a lot in the last decade or so. A decade back, admission to a foreign student in the US meant financial aid was part of the package. The aid package covered tuition and was sufficient to cover living expenses. These days it has become extremely competitive to get financial aid in most US Universities. Most foreign students I know, atleast in the East and West Coast Universities, have little or no aid and are literally paying through their noses for a US education. They live crammed 3 to a bedroom, 12 in a 3 bedroom 2 bath apartment, partitioning the living room to make an additional room to cut costs. The hope is to live the American dream with a good job after graduation. Unfortunately for many of them, there are not so many jobs to go by either and several of them have to go back and face repayment of huge loans. What induces waves of students year after year to aspire for a US education? In some South Indian communities it is the one sure shot way for the groom's family to demand more dowry and the bride's family to pay less. Its a matter of pride to say that your child is in America. What is the Indian obsession with the 'fair coloured'? We hate them for exporting their culture and corrupting our kids with their morals, but we aspire that our kids live there 8000 miles away from what is indeed home!!

Back to the students issue. With the latest terror threats and increasing xenophobia due to successful immigrants American policy makers are really tightening the noose on foreign students. I have heard it say that since 9/11 the number of institutions/organisations funding educational institutions has gone down. American Universities are apparently cash strapped due to shortage of donors and grants. There could be some truth to this, since a lot of money is being spent on the war effort. What does irk me is that F1 students are not allowed to work beyond 20 hours a week and even that needs to be on campus. However, this law is overlooked in several cases, especially among students working in science and technology labs where they essentially become free labour for the Professor.

Personally student life in the US sucks!! You have no life apart from college, your family is miles away, you do not even realise its festival season, you live pay check to pay check and hope you don't lose your job to the Chinese bloke in your class. What am I saying? Isn't this every libertarian's dream, perfect competition!! :-) Just sour grapes and home sickness I guess!! This post is extremely normative and unbecoming of an aspiring economist!!! :-D

Tuesday, October 03, 2006

Adam Smith

Levy's class has an extensive reading list which includes Adam Smith among others. I am way behind in the readings (the class is finishing with the third book, while I am still at the first). How can you read Adam Smith for a whole day, or read the Theory of Moral Sentiments in two weeks? I do not know how the rest of the class does it, I find my mind restless beyond 20 pages. Its too much information and my mind needs to process it and rest before I can continue; am still putting up a brave fight to keep up with the class. This is the first time in my life I am having trouble setting and routine and following it. All Thanks to Adam Smith and Menger who do not let my mind rest so I can sink into blissful sleep. Reading TMS I can see concepts such as Utility and Preference and Diminishing Marginal Utility jump out at me although they are not given such nomenclature. It is very interesting to see Smith's extensive observation and understanding of Human Psychology. Smith is often misquoted as promoting individuals to be selfish; however, it will be clear to anyone who reads the first 40 pages of TMS that he categorises selfishness between the social and unsocial passions and does not say that an individual needs to be selfish. He makes no such normative claim (to the best of my knowledge). The invisible hand works through self-interest and not selfishness. That said, in my own self-interest I need to get back to reading.

Sunday, October 01, 2006

Happy Dussera!!

This is the third year in a row I am missing the festive season in India. Missing the sundal (south indian savory made of chick peas), garba tradition. Happy Dussera guys!!

Saturday, September 30, 2006

Of preserving languages and culture!!

The Karnataka government wants to remove English as a medium of instruction and promote Kannada as the sole medium of instruction in their educational institutions. The stated purpose is the preservation of the language. During my brief stay in Bangalore I noticed a deep resentment among local students and bureaucrats towards people from other states who had settled in Bangalore. I was once rudely asked to leave a government office (where I had gone requesting for some data), because I did not speak Kannada. My co-worker was resentful of North Indians who with their fancy english accents were getting all the jobs in Bangalore. I do not have much experience with the language issue in other places. Tamil Nadu of course is a whole different matter. The same politicians who say we have to preserve Tamil send their kids to English Medium schools and abroad. I was studying in Tamil Nadu during the anti-hindi movement. Sixty years since independence it is obvious that Hindi as a language is essential to travel within India and world over Indians have a new respect because we speak English. I have nothing against the Karnataka and Tamil Nadu governments wanting to preserve Kannada and Tamil. I know most parents aspire to send their children to an English Medium school. I would like to know which vote bank Gowda is targeting.

Friday, September 22, 2006

Papers to go!!

I am pretty impressed that in the last year or so I have learned to write 3-4 page papers, as first draft ideas without much effort. Some of them seem like very good ideas and others need to be trashed. The problem however seems to be going beyond the first draft and churning out a meaningful story out of the scraps. That is the next stage I need to progress to. Prof. Wagner's class is an awesome opportunity to do become comfortable articulating ideas. I usually shy away from scholarly comments because of incomplete knowledge. That is another hill to climb now. I am reminded of what KP said long back. The trophy is always at the top of the next hill. However, I am pretty impressed with myself that I have atleast learned to articulate first ideas and not be quiet atleast in paper workshops.

Thursday, September 14, 2006

Why I hate hardcore Austrians sometimes

Sometimes I wish to completely dissociate myself from hardcore Austrians or anarcho capitalists. They live in Utopia. They think they can just get rid of the government in one wide sweep and a spontaneous order will just emerge within society and take care of everything despite generations of individuals in society who have grown up with the unshakeable belief that the government has to take care of them come what may. I am not saying those who think government has to do all are right; however, there is no reason to be rude to those who think we have to start from how things are right now, rather than think in terms of ceteris paribus and an ideal world all the time.

These 'elite' may be extremely intelligent and have high IQs but they have no sense of ground reality. They believe that a million jobs will be created overnight and that hunger and starvation will just disappear. They do not understand that even with emergent systems things do not happen overnight and there is a time lag between mechanisms falling into place and benefits spreading out. All they want to do is theorize sitting in their comfortable couches and complain about how the government is screwing everything up. I DO NOT DENY THAT THEY SOMETIMES HAVE WONDERFUL IDEAS ABOUT HOW THINGS CAN BE MADE BETTER. What they do not realise is that if they were to preach the same truths in milder language without abusing others and sounding insensitive to the real concerns of the population a lot many more people would listen to them.

I have attended on an average two seminars a week on Austrian lines. for a whole year now. Not a single one of them has been devoid of tirade. For a conservative person like me it is difficult sitting there listening to verbal abuse. But I know these guys have interesting and truthful points to make and am willing to give them concessions. Not everyone does. I think this is why everyone dismisses the Austrians as a bunch of lunatics. From stories I have heard of Murray Rothbard to the current leading Austrians there is much verbal abuse and less progressive action, and I am embarrassed that three generations of brilliant Austrians have still been unable to make mainstream economists look up and listen to them. Menger, Mises and Hayek are still respected, I believe because they put their anger and frustration towards leading a community towards change, not by fussing and fuming and using the f word everytime the words government and macroeconomics are mentioned. The fact is both of these are here to stay and will remain as long as the other. The Austrians cannot wave a magic wand and make these disappear overnight or even in one generation. It is going to be a few generations of persistent reforms without abusive language to make them go away.

Milton Friedman brought in a revolution in just a few years. But he is also a mild mannered man who sticks a knife through your bad ideas with smiles and laughter and without you even realising that you have been struck down. I wish the Austrians would take a leaf out of this short man who has the respect of academics and commoners alike around the world.

Wednesday, September 13, 2006


I am not ready for methodological studies. I do not think I get it. It took 5 days and several re-readings to understand the first chapter in Menger's "Investigations into the method of social sciences with special reference to Economics", and it is only 5 pages. What was the learning? Left my brain muddled and uneasy and unclear about even the things I knew for sure about methodology. I am guessing it was easier in the original German version and translation has rendered several sentences cumbersome to read. However, its not just the language, its the content that is too heavy for me at this point. I just do not know enough to internalise these things. Hopefully things will improve soon.

Monday, September 11, 2006

Economics of Prayers

I think we can make a model of 'Prayer Optimization'; i.e, we can find out the optimum number of prayers that are required to a desired goal. In my case the last week or so, I urged everyone I met to pray for me so that I passed my Macro Prelims. The request got passed around and I know several people prayed for me in addition to my additional prayers. Result!! I passed!! I did not do the same for Micro and the results were disastrous. Now I know what I need to pass exams, irrespective of my preparation or performance, just the optimum amount of prayers.

Its not difficult for me to imagine that prayers help achieve goals, after all Indian politicians, movie stars and other public individuals (private individuals do the same, but the media does not care about the common man as much as about why Urmila Matondkar should receive the Guinness Book mention) offer elaborate offerings and prayers to succeed in election campaigns and such. The presence of multiple gods and goddesses makes it complicated though, especially because some gods are not happy if you show lots of attention to other gods and crave all the attention to themselves, and will go all out to disrupt your prayer cycle in any way possible (something like the Greek gods in the Iliad). So the number of constraints in the Lagrangian will be a lot for some gods than others. I have in my classes worked with a maximum of two constraints and with equality conditions. However optimizing prayers for any god or group of gods involves using the Kuhn-Tucker conditions and multiple constraints. Besides I need to account for the fact that I live in the US and Indian Almanacs are yet to be drawn for US skies so I am disadvantaged already in not knowing the auspicious and inauspicious times to pray, study, start new projects etc.

So to optimize my potential success, I need to first, with the utmost haste, learn the ancient Indian texts to make the Indian Almanac for US skies. Then I can calculate the optimum amount of prayers I will be required to do using a simple lagrangian (well not so simple, but hey I can use computers to do most of my dog work can't i?). Hopefully I will have all of this done by the time I take my exams again in January!! :) Then in addition to being successful in my exam and my course, I can also become a successful entrepreneur!!

See!! I can use economics everywhere. All I need is an incentive, and I have a lot of incentive to develop 'prayer models'. Imagine all the power and attention I will get from the Indian community here and also politicians etc. I can predict elections outcomes and since I intend to be the monopoly, I will charge just below the average cost of my potential entrants and I am assured of keeping my monopoly status for a long time (not forever of course!!).

Hmm!! Seeing that I do know micro somewhat, atleast enough to know that incentives matter and where a monopolist should price to avoid potential entrants, and know that I cannot keep my monopoly status forever due to innovation, I see clearly that it was lack of prayers that led to disastrous results!!

ps: Count the number of personal pronouns that point to me!! Self centred glory!!

Saturday, September 09, 2006

H1-B Visas

Is it true that H1B employees are paid below what similarly qualified local Americans are? If that is true, then American fears of job security would be heightened, because the cost to company of hiring H1B guys would be lower than that of hiring local Americans and rational profit motivated organisations would prefer to hire the former. The H1B cap has been reached for 2006. However, a considerable chunk of the 20,000 (each for 2005 and 2006) exemption for individuals with US Masters or higher degree still exists. This study here, shows that there is no clear correlation between increase in immigrant employment and loss of jobs for American born individuals. The H1B cap is like a quota on employment and works the same way. Companies employing foreign individuals spend increasing amounts of resources on finding different ways to go around the quota restrictions which is wastage of resources.

Friday, September 08, 2006

Voting and Violence

Prof.Levy's History of Economics classes have been fun. I have had other history classes before but this is the best history class I have ever had. We are doing the economics and public choice of Homer's Iliad right now. Yesterday, we talked about how the pre-history of the gods was violent and bloody, and how Earth and Olympus were common to all gods and the rest of it was chosen by lot. The distribution was unequal so that it remains 'fun' for the gods. What I came back home with was the following idea, which is so obvious now in retrospect. If every vote counts and if there is a bimodal distribution then the population size matters a lot and both groups know that by killing one or a few people in the opposite faction they can win. Thus there is inherent instability, violence and lots of killing.

I can take this idea home to the small town and village politics in India. The way the political system works (to my limited knowledge) is that there are local representatives in the state assembly and parliament. In many cases there are two strong contenders and others vying for the same constituency. The contenders can try to persuade through fiery speeches or bribe the population to vote in their favour. However, there is no assurance in the absence of threats and coercion that individuals will vote the way they said, since ballots are secret. So kill a bunch of people in the opposing camp, that increases your chance of winning in two ways, one through the number of people capable of voting for you, and the second the killing sends a signal to the rest of the population that they should vote for you if they value their life.

Hmm! That does not seem like a bad idea at all. Especially since violence does escalate during elections in India. By the same logic booth capturing also makes sense. If you know a certain locality is the strong hold of the oppositon and all those votes matter then just capture the booth and ensure that your candidate wins. It would be a cool statistic to find the correlation between number of election violence deaths and margin of victory.

Wednesday, September 06, 2006

The Stepping Stone for success

I remember a few years back I spent the day after the FPM Comprehensive results with Karthik trying to console him and plan strategies to make sure he passed the next time. Our combined efforts helped him pass and since then he has graduated and has a great job. He did take his failure very much to heart and worked hard to be where he is today. Guess its my turn to console myself and move on. I know not what went wrong, but I am ready to go on the offensive now and beat this thing.

Sunday, September 03, 2006

Demand curves always slope down!!

A few weeks back Ali and I were at the Indian store buying stuff and we saw notices that said "Please limit your lentils purchase to one packet". The lentils cost more than usual, and I was wondering why when we noticed the notices. Although, I needed lentils I put off my purchase for later and decided to shop around for cheaper prices. I could wait a couple of weeks or even go without lentils for a while and have kidney beans instead. The economist in Ali was curious about the notices and we asked the owner about them. There had been a shipment delay and therefore a reduction in supply. Obviously prices went up and the owner also placed quantity restrictions. The price increase made sense, and it was more than enough to deter me from purchasing lentils, but why the quantity restriction?

The buyers at the store are a good mix of students, middle and high income families. About half the student population does not have aid and the other half has low after tax incomes (yours truly included). My guess is that the first two groups atleast would respond reasonably well to price changes, so the case for the notices is weak. If the store owner knows that demand curves slope downward, and I am pretty sure he does, why would he put up those notices? Are they just additional deterrants? Any ideas?

Thursday, August 31, 2006

The Office of the President

I am curious about why we continue to keep the Office of the President in India. As far as I know (and I know very little), the President has no real powers. I remember Giani Zail Singh (former President) being under controversy due to him taking orders from Indira Gandhi (then the Prime Minister). Abdul Kalam is certainly the most inspiring President we have had in the past two decades. He is a scholar and academic and has several accomplishments up his sleeve, notably his role at ISRO.

My conspiracy theory is that the current President's nomination was largely because he is Muslim and came close on the heels of the Godhra riots in 2002. The former BJP government did not take any steps to punish Narendra Modi but had to do something to show that their motive was not Hindutva. So they appointed Abdul Kalam a top scientist, known for his vision for India, and most importantly, in my belief, a muslim. There is no doubt this President is a very capable man; however, how much can he do from his current appointment? How much can any President of India do? If his powers are very little and there is very little voters can do towards making him accountable why have a President in India. I think I will take up a new hobby this semester, reading the voluminous Constitution of India.

Wednesday, August 30, 2006

Too much democracy in India?

Kalyan strongly believes that India has too much democracy. It is true that we have a multimodal distribution of interest groups and political parties who are all pursuing their own agenda. Can there be too much democracy? Suddenly I was not sure I understood the meaning of the word, so I scrambled up to Merriam webster for the meaning. Five are listed, the first one is : rule of the majority and the last is absence of hereditary or arbitrary class distinctions or previleges. We certainly do not have the latter in India. There are several arbitrary distinctions based on class and caste none of which have to do with an individual's merit or skills. Do we have the first, i.e, rule by the majority? There have been no clear majorities in the past decade or so in India. For several years it was the Nehru family at the helm, but since the assassination of Rajiv Gandhi in 1991, we have had no clear majorities in government. The BJP had and the Congress has coalition governments with multiple parties whose interests are in conflict several times. This time more so since the Left is part of the government and they are totally opposed to anything that even remotely resembles progress. They have even effectively persuaded two state governments to ban Coca-Cola and other soft drinks.

Does all of this mean we have too much democracy? I do not think so. There is certainly a very vibrant democracy, as we saw during the last elections when the BJP government was overthrown from the Centre and AIADMK from Tamil Nadu. I have lost count of the number of political parties we have. There are multiple interest groups with differing agenda. However, economic theory tells me that in a free market system the bad ideas will be weeded out and the good ones will remain (good and bad defined as what the market demands and not). But we do not have complete free markets in India, so the ones weeded out may or may not be bad and that is just chance and the level of power the interest group has on the government or any of the parties associated with the government. The current situation is that there are multiple groups and a relatively better informed public; however accountability is still lacking, so even if the majority were against a certain policy there is very little they can do to correct an unpleasant situation. It is obvious with the better informed public atleast that most of them are very active in their opinions about policies. A look at any discussion group online is enough proof, and there are equally vocal voices on either side of the debate. But then the government comes along and clamps down on using blogs to communicate because they feel terrorists use blogs to communicate and preach. If indeed the rule is of the majority then is this what bloggers desire? Can an individual sue the Government of India for curbing freedom of speech which is his constitutional right? How can I with any conscience say we have too much democracy?

Tuesday, August 29, 2006

Back to School

After three months of summer we are back to school today. I am excited about the new term and, classes. Looks like its going to be a busy semester and I am looking forward to it.

Thursday, August 24, 2006

Viral diseases and multinational companies

Surat and Ahmedabad are under viral attack. The recent flooding of the state and water logging in Surat for 6 days is the cause. This is the state where Medha Pathkar and Arundhati Roy have vocalised against the dam across Narmada. This is also the state of mass genocide. Instead of paying attention to improving the status of health and education in the country we are engaged in petty squabbles about banning blogs and products by multinationals. Read Jayant Bhandari's article on the Coke ban in the country. Its so silly that we spend millions of rupees fighting against multinationals which have made it easier for us to access world class products and have provided employment opportunities for so many. When was the last time Vandana Shiva tested municipality supplied water in any Indian city? Will she sue the government and ask for a ban on government supplied drinking water in the country? I am sure the content of pesticides in potable water is high enough to warrant such an action. If coke and pepsi are a health hazard what about the millions of people afflicted with water borne diseases every year. We still have Typhoid and Jaundice prevalent in the country. Even people who live affluently and can afford bottled water are at risk. What is the CSE's solution to that?

Indians still believe that foreigners will take over their country and politicians feed this xenophobia. What else could be the reason we are against multinationals? We are certainly not averse to profits and money. We even worship the Goddess of money (Lakshmi), and go to great lengths to please her so that we make more money. However, the Marxist mentality that the rich are getting richer at the expense of the poor exists and we have enough marxist professors to keep this idea fuelled for several generations. Even highly educated Indians believe such things and do nothing to prevent corruption within politics and bureaucracy which is the true cause of so much poverty and lack of basic services. Even the success of the relatively free computer industry has only led to more resentment against the haves. I would like to know where Vandana Shiva's children study. In most cases children of such activists and politicians, who are against 'everything foreign', happen to study in US or UK or Australia or any such country in the West. If indeed they believe that we need to embrace autarky why do they send their kids abroad to study and also take expensive tax payer paid vacations at exotic locations? A compilation of statistics (about politicians bureaucrats and activists) on vocalisation about multinational companies, foreign education of children and personal preferences of products such as Coke would be a good statistic for the media.

Monday, August 21, 2006

Worst fears come true

The best institutions in India are in the last stages of their life. The minute this bill passes through parliament, they would have sealed the fate of India and millions of Indians forever. I am not against equal opportunity, I am against the government mandating equal opportunity against better reasoning and judgement. If the last 15 years of India's recognition was due to our software gurus, the next generation of IITs and IIMs are going to bring a bad name to such institutions and India in general. My condolences to my countrymen. Why should I go back to such a country where I am not judged by my merit and what I can do but by my caste? Read my earlier blog on the reservation issue here.

Sunday, August 20, 2006

State owned oil companies

The economist has an article on state owned oil companies. The conclusion is that most of the oil reserves in the world are state owned and ill managed. This is the strongest case for oil market liberalisation I have heard (then again I have not been following journals all my life). The idea is simple, there isn't the required incentive structure in government run companies for them to be run profitably. Then again petroleum prices in countres like India are heavily regulated and there is heavy resitance against price increases.

Saturday, August 19, 2006

Finally a long deserved vacation

I am finally going on a vacation. It has been eight months since my last and I am looking forward to this one, especially since the shadow of prelims is past me. Haven't seen my niece and nephew in more than a year and I am excited to be getting away from Fairfax for a change.

Thursday, August 17, 2006

Its over

Its finally over.. three months of torture, anxiety, callousness, depression, hyper activity.. gone in a flash!! It feels strangely quiet around me now.. I feel empty!! I dunno if I am feeling relieved. I know my family would be. They have faced the worst of my exam blues and nightmares. Wish I was home and have them fuss over me!!

Tuesday, August 15, 2006

One down One to go!!

Micro down!! Macro to go!! Pray it goes better

Monday, August 14, 2006

Udavum Karangal and what Independence means to me

Literally translated, the title means "Helping Hands". Hats off to the independent spirit of independent Indians. We have what it takes despite the odds. Think about Vidyakar. I would love to listen to his story of what it took to be where he is today. He is well known, but there are so many unsung everyday heroes. We Indians do not have grand TV programs and Medals for our heroes; nevertheless, we are proud of them. They have shaped Independent India through 59 long years. We are yet young, and have much to achieve. However, we now have the distinction of "..those ruddy Indians in call centres, they are taking our jobs away.." Makes me very proud to see the world look up and recognise, even if its due to misplaced job security and immigration fears. What a bunch of resilient people we are. Even as I write this I am grinning from ear to ear, and my chest swells in pride at our achievements.
My personal Independence Day feeling is that it is freedom from colonization and the freedom to achieve my goals and educate my country's youth in Economics that has led me here. Ya! Ya! I know its my economic self-interest it is also my psychological motivation. Back home its 15 Aug already, and its a holiday very different from the grand 4th of July celebration here. I remember being in school and we had to practice long hours for the March Past, and we used to look forward to the free candy that was distributed. Nothing fancy!! The cheapest of all candy, but it was still candy given free to us at school (I am sure it was added to our tuition) and you could hang out with friends without teachers telling you off. I am sure it hasn't changed much since my times.

(Select text to read, its in the colours of the Indian Tricolour!!)

Help!! India is becoming communist!!!

The latest ban on Pepsi and Coke in Kerala is another instance of the leftists taking over in India. We have two of the champions of liberalisation at the helm (Dr.Manmohan Singh and Dr.Chidambaram) and yet they have let something like this happen. I remember when the incident first broke news in 2003. Does the Kerala government not realise the amount of unemployment they will have if they closed those factories down? But then, who said Kerala government was industry friendly at any point? They have always been communists, and that is what the children in Kerala grow up believeing. Someone please do something. Are the people in CDS leftists too? I thought atleast some of them were libertarians. If two Economics PhDs at the top positions in the country can do nothing about this, what hope is there for small fry like me?

Sunday, August 13, 2006

Crunch Time

Well!! the last few hours before D- Day and my marginal productivity has certainly gone up in leaps and bounds quite uncharacteristic of me. Usually by this time I would be reading fiction watching movies and getting thoroughly drunk. This time around I am sober and have been studying all day. Be it what it may, I am OK. I am getting more than my usual hours of sleep which is like every other exam time when i tend to sleep more. There were 30 panic filled minutes this evening, when I started looking at Macro empirics and realised that I knew nothing. How did I solve the problem? Well! I sent a panic email to my bro and called mom and dad. They are all surprised I am still studying for the exam!! Am alright now. My initial idea was to pull an all nighter, but decided against it. I still need to start on micro early tomm morning.

The woods are lovely dark and deep,
I have piles to read before I sleep
and piles to read before I sleep!!

Who cares about the piles now? The woods beckon!! :D
To all my classmates reading this, GOOD NIGHT AND GOOD LUCK!!!!

Friday, August 11, 2006

Whats new about terrorists in India

According to this news item, the US has issued an advisory that there might be possible terrorist attacks in India. Whats new about it? There are always some kind of terrorists in India at any point of time, especially now since Independence day is just round the corner. Every year around this time there is atleast one incident somewhere in the country (there is atleast one everyday in the Kashmir valey) that is classifed as a terrorist attack. Besides, Americans are paranoid anyway, and their news agencies like ABC only fuel the paranoia. Just as an example, if a house catches fire, the news report would say something like,"... we do not know yet if it was a possible terrorist attack..". C'mon guys give me a break.
Here's a very clear example of American paranoia. After the thwarted plot in Britan yesterday, ABC randomly interviewed about 4-5 people in the DC area.. one of them was a British family. All except the British family were ".. afraid for our safety.. i do not feel safe flying anymore..angry with the government and airports authority", the latter "..we are not intimidated.. they were caught weren't they.. this kinda thing happens.." Go figure!!

There are always terrorists of some kind in countries like India and Pakistan. We learn to live with that reality..

Monday, August 07, 2006

What a bunch of C@#$!!

These are the recommendations of the Quota panel. As was expected too much government control has been advocated. Reminds me of Atlas Shrugged. Is there an end in sight to this quota thing? Some readers ostentatiously say that the US has such policies so we should also have similar ones. It is obvious in the US that while they followed a pure merit strategy they were doing fine; however, recently so many people including Oprah are lamenting about the pathetic state of their government run schools. Why do we want to follow a stupid model that is proven to be a failure? Makes me so mad that we are wasting all our brilliance and talents in finding ways to get government favours while we can use the same to develop knowledge and increase productivity.

Now is the time to Panic or er not!!

After thinking about it, dreading it, and going on a roller coaster of studying and giving up its finally one week before the exam. I tried testing myself today and realised that I couldn't have picked a worse time to have all details muddled up in my head. I couldn't do something as simple as the Hicks, Slutsky and Marshallian demand differences. I completely forgot the Coase theorm and for some reason was attributing all of Demsetz's property rights arguments to Coase. What a disaster!! I did think that this would run me into a mild panic state; however, as has been my practice forever, my mind has conveniently shut down so close the exam and all I can do is read fiction. I am sure my middle school teacher has a smug look on her face, cause she predicted that this would be my lifelong habit. I concede defeat Ms.Suguna.

Wednesday, July 26, 2006

What does testing accomplish?

19 days to go and I am beginning to get annoyed with the concentrated lack of consistency of usage of terms in Macro. What is the point of using 10 different phrases to name a certain school of thought? As I plogh through the different models and empirics the big question is, just how much of this am I actually going to use eventually? If the test of advancement to candidacy is 2 months of cramming and ability to remember, everything I have fought all my life in the education system seems to be a complete waste. Why and how would it make me a worse Economist if I do not know certain empirics and models from certain papers and am unable to print them on my answer sheet? Where is the test of my real knowledge of Economics? What is the basis for the assumption that a pass in the qualifier underscores your knowledge of the subject? How good is the quality of signal of PhDs in Economics?

Friday, July 21, 2006

All kinds of costs

As an international graduate student living on a shoestring budget and with little opportunities to borrow the most valued products will be consumed, for example housing close to school, or atleast on the bus route. However, accommodation near school will have high demand and that will drive rental prices up. Therefore, only those who have the means to pay the rent will live close to school, and the international graduate student is most likely not one of them. People who do not understand basic economics will now say that there is discrimination against international graduate students by the home owners near school. We can replace international graduate student with any number of other groups and see how rent control, zoning laws and other such policies affect the basic workings of the market.
On a similar note. You will hear parents say things like, OOh!! We sacrificed so much so that you could get a good education and all the comforts of life. Sacrifice considered a virtue. No offence meant to their noble intentions, they just did not want the other things as much as they wanted a good education and comforts for you. On the margin the costs of the sacrificed were higher than the benefits from doing so. Point of the day!! Even people who do not have a graduate economics degree think marginally and act according to basic economic principles although they give it other names.

Thursday, July 20, 2006

Mad rush to the finish!!

Suddenly everyone in my class (including myself) has become busy. Its the last 26 days before Day Zero and guess I have started to feel the heat .. Well Even laziness has to come to an end sometime. :)
This sounds good to my friends abroad. They can call me anytime for free, even when I am not hooked up.

Thomas Aquinas and the Flying Cow

Adam told me this story about Thomas Aquinas. Aquinas was being teased by colleagues who told him there was a flying cow and when Aquinas looked outside the window they all laughed. His explanation was that he would rather believe that a flying cow existed than that his brothers had lied to him!! What a guy!! Noah and I spent over 12 hours at Adam's. We studied some, and generally just hung out together. God! I realised yet again how much I miss hanging out with these guys!! Adam finds these bizzare Ali G videos and they are just crazy!! As usual, to me the highlight of the evening was Guitar Hero!! I ROCK!! Wish we had had time for Firefly!!

Wednesday, July 19, 2006

The Crystal Maze

This was a UK gameshow Prakki and I used to watch more than a decade back. This was when game shows were clean and the quality of sportsmanship was in high regard. Sadly gameshows of today have participants bickering and telling on each other and being mean. I was surprised to find an email fan group for Crystal Maze. Prakki and I used to think we were the only nuts and I am sure given the chance we would have applied ourselves to participate. We were completely in love with Richard O'Brien. I didn't care much for Ed Tudor-Pole who hosted it sometime. Read this amazing story by a contestant. Are they going to release episode DVDs?

Tuesday, July 18, 2006

Indian Government blocking blogs?

The Department of Telecom in India has 22 page confidential list blocking certain websites, and apparently ISPs have blocked whole domains like blogspot and typepad. Now that bloggers are becoming aware of it, and talking about it, I am guessing the goverment will be forced to come clean about this.

Shivam Vij at Rediff says:

In 2003, one of the first things CERT-IN did was to approve the blocking of an obscure mailing list run by a banned militant outfit, the Hynniewtrep National Liberation Council (HNLC) of the Khasi tribe in Meghalaya. Ironically, the popularity and visibility of the list went up by leaps and bounds, despite it being blocked by all ISPs. Many could still see the list via email or proxy surfing.

As with many such issues where there is a large educated population being targeted by policy in India, in the next few days, if I can safely predict based on trend, a small group of people will get together from one of the major cities and file a case against the government for violation of constitutional rights, there will be heated discussion in several media and the government will appoint an x member committee to look into the issue, the committee will come out with its report 5-7 years from now by which time the main issue would have been forgotten, the government will reject the findings, and individuals would have adjusted to life without blogspot or typepad.

I do not know how we can call a lot of stuff happening in India democracy. The idea of the socialist state and bureaucracy is to drag its feet forever so that even the most ardent individual would either lose interest or be dead by the time a decision is made. Think about all the different committes and outrages in the past, Kelkar Commission, Bofors Case, Kargil Coffins, they were all media juicy news for a while, and they all lay dead and buried now.

Its funny the reasons the government has for blocking blogs. Even assuming there are some terrorist blogs among those banned, do they think that by blocking these domains they are going to prevent terrorists from communicating? Its ridiculous!!!

Thanks to Brian for the pointer.

Monday, July 17, 2006

Economic Models

The Economist has a special report on Economic models and the numbers they generate as results. It basically questions how good economic models are. I remember what ticked me off modeling. While doing my masters I attended a seminar where two different authors had modeled something out of economic theory and tested it. The main difference between the two theses was significance level. One of them accepted the theory at 5% and the other rejected it at 1%. It shocked me that they could so easily accept or reject basic economic theories based on flimsy statistics.
My favourite sentence from the Economist article. "Mr Lucas and his disciples, echoing Margaret Thatcher, believe there is no such thing as society". Brings home the Austrian point that it is not society or firms that act, but individuals who act and take decisions.

Sunday, July 16, 2006

Good Night and Good Luck!!

I loved this movie. It is very libertarian. I do not know enough American history and politics to know the complete background but the message in the movie is powerful.

Saturday, July 15, 2006

Widespread distrust

Reading different media accounts and having lived through a riot in 2002 I guess all I can say is that there is widespread distrust between Hindus and Muslims in India. The Hindu population is as much to blame as the muslim. I do not for one second believe that the common muslim is a terrorist. I do invite you to read this interview. What shocked me about it was the individual's repeated usage of words such as control power and rule. I would like to see a similar interview with an RSS or BJP activist. I am sure it would be on similar lines and have similar assertions about control of power, supremacy of their religion etc etc blah blah blah!! The Hindu community also has a million radical elements incognito, and yest the media does nto report them always as rightly accused by the Indian muslims. During the Gujarat riots in 2002, my hindu neighbour's six year old daughter proudly told me that she and her cousins threw stones at muslim houses, and her father proudly displayed a sword with which he trotted around the next few days along with the rest of the men in the apartment complex. I was shocked. I have always believed that what you teach young children is what you see in the future. The stories of atrocities of partition was what young children in the 50s grew up with, and in turn they taught their children similarly to dislike and hate the other community. All the different terrorist acts in the meantime have only added fuel to the fire. Its easy to find theoretical solutions for everything. However motivations and incentives of terrorits and radical elements may not always be easy to understand for the economist.

Friday, July 14, 2006

Every country deserves to defend itself

This week, since the blasts in Mumbai, there seems to be a shift in public opinion in India about our relationship with Pakistan. I was shocked to read an interview with a SIMI (Student's Islamic Movement of India) activist. She was a medical student and said something to the effect that muslims will not stop jihad until the whole world was brought under Islam and that she was willing to take up arms for the cause. I think of myself as a very open minded person, I have muslim and Pakistani friends who are very dear to me and I never had or will have any doubts about their humanity. However, in the future when I meet a new person, I think I will be guarded. What are the muslims in India complaining about? They have preferred minority status although they are 12% of the population. They have their own minority schools and colleges and also have access to admission in other institutions through quotas. (Brahmins who are 5% of the population are being discriminated against)
If they think that their community is suspect everytime an incident like this happens, it is not without reason. There has been a pattern of such violence by terrorists who affiliate themselves with this religion and community. I am not saying the community is to blame, the common muslim in India or Pakistan is just another ordinary person motivated by his self interest of survival. However, when banned organisations such as SIMI which were started to educate and enlighten the community according to its founder, have openly extremist members the whole community's agenda becomes suspect.

I believe at this stage India should do the following:
1. Indian muslims who believe they are being treated unfairly by the country should be allowed to move to any muslim country of their choice.
2. Indian Pundits and hindus in the disputed Kashmir valley should be brought to Srinagar or within Indian borders. Give PoK to Pakistan. We do not lose a lot and maintain the tourist section of the state.
3. Hindus in Pakistan who complain they are being unfairly treated there should be sent to India.
4. Organisations such as RSS, VHP and Bajrang Dal should be banned.

I do not know why for 59 years India has been disputing over Kashmir. The terrorist threat is driving tourists away anyway and the amount of money spent cleaning up after terrorist attacks (everyday in Srinagar and Kashmir valley), could be put to better use. Economically it would be the smartest thing to do.

Wednesday, July 12, 2006

Sangs is safe

Thanks guys. Sangs finally sent me an email telling me she was safe and that she had recently moved to Bangalore.

Tuesday, July 11, 2006

8000 miles away I am angry and distraught..

I just got the news about seven bomb blasts in Mumbai in the metro trains during rush hour last evening (IST). I have friends and family I am trying to get in touch with, some of them I have managed to speak to, others are not answering their phones. Why would someone want to do this? My heart goes out to Mumbaikars, one of the most resilient class of people I have ever met. It is one of the most entrepreneurial cities in India, despite heavy regulations there is a lot of order in the perceived chaos in the city. What leads to such lawlessness in a country boasting some of the brightest minds in the world? Why does the intelligent well educated middle class sit quiet and not question inefficiencies in the government? Why do we let idiots and bandits like Lallo Prasad Yadav and Phoolan Devi rule?
My heart goes out to the families of those that were killed and injured in today's blasts. All I can do from so far away is pray and hope Mumbaikars force the government to atleast offer them the basic security they deserve.

Trade negotiations

Yesterday I read an article in The Economist that the latest Doha round of trade negotiations had been unsuccessful. I wasn't even aware of a round. Usually the Indian newsdailies make a big issue of it, and I was surprised that there wasn't as much as a 'peep'. In addition, the Indian representative arrived 90 minutes late, and his excuse was the soccer match. Is he paid to waste tax payers' money on foreign trips to watch soccer matches? How do such people get elected in the first place? So many organisations seem to be so angry that the "lower caste" are being denied opportunities, why does no one not question such wasteful expenditure?

Public policy thought process: if one of the incentives of being in government or government job is foreign travel at tax payer expense, the costs of vote rigging and other methods to get votes may not be that high compared to the payoffs. There would be more resistance against change transparency or more accountability. It may be a good exercise to see how many such foreign trips involve family members also, i.e., in how many cases do families of these ministers also travel at tax payer expense?

Monday, July 10, 2006

Are Oil companies to blame for rising Petrol prices?

Gas prices have been close to and above the $3.00 mark since March, and I haven't found a credible reason for it yet. Of course, there seems to be a supply shortage, but why? The Government of India raised Petrol and Diesel prices in June, and Veeresh Malik seems to be confused about who to blame for the rising oil prices. He states that Indian Oil did not respond to enquiries about prices, and that is somehow linked to private oil companies' greed. Indian Oil is a state owned company. Even the example of Indian Railways he uses is that of state inefficiency. Gas prices in India are controlled by the state, and private oil companies can only use the prices that are set by the government. Mr.Malik seems to be talking about price gouging even without having his facts about the case in order. He even states that the amount of money spent on taxing oil at different levels would be sufficient to sustain a few states.
If the oil companies collect tolls for building highways, why should they give the money to the government? I like the conclusion that the petroleum ministry is also the answer to this. But are they listening?
Read his article here.

Sunday, July 09, 2006

Rationally irrational!!??

I was surprised that at the end of the storms and floods last week, people in Virginia are blaming the government and asking for Federal Disaster Assistance. I agree a lot of people lost their houses and cars etc, but why should the government pay for their loss? Ideally they should have been insured, if they weren't then the individuals took the risk of non insurance. Most of the losses had a very low probability of happening; however, these were regions which were in the flash flood zone and although this was a really big disaster unlike any they would have experienced in the past, home owners must have realised the potential for flood damage. There was even one home owner on TV who said that his basement had flooded last year during the summer storms. So, if individuals know their homes could be flooded, and still did not insure their homes or make alternative arrangements, does that mean they are irrational? To use Prof. Caplan's terms are they rationally irrational? I would say they are plain stupid or simply risk seeking. They do not have a right to demand tax money that you and I pay as disaster relief.

Friday, July 07, 2006

Pirates aaarrrr!!

Went to see the midnight release of Pirates of the Carribbean with Brian and Ali. Had my Pirate hat and hook on me, made Ali wear the hat and the sword!! He was reluctant and felt embarrassed.. i was fine.. was aared and arred back, got a few compliments for the hat and generally had a great time..

Thursday, July 06, 2006

Why do doctors choose to work at government hospitals?

The premier medical school and hospital in India AIIMS is under attack. It is proof that the reservation issue will not die a slow death as many would want it to. How can the Union Health Minister sack a top doctor at AIIMS? Why should Dr.Venugopal wish to even remain at AIIMS anymore. It is the government itself that forces people into the private sector and then they cry and lament that the best talents of the country, educated at tax payers expense, choose to leave the country. What incentives do highly efficient and intelligent individuals have to remain in a country that does not respect or reward intelligence and genius?

I would say all the doctors should simply take an oath not to work at government hospitals anymore, and join the private sector. Why should they waste their talents for the government? I am sure private sector pay is as lucrative and much more rewarding. If there are such incentives, why do so many medical students end up working at government hospitals? It is well known that government hospitals are ineffcient in India, and private hospitals such as Apollo do a much better job. Are there restrictions on starting a hospital or a clinic? Do interns have to sign some kind of a contract with government hospitals which effectively prevents them from seeking employment elsewhere?

It is a myth that individuals want to remain in government jobs because they can earn money without working. I do not believe we are a country of lazy people. Besides government jobs do not pay that much for the first 15 years or so; although, there is complete job security after that. What could be true is that, medical colleges are churning out poor quality doctors, who stand no chance in the private sector. Are medical colleges under pressure to pass every student that is in school? I do not believe that students are dull; however they may have lack of incentive to be good doctors. That is an unsatisfactory explanation because decent medical schools charge upto Rs. 20 Lakhs for admission, besides a yearly Rs.4 Lakh on tuition fee and living expenses. If an individual has to shell out so much money to be at medical school, he would naturally want to be a good doctor so that he can earn enough to pay off medical school loans and live comfortably. Why then do good doctors flock to government hospitals?

Coalition Government = Economic Doom

As if the problems with divestment were not enough already, now Dravida Munnetra Kazhagam (DMK) has threatened to pull out of the United Progressive Alliance (UPA) if the Neyveli Lignite Corporation (NLC) divestment goes through. Its not a joke that Tamil Nadu now has a significant say in national politics. Jayalalithaa successfully brought one Vajpayee government down, by pulling out of the coalition. All of these political power play is only wrecking havoc on the economy. The current strike by the employees is costing the government Rs 6 Crores (USD 1.34 million) per day. This is an agitation egged on by the state government. The southern states are known for their bad power situation. An example in contrast would be Mumbai and Gujarat which are powered by private power companies (Tata and Reliance), which power cuts are rare.

Here is the report of the Disinvestment Commission about NLC. Although they start off shaky saying disinvestment is not appropriate, the rest of the study points clearly to disinvestment. 64% of sales revenue is outstanding from State Electricity Boards(SEBs). No private company would operate in such conditions. The recommendations are to improve the power tariff structure, which again is politically suicidal. Andra Pradesh under the leadership of Chandrababhu Naidu and with World Bank aid did just that, the result, he was voted out of the government by people who wanted free power and did not want to pay for it. Nine years of power reforms down the drain overnight.

Wednesday, July 05, 2006

Three Cheers for markets

Hurrah for markets!! The market works beautifully even if rains disrupt transportation in Mumbai. Read the article here. What would have happened if local vendors had demanded that government provide transportation for their goods? What about government vendors of produce and other commodities? Did they do likewise or were they buried under tons of paperwork? My guess would be the latter. Besides they would have had no incentive to make alternative arrangements to get the supplies. Even if the persishables had rot the government would pay them. The article mentions that prices did not go up, but if they had what if the government had stepped in and controlled prices? Would the private vendors have still had the incentive to take a taxi to fetch their produce? I guess several of them would have formed an informal group and fetched all their supplies together and shared the cost, and then the government would have cried that they were engaging in price gouging.
It still amazes me how wonderfully well markets work even under difficult circumstances. I guess for me the charm of markets and economics will never wear off.

Tuesday, July 04, 2006

More Bad laws..

What does it take to learn a lesson in economics in India? The idea of giving tax breaks and creating special economic zones seems to be eternally ripe. It is justified under the grounds that Indian entrepreneurs want it. Of course they want it, it is a means for them to reduce costs, and profit motivated entrepreneurs will try to reduce operating costs as much as possible. Its a simple cost minimization lagrangian solved by every first year economics graduate student.
It is inefficient to give businessmen land at less than market prices. Basic law of economics, when anything is priced below its market value there will be shortages. PM Manmohan Singh is hailed as a famous reformer and FM Chidambaram states that financial reforms are of utmost importance. I think the PM is confused . On the one hand he lashes out against Mumbai's archaic land laws and on the other he promotes the idea of land subsidies for businessmen. The ideas don't add up. To catch up with China India does not need more laws and subsidies, it just needs to ease regulation in every sector of the economy.

Mumbai politics

PM Manmohan Singh seems to be uncharacteristically criticizing suddenly. Is this a weak attempt to deflect attention away from other issues? The Economist reports that he had harsh words for Mumbai on 21 June 2006. Of course his criticisms are completely valid. However, what good is simply scolding Mumbai government for their Land Ceiling and Rent control acts? Positive measures need to be taken to remove these uneconomical laws. I do not know how such archaic laws can be changed in a city like Mumbai where the local population is very much involved in everything. A few months back, Mumbaikars mobbed the local Producer's office demanding that their favourite singer be brought back into the Indian Idol competition (modeled along American Idol) , after he was voted out by a nation wide viewer vote.

Another instance is the Airports Authority's (AAI) long legal struggle to evict slum dwellers encroaching on AAI property, which is preventing the expansion of the Chatrapati Shivaji Terminal. The drive to evict slum dwellers is seen as some kind of conspiracy against 'humanity' by real estate guys, the 'elite' and government rather than an effort to enforce property rights. The government is to blame for this situation, after all they built the roads, water and electricity connections in these slums for their votes.

Monday, July 03, 2006


I started my countdown for the prelims last week. There are 43 days to go, and I am far behind schedule. Brian, Marek and I had a fun afternoon yesterday. Marek had Chipotle for the first time, and Brian tried the Burrito Bowl. We spent a good chunk of the afternoon trying to convince Marek to go watch a movie with us on thursday, but he did not budge. I wish I could have so much will power to 'consistently apply the seat of my pants to the seat of my chair' (quote from Pete). Prakki and I had a long chat yesterday about our childhood. We relived some of our childhood memories and concluded that we had had a blast as kids. For a few years now I have been struggling with the disconnect between my mind and my heart. My heart yearns for the simple pleasures of my childhood, no car, no tv, to telephone, no internet, lots of trees, bicycles and farms and fields. Economic sense tells me that with development several of the above are bound to go, and that is essential for growth. Its hard to reconcile the two.

Sunday, July 02, 2006

Public Policy in Casteism

Francios Gautier, a French journalist is writing about casteism in India. There seem to be a lot of public policy issues involved here. I have alway kept away from writing and talking about caste based issues for personal reasons. However, I do think that there is a lot to be said in terms of public policy here, and I think there are a few economics dissertation topics here. I am still not sure if I would like to write and publish on these issues, for one I am likely to be heavily biased and totally unrepresentative of average sentiment due to my background. However, it is a debate to which I think I can make a positive contribution.

Colonialism distorted several religious and cultural practices in India, and made them seem barbaric to Westerners. In due course with Independence, Nehru followed the Socialist Secular motto for the country, and quotas were written into the constitution. Dr. Ambedkar himself believed that the quotas should be temporary and last only 30 years or so. The public policy argument is that individual politicans and political parties of course have one major goal in mind, to be in power. Therefore, to gain votes and remain in power it was easy to perpetuate a class divide. While the Communists and Marxists promoted the class divide, the other parties added a twist and mixed caste with it. Today the real issue is that of class divide (rich and poor), and it is promoted as caste divide.

The fact that there are so many OBC categories and several castes and sub-castes vying to be included in the OBC category is a case in point. In the absence of special favours by the government what is the necessity for classification into different caste groups? Different caste groups would of course emerge as groups evolve over time, just like there are several church groups in the west; however, would they engage in such 'wars' as exist today in India in the absence of political favouritism?

Saturday, July 01, 2006

Austrian Economics

If something is the ultimate truth why don't many people believe in it. Most of the fundamental laws of Science are not disputed, so are the fundamental laws of Economics, the most basic being that demand curves slope downward. I guess at the most fundamental level the point of departure is level of government intervention in the economy. Ever since I started graduate school I have been wondering why no one takes Austrians seriously. If what they preach is the ultimate truth why are they unable to convince others of the truth. Everytime I talk to people about Austrian Economics, the one question that always stumps me is "Where is the proof of its success?"At that point I have no answers. I am not an expert on Austrian Economics. I know very little; and at this stage I am unwilling to brand myself as anything but an economist in the making.

Monday, June 26, 2006

Indian Roads and bribing

Ha Ha !! I guess PM Manmohan Singh has read the NBER paper. However he seems reluctant to admit the problem of corruption and the basic economic and public choice arguments behind the study. Instead he decides to lash out at the public for being 'ill mannered on the road'. Whoa!! Where did that come from? Is it a response to the rediff article on the PM that asks readers to vote? Many readers seem to believe that Indians are ill mannered on the road.

Here is Prof.Tabarrok's post at Marginal Revolution. I think at many levels there is just blatant violation of the law. For example underage driving or teenagers driving without license. When a teen drives a motorcycle it seems it obvious to everyone but the traffic policeman that the kid does not have a license. Are stricter laws a solution? How about making penalties really heavy? As a libertarian my instinct is against any more laws and government interference. However, heavier penalties does seem to work. I know that if I park illegally I could get a $75 ticket, and so I never do, likewise for an accident that did not hurt or injure anyone else and just gave me a flat tyre I pay a $125 ticket. Will I be careless again, of course not!! What are the penalties for drunk driving in India Rs.500 if you get caught and are given a ticket. The most probable event is that you will not be caught at all, and even if you are caught you would probably slide a Rs.100 note to the cop and get away with it.

There is more to the corruption story in India than just moral values. Since everything works only if you bribe someone, the bribe amount is simply part of the price. After all, the government does not set the bribe prices, it is a market determined phenomenon right, so much for such and such service, and the price also varies. Its a nearly perfect example of a free market phenomenon. More on this later.