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.