Sunday, January 28, 2007

Coffee, lounging and operating hours

I love the concept of bookstores here in the US. Traditionally in India you cannot linger in bookstores or restaurants. It is just the opposite here. You can linger both in restaurants and in bookstores. This afternoon for example, I was just sick of being cooped up inside my house and decided to go to Borders which is the closest bookstore to my house. I did not buy any books, I did not even browse their book aisles. I went with my own books to read, sat in the coffee lounge and read my books. No one asked me to leave or to purchase anything to stay. I did purchase a cup of hot chocolate because I felt like it, but there were several others who did not buy anything, and just lounged around reading either their own books or books they had taken off the shelves in the store. It is a beautiful concept, and I wish we had many more such stores in India.
Even in restaurants like I Hop or Denny's, you can just order a cup of coffee and stay there the whole night doing your thing and you will not be thrown out. Compare it to Indian restaurants where they kick you out as soon as you have eaten. This is true of many Indian restaurants here as well. I think its a mentality rather than a business model. Also Indian restaurants are the only ones (to the best of my knowledge) that are closed between the end of lunch service and beginning of dinner service. I wonder why they do not keep it open like all other places. Thai and Chinese places have differential rates between lunch and dinner (dinner is costlier by $2 or so). Most Indian restaurants, have a buffet lunch and made to order dinner. I wonder what economic logic lies behind keeping them closed in the late afternoon and early evening hours? There is not much wait staff during the buffet, and I guess the Chef and his assistants need to be paid anyway. They have already incurred rental costs etc. So why do they close? Especially in this country where people are willing to eat all through the day. They can continue to serve buffet till about 30 minutes before dinner service, and can display the timings appropriately.
I do not know if it makes sense for them to close during this time in India either.

Hope for India

I was plesantly surprised to see an outburst of emotion against the news article about Sitaram Yechury's comment to rewrite Indian history. So many people do seem to believe that Communism would sound the death knell to India's progress. It gives more encouragement to my beliefs that India has a lot to look forward to towards making progress. The Russian and Chinese examples have been cited more than once in the comments. It is heartening to see Indian individuals believing that capitalism is the key to success. If only they showed the same vigour in embracing many more capitalistic ideas my job will become an easy one. The big business bashing needs to stop. I guess much of the ire against such firms is because they were the monopolies during the license raj and they have profited by garnering favours rather than by actual efficiency in production. Another reason is the big divide between the haves and have nots. Last week's issue of The Economist had articles about this divide. If there is some logic to the trickle down effect, I wonder why the proportion of poor in India has not gone down even marginally and why there are still so many people whose nutritional intake is lower than in Sub-Saharan countries. Food production has been in surplus for more than a decade now. The IT revolution has enabled the middle classes to climb higher and has also expanded the middle income group's proportion in population. Have the poor benefitted from any of these at the grass roots level in terms of the basic needs of life? So many puzzles! The truth remains that Communism is not the solution.

Economic education

One of the questions in my Micro prelim was about return to education and how I would relate my own life experience to what is in the literature. After outlining (with incorrect statistics) what literature says about it, I proceeded to argue through several paragraphs that I believed my own PhD to be just a signal with negative rates of return. It was difficult to make the argument since I could not state explicit facts about myself that would reveal my identity. Since I am the only Indian in my batch it was even more difficult to make the argument for a negative rate of return given inflation rates and expected salary levels in India. With about two years to go to complete my education this is a dangerous line of thought, since my investment (or is it just a cost at this juncture) in terms of time, money and other aspects has been huge towards this goal.

With the usual assumptions of economics I am supposed to be a rational individual who has made the choice to become a PhD with a fairly accurate measure of my intellectual capabilities. However, the rationality assumption also demands Bayesian updating. How indeed do I measure my success in the PhD program? If its by number of papers published, then I do not deserve to be in the program. If it is success in classes, does a 3.xx average count as decent score? Besides, even the As I have in my classes is because of good technique of answering exams rather than actual proof of acquired knowledge. What new do I know now that I did not know three years back? I know where to look for US Economic data, how to pick out libertarian books, where to purchase the cheapest books (most of which just adorn my bookshelf) and what to do to pass exams.

So, if I followed the principles of basic economics I should do a Bayesian update and quit grad school. Hmm!! The return indeed is highly negative if I quit now and walk away with my tail between my feet!! If I complete, atleast the signal will get me a better paid job than what I would get right now. I guess due to opportunity cost considerations I do choose to remain rationally irrational!! Now!! There's something I have learned that gives me hope for my future.

Saturday, January 27, 2007

Solutions to traffic problems

Karthik and I were talking this morning about how terrible traffic is in Delhi. Here is one of the alternative ideas we came up with.

Deregulate air travel, so it becomes cheaper for individuals to own private jets and helicopters. This would make owning helicopters cheaper and may lead to a Helicopter-taxi service. The operations of this service would be simple. There would be fixed routes operated by different carriers, and helipads on roof tops of apartments and office buildings. In fact the helicopters need not even land on office rooftops. There can just be a giant airbag onto which individuals can jump and walk away to their offices. There would then emerge a market for training institutes to teach proper jump techniques and big insurance markets for all. I believe there exists a class of individuals that would be willing to pay for such services to avoid the hustle and bustle of road transport and commute through roadways. The question that remains is why is not a popular idea yet even in the West where most innovations take root? Are there strict regulations? Is it so expensive that no one is willing to take it on? Why wouldn't jet setting top executives prefer this mode of transport?

Economics of Bollywood

Bollywood seems to understand the law of comparative advantage and specialization very well. To most Americans and Westerners in general, it seems strange that actors and actresses in Bollywood movies do not sing their own songs. The concept of a well established market for play-back singers is strange to them. Looking at it from an economic perspective it makes perfect sense. Most actors have pathetic voices and would top the charts of funniest and ridiculous singing talent that we see in the first few episodes of any season of American Idol. They could take singing lessons like Western actors do for their musicals, but then that would be an enormous investment in lessons etc and some good actors may not even be on the silver screen, cause they just cannot sing. That would be a disaster since singing and dancing is such a big part of bollywood, and also a lot of revenue is generated out of movie sound tracks (sale of audio cassettes, and cds). So Bollywood has put the law of comparative advantage to good use and has specialized talent in playback singing. Now, not only are there successful actors, there are also successful playback singers. Specialization, that is raking in money for Bollywood.

Taking this idea a little further is the presence of what are called item numbers in most commercial Indian movies (Bollywood and other regional language). Item numbers are typically very provocative song and dance sequences which are not connected to the plot in any way, but are essential cause they sell. Typical item numbers have terrific dance sequences by very sexy women (usually a top model of some kind), scantily clad and set to a great tune with lewd and double edged lyrics. Most Indian heriones are sexy, but may not be great at such dancing. For a long time, atleast until the late 90s, there were probably one or two 'item girls', Helen being the most well known and best of all of them. They tended to be B rated actresses, who failed to make a mark acting, but owing to a terrific body and dancing skills, got the roles of the vamps, but they were part of the plot in most movies. They were not well respected by the public, but it was known that their song and dance sequence was required to complete the movie. These days there are quite a few 'item girls', and what is more they are not part of the plot. The 'item numbers' are just random in any movie. Law of comparative advantage and specilization at work again. Although censorship is huge in Indian cinema, the entrepreneurial talent in the industry is obvious. It is truly an industry where individuals are rewarded or punished by the public. You make a good movie, you rake it in, you make a bad movie, however sexy your item number you bomb at the box office. Hurrah for the markets!!

Wednesday, January 24, 2007

Macro Questions

I taught my first class yesterday and as is customary started with National Income Accounting. There were a couple of questions I could not answer right away.

1. Is recycled material counted as part of GDP, especially when something completely new and different is produced from them? What about recycled computers; i.e if the parts are melted down and made into something different?

2. If an individual holds dual citizenship, how does it affect GNP calculations? For tax purposes primary residence is considered, is it the same with GNP?

I did mention several times that there were tons of problems with these numbers and that they should take them with a pinch of salt. Hope the idea went across.