Thursday, December 20, 2007
Monday, December 03, 2007
Whether individuals care about the long term or the short term is revealed by the implicit interest rates or relative prices in the economy. It is easy to understand behaviour once we identify that there are always implicit prices involved. Now you may ask, how can you put a price on emotions and such. Sure, I cannot give you a money value, but I can certainly say what kind of behaviour is more expensive to individuals.
Here's an example from my culture shocked self. Promiscuity, especially among young people in the West, used to bother me a lot. I could not fathom why young adults would indulge in such highly risky behaviour. My first reaction was to blame it on culture. However, there is a stronger economic argument to this. Promiscuity is higher because social approbation towards such behaviour is lower. In addition contraceptives have dramatically reduced the chance of pregnancy (which is a huge cost of promiscuity). Since the price of indulging in such behaviour has gone down, the demand for it has increased. Thus the relative price is skewed more in favour of the present than the future.
The question I do not have an answer to is after so many years of suffering under socialist rule, and seeing prosperity in rich countries, why do people still vote socialist? I can say ideological preference, but that is not a convincing answer. Socialism appeals cause it promises free stuff. Ok, that appeals to emotions. But what is the economic rationale? Is it because it is cheaper for them to vote socialist?
Friday, November 30, 2007
This is fine as long as we do not talk about what practices live and which ones die out. It makes perfect economic sense that only the ones that are very relevant to the current structure of economic systems will continue and the ones that are not very relevant will fall into disuse. However, emotionally it is not very appealing, since we grow up with certain traditions and would like to hold on to them for ever. I think this is where economists disagree with other social scientists. Where as economists think in terms of relative prices and keep the emotional aspect at bay at least professionally (this is good since its more credible), other social scientists are all about emotions.
So should we lament the loss of traditions? As an economist no!! As an emotionalist sure!! Is that hypocrisy?
Wednesday, November 28, 2007
Sunday, November 18, 2007
Reliance is a big conglomerate in India. It is known to have snagged plum deals through dubious and illegal methods during the period of heavy industrial licensing in the 80s in India. In fact as a good entrepreneur all Dirubhai Ambani was doing was respond to incentives set by the prevailing policies. This is a great public choice story. He found a way to bribe and do favours for politicians in return for monopoly rights to produce several products. Since this was done at the expense of other entrepreneurs who were not entrepreneurial enough to snag the monopoly contracts, Ambani was hated by many people. Once liberalization kicked in, the Reliance group was in a great position to take advantage of new opportunities and diversify even further. Reliance is growing bigger, there is a family feud, the company has been split, but it is still creating jobs for a million people or more in their different organizations across India. People take their money and complain that they are depriving the poor of India. What they do not see is the number and variety of products that are available in the market due to them.
I am not endorsing the illegal practices of Reliance. However, as a good economist I can see that all they did was act on an available opportunity. The perception of entrepreneurs in a Socialist country is affected by the legacy of the government. Being entrepreneurial is coveted in a country like the US, while in India (at least until the software boom hit) the most coveted job is to work for the government. Even today, millions of people are willing to bribe government officials just to get that job with the government where there is no accountability, there is job security come what may, and they can earn money under the table with promising and motivated entrepreneurs.
Saturday, November 17, 2007
Sunday, November 11, 2007
All it takes is one man to stop the tanks!
Saturday, November 03, 2007
Friday, November 02, 2007
Friday, October 26, 2007
Monday, October 08, 2007
Sunday, October 07, 2007
Sunday, September 30, 2007
Thursday, September 27, 2007
Thursday, September 06, 2007
Hattip Anthony Evans
Sunday, August 19, 2007
Wednesday, August 01, 2007
Friday, July 27, 2007
This past two days I have been in
Let us for example assume that the idea of SEZs is great and that it is going to be an immense success for
There is a huge anti-growth and anti-industrialization lobby which I think is promoting this idea under the guise of loss of agricultural land. What is sad is that the media has played up the idea so much that some intellectuals also believe this to be true. With all this brouhaha, a small story in the Times of India Delhi edition was almost missed (Hattip Parth). This is the story of a small village about 50 Kms South of
Something similar happened with land acquisition for the National Highways Project. For a change the land owners were offered market prices or higher, and that quelled all dissent for the project. The righteous indignation land owners feel when their land is taken away from them is understandable. This is the result of offering prices that are totally uncompetitive and below the market value. Giver sellers the market price and why would they care. Now the market price would be based not only on the current economic scenario of the region but the expected future streams of income. If, as was being suggested by several people from the government, prices of land would fly through the roof once development begins after acquisition, and this is common knowledge which is why they demand just compensation, land prices will reflect that. Developers who do not want a hold out situation will have to make offers appropriately.
The power of vested interests was very obvious yesterday at the conference where the lot was that of real estate developers and government officials who apparently have huge rents to gain from this project. There were very few academics and other practitioners in the group. It was pretty depressing to me to hear speaker after speaker try to talk in the same platitudes and not say anything substantially important. They kept highlighting the success of
It was obvious that the law itself was flawed and a number of real concerns on the ground have not even been thought about by the Commerce ministry. Everyone is just caught up in the whole melee and excitement of these projects. One legal practitioner even spelt out two separate statements from the act and pointed out that they were in conflict with each other and asked the Commerce ministry guy if they had any answers. The latter clearly had no clue about this contradiction and evaded the question.
The only two speakers who made sense in the morning sessions were my Professors who in many clear terms stated that we did not really SEZs for the kind of development they were looking at. They mentioned that the kind of reforms required was clearly outside of the topic of SEZs and that was the need of the hour. Even with the idea of SEZs unless the macro economic problems of land reforms and property rights were sorted out and some of the draconian laws and regulations were removed even with the SEZs we would only face more problems than solutions. This however, was received not too well by the crowd of bureaucrats and rent-seekers.
The afternoon session started off interestingly enough with a simple description of the procedure of the legislation of SEZ and how an individual or developer could jump on the bandwagon. This was followed by something like a panel discussion with government officials, individuals who are running SEZs right now and my poor Professor who was completely ignored for the better half of the hour that he was on the dais. Again the questions from the audience were most depressing and related to things such as size and operational aspects rather than the actual viability of such a scheme.
One of the experts on stage kept insisting that none of the consultants they approached initially felt that such a project was viable and that they had to spend a humongous amount of money to fly to Washington DC to talk to a consultant to even agree to work out a model, and even then they had to pay half the money upfront to persuade him to even think about the project. Now, correct me if I am dense, but if highly trained professionals feel they cannot provide something to this scheme what makes career bureaucrats believe that their project is even remotely intelligent? They had used hard earned tax payers’ money to make these trips to DC and even pay this consultant upfront. What a waste. And this expert kept telling this story as if it was a great achievement. I couldn’t help wondering if we are just a country of morons and idiots.
On the whole it was a depressing day for me. I thought it would be an interesting day with lots of academic debates; and it turned out to be a complete sham in the end. There were about 300-400 participants. At $1300 a person, you do the math at the mammoth waste the whole day was. Not just in terms of money but also in terms of time. That was just day one. Thank heavens I did not plan to stay the second day.
Thursday, July 26, 2007
Education Vouchers are a pet peeve with libertarians at GMU. I am not sure how successful they are in the US, but it is a reality in at least
Sunday, July 22, 2007
U-No-Hu had a single purpose and since he was like a one man planning commission he planned everything to be in power and become immortal. His band of followers were terrified to bring in any new ideas both because they were afraid of his power and also because they believed that he had tested the limits of magic and knew everything. (the latter is how economies perceive of planning commissions, a bunch of highly intelligent and widely read individuals) However, if he had used non-coercive means to discover the knowledge in the market he would have discovered the secrets behind more powerful magic. The single minded pursuit of immortality blinded him to everything else. Any of us would have told him that he suffered from the knowledge problem. duh!! Sure he had all the information, but he did not know all the subtle stuff which makes up knowledge. He was like a super computer that processed all the data but missed the real stuff. Come to think of it, the whole series reeks of the knowledge problem. Needs more thought!! More on the knowledge problem later.
Pesky call trouble? Try this out
Radha Sharma | TNN
Ahmedabad: “This is a public request. If you are an agent selling insurance, loans or personal finance, you are please requested not to waste your money and my time. Thank you!”.
If you too are harassed by the tirade of tele-marketing agents calling you up at the wrong time, you might take a cue from this specially recorded caller tune by critical care specialist Dr Raj Rawal on his mobile phone.
Dr Rawal says the idea was born out of a desperate need to stem the nuisance of being pestered daily by agents selling things he did not want. To his glee, the idea has worked!
“Earlier I used to get 10 such calls a day, now only one of them dares to speak to me after hearing the caller tune,” says Dr Rawal.
High-strung professionals have devised their own novel ways of warding off tele-marketing companies. From ‘leave me alone’ caller tunes to witty dialogues, these harassed professionals seem all geared up with tailor-made answers to beat the tele-marketing nuisance.
Daxesh Mehta, a software engineer, takes refuge in dark humour. “Whenever I get a call from agents selling loans for banks, I tell them I have currently lodged in the jail for defaulting on a huge housing loan,” chuckles Mehta...
How long will it be before an enterprising individual cashes in on this idea? Here is a huge market potential.
Friday, July 20, 2007
The Economic argument is always that of incentives. In this case as one of them pointed out clearly, monetary incentives are useless because it is difficult to objectively measure the output of some of these cadres. In addition what they can make under the table cannot be competed against by the State. How do you bring in competition in this setup? Approbation is a beautiful tool that can be used effectively in this system. I have long noticed that in the US, local news stations play up 'heroic acts' by individuals. Since the individual is the point of measurement, any small good act by the local cop is played up by the media, and he/she is given a medal in an ostentatious ceremony by some local big shot (the Mayor etc..) Why hasn't the well developed Indian media, who are so easy to point out the misgivings in the government and its departments as willing to shower accolades on the local leader or bureaucrat who has sincerely done something good for the community? There is a clear short supply in this field and there are huge gains to be made by both media and the general public in this field. Adam Smith talks about the power of approbation in the Theory of Moral Sentiments.
The other suggestion that came out was the power of civil societies in retaining good bureaucrats. The public obviously likes someone who is an active leader and who does something tangible and visibly better for the lives of the community members. There is no dearth of societies in India; however, they also seem bureaucratic and there is something to be said about the political nature of even civil societies in India. It is true that bureaucracy begets vested interests and there will be principal agent problems. My colleague from GMU Josh Hill has an interesting argument about the Principal agent problem in the British bureaucracy during colonial times and how approbation works in this setup. This was mentioned by Mr.A a well today that British bureaucracy is tied in with Knighthood. A complete revamping of the system is required in India. However, the problem is circular, the change needs to be brought in by the very same people in the system and that needs at least a few individuals stepping into the fire and suffering third degree burns in the process. No self interested individual is likely to do that however well meaning. Again as Mr.B pointed out, there is something inherently wrong with the system where a person has to sacrifice a whole lot to do what is right.
Are there any practical, workable, implementable economic solutions other than the easy ones my anarchist friends are likely to give me(i.e., get rid of the whole system overnight)? I am strongly inclined to believe that there is a solution from sound economics. Every thing does boil down to self interest and incentives (monetary or otherwise)
Wednesday, July 18, 2007
Every time there is overproduction of a good we need to look at the underlying causes. One of the most repeated questions in
Although it is laudable that the government is thinking about the unemployed, they are way off base when it comes to having diagnosed the problem. The root of the problem of unemployment and under employment lies elsewhere in the education system. Here are two reasons
- Highly subsidized technical and higher education
- Emphasis on technical skills such as scientists and engineers since the first five year plan
One of the most fundamental concepts taught in introductory economics courses is that of costs. Due to scarce resources individuals allocate their scarce resources based on a value scale. The most valuable use will be on top of the chart and the least valued will be all the way down. In the case of higher and technical education in
Emphasis on technical skills such as Scientists and Engineers since the first five year plan
A newly independent
Wednesday, July 11, 2007
Tuesday, July 10, 2007
Wednesday, July 04, 2007
Tuesday, July 03, 2007
Monday, July 02, 2007
I just walked down the aisles of the library yesterday and today to find out what kinds of books they have. They have some really amazing international publications in addition to Indian ones. The Indian ones, especially the ones published by Oxford University Press are really cheap. You can get a good hardback for as little as $12. The lack of articles in popular journals about Indian economic reforms is more than adequately compensated by the number of books that have been written on the subject. The analysis runs mostly from the extreme left to somewhat left of centre. I have not found any central or even slightly right of centre arguments in the books I have perused till now. The biggest drawbacks of most of the literature however is that there are a lot of statements without any kind of substantiation. Arguments are made from legends and folklore and popular rhetoric which would hardly stand up to any serious academic scrutiny. There are no references in most of the books. It is disheartening, because there are some really interesting counter arguments to be made if any of their arguments are true, and to be able to do that I have to go find sources to authenticate both their statements so that I can prove that they are either right or wrong and move on with my analyses. It is somewhat frustrating, but then it has only been three days since I started work and hopefully by the end of summer I will at least have an interesting question, and a knowledge of where to look for the answer, if not the answers themselves.
Sunday, July 01, 2007
Friday, June 29, 2007
Friday, June 22, 2007
Wednesday, June 13, 2007
It is ridiculous to see such riots. It is also very sad because it is indeed these differences that politicians exploit to keep this country from progressing. For long we have been complaining about this but nothing seems to be happening. Now however, I am happy and proud to know that youngsters in India have started progressively taking positive steps towards political reforms rather than just sit and complain about it all the time. With the intellectual atmosphere at an all time low due to riots and agitations in every region of the country demanding more quotas and more reservations for 'backward communities', this is a welcome relief to me. At times it is despairing to see that the lower castes call themselves the minority, when they make up about 60% of the population, and more and more communities fight for minority status.
A group of young and well qualified youth have started a political party with good intentions towards reforming the political system from within. They call themselves the Bharat Punarnirman Dal, which roughly translates to a India Reconstruction Group. Here is their website. They do seem well qualified and they have a practical workable agenda. This is a group that needs to be closely watched cause they have great potential for success in their plans.
Sunday, May 27, 2007
Friday, May 25, 2007
Wednesday, May 23, 2007
Everytime I am here I am assailed by more and more regulations. This time I was stopped longer at the customs point and the officer tried to make me pay for electronic items I already own and plan to take back with me, for example my two year old refurbished laptop, and my three year old battered digital camera were all recorded. I had to show him my I-20, and Thank God I knew the laws on importation. If I had not mentioned that I knew what was allowed and what wasn't he would have made me pay duty on stuff I am allowed free into the country. These laws are deliberately written to fool common people. Besides, people have been used to such oppressive laws for such a long time that they do not even know that these laws have changed. In addition the officials themselves do not know these laws for the most part. It is a contradiction of sorts that people who spend so much money going abroad to study and work do not spend five minutes to read the laws on a website that would save them atleast 30% of the money value of the products as duties.
There is only one way to improve innovations, create incentives. We are a very smart population. After all even during the most oppressive days of licenses we found ways to be entrepreneurial, why wouldn't we be willing to do so now given the changed economic climate?
Wednesday, May 16, 2007
The last time I visited family, one of my relatives who manages a big organisation mentioned something interesting. He said that recent academic stuff seems more relevant to business environment than stuff a decade ago. That set me thinking into the kind of books being published. This was also part of a question I had to answer for my Austrian II class. Most of the readings we had in that class were books that had Austrian style arguments for the most part, without calling the theories explicitly Austrian. Here is a success story of ideas. Who cares what the field is called. I have shied away from being branded hard-core Austrian. I believe in the ideas and not the idols. It has been the bane of many movements, that have lost steam after the founders passed away, that they faded away because they concentrated on their idols and not the ideas. So the books we have read this semester make me believe that there is a strong future for people like me, after all these authors are from MIT and such hardcore mainstream places.
Getting back to my point about entrepreneurs, my main contention is that business schools still study entrepreneurs not only because they try to teach entrepreneurship, but also because of their research strategy of using case studies. Analytical narratives and case studies in economics are becoming fashionable only now with the success of Professors like Willam Easterly. The winds have shifted in favor of people like us and I am glad to have had Prof.Cowen drum his third law into me.
Saturday, April 28, 2007
Sunday, April 22, 2007
Sunday, April 15, 2007
Environmentalists are also scare mongers. Every moment of every day some one is in the process of inventing something that makes life easier on earth. That is never a part of any of the series on the environment. If Methane gas bubbles to the surface of the seas due to a degree or two rise in sea water temperature, and if people in the scientific community are aware of this, we can be sure that someone somewhere is working to find a way to reduce the unfavourable effects. How come the community never talks about these new inventions that have made life easier to live? Will they be willing to live in conditions of the 18th century world? I doubt it!!
All of their predictions are based on scanty data from the last 50 years or so. Records of such things as sea temperature etc have been kept meticulously only for the last 50 years or so. The study of Earth itself, is a few thousand years old. What is the proof that such a rise in temperature is a natural phenomenon that occurs every other century or so? 50 data points are nothing in statistical analysis, they won't even cover the required degrees of freedom given the number of variables they try to predict. I am highly suspect of the data. Sure the environmentalists have good intentions, unfortunately, their actions and paranoia are causing several unintended consequences.
Friday, April 13, 2007
Songs and dances were not disallowed, so it probably began with suggestive and sensual song and dance sequences in movies with some exposure. The world has become more and more tolerant of openly sexual behaviour since the 60s. The Indian Censor Board, I conjecture, retains the same laws and mores from time immemorial and is archaic by any definition. Since direct kissing is not allowed in movies other suggestive scenes have crept in to the extent of vulgarity in 99.9% of run-of-the-mill Indian movies. By contrast a Hollywood movie can suggest sex or passion with a kissing scene, so no vulgarity is required, unless the film maker intends vulgarity. With every generation, some aspect that shocked the previous generation becomes generally accepted and that is where the bar is set for the next round. So we notice a progressive degeneration of the portrayal of sexuality in Indian movies. It is not shocking to note that it is the Censor Board that is to blame for this. Neither is the film crazy public to blame nor the film maker. Women's groups that protest the portrayal of women as sexual objects in Indian movies should make note of this when they call directors foul names. The Entrepreneur always finds a way, especially in an industry as lucrative and competitive as Bollywood where there are huge profits to be made.
Wednesday, February 14, 2007
This is the state of
The ant works hard in the withering heat all summer long building his
house and laying up supplies for the winter.
The grasshopper thinks the ant's a fool and laughs & dances & plays the
Come winter, the ant is warm and well fed. The grasshopper has no food
or shelter so he dies out in the cold.
The ant works hard in the withering heat all summer long, building his
house and laying up supplies for the winter. The grasshopper thinks the
ant's a fool and laughs & dances & plays the summer away.
Come winter, the shivering grasshopper calls a press conference and
demands to know why the ant should be allowed to be warm and well fed
while others are cold and starving.NDTV, BBC, CNN show up to provide
pictures of the shivering grasshopper next to a video of the ant in his
comfortable home with a table filled with food.
The World is stunned by the sharp contrast.....
-How can this be that this poor grasshopper is allowed to suffer so?
-Arundhati Roy stages a demonstration in front of the ant's house.
-Medha Patkar goes on a fast along with other grasshoppers demanding
that grasshoppers be relocated to warmer climates during winter.
-Amnesty International and Koffi Annan criticize the Indian Government
for not upholding the fundamental rights of the grasshopper.
-The Internet is flooded with online petitions seeking support to the
grasshopper(many promising Heaven and
-Everlasting Peace for prompt support as against the wrath of God for
-Opposition MP's stage a walkout.Left parties call for "Bharat Bandh" in
-CPM Kerala immediately passes a law preventing Ants from working hard
in the heat so as to bring about equality of poverty among ants and
-Lalu Prasad allocates one free coach to Grasshoppers on all Indian
Railway Trains, aptly named as the 'Grasshopper Rath'.
-Finally, the Judicial Committee drafts the Prevention of Terrorism
Against Grasshoppers Act [POTAGA]", with
effect from the beginning of the winter.
-Arjun Singh makes Special Reservation for Grass Hopper in educational
Insititutions & in Govt Services.
-The ant is fined for failing to comply with POTAGA and, having nothing
left to pay his retroactive taxes,
his home is confiscated by the Government and handed over to the
grasshopper in a ceremony covered by NDTV.
-Arundhati Roy calls it "a triumph of justice".
-Lalu calls it 'Socialistic Justice'.
-CPM calls it the 'revolutionary resurgence of the downtrodden'
-Koffi Annan invites the grasshopper to address the UN General Assembly.
MANY YEARS LATER...
The ant has since migrated to the
company in silicon valley.
While 100s of grasshoppers still die of starvation despite reservation