Posts

Showing posts from February, 2020

Decision Making as Output and Bounded Rationality

-
  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
Post a Comment
Read more

Schelling's Equilibrium

-
Economics text books describe equilibrium as intersection of demand and supply curves. In a market economy analysis, a shortage of goods (demand > supply), the prices will rise incentivising more number of producers to enter into the market. The increased supply of goods accompanied by a drop in quantity demanded following a rise in price will restore the balance in the market. Similarly, a scenario of surplus (supply > demand) causes a drop in prices. The drop results in increase in quantity demanded yet at the same time disincentivizes production causing a fall in quantity supplied till the market is restored back to equilibrium. Yet the concept is quite non-intuitive. It seems it is more of text book idealism than something that can be observed in practice.   Equilibrium as a concept takes its roots in biology and physics rather than economics. In natural and pure sciences, equilibrium is described as a situation in which some motion or activity or adjustment or respons
Post a Comment
Read more

Surveying Repugnant Markets

-
Markets conjure several things. They allure a numerous. There exist many types of markets. One talks of stock markets- the market for ownership; there are commodity markets at B2B levels, B2C levels- commodity exchanges, food markets, retail outlets, wholesale outlets; there are markets for financial capital- debt and equity markets; there are markets for goods and services and more. To economists of classical and neo-classical school, markets perform the role of allocation and distribution fo goods and services best. To them, Pareto efficiency is something best achieved through market mechanisms and not through central planning. Yet there are markets which people find it nauseating or repulsive to see they exist. In fact, the very idea of certain goods being exchanged in a market model is something that would be contrary to the norms established in the cultural context. In some geographies and societies, some of these markets might find favor yet in many others there are seem s
Post a Comment
Read more

A Primer on Real Life Action and Economics -II

-
The post ‘ Primer on Real Life Action and Economics-I discussed how real life instances are theorized through the conceptual prism of economics. The current post continues the discussion applying the concept of economics to more areas. Like in the previous post, one column highlights the real life phenomenon what we observe, while the second column builds up the theoretical linkage to economics. Real Life Practice/ phenomenon Economics Linkage Live events Humans enjoy live action. They love going to stadiums to watch sports events, visit theatre to enjoy live theatre performance, visit musical shows preferring their genre and likes. An interesting pointer would be an analysis of these live events through the economics angle. There is obviously the angle of utility maximization. People prefer entertainment and leisure and these activities offer the same to the consumers. Therefore they seek to maximise their utility by at
Post a Comment
Read more

Shaheen Bagh and the Fallacy of False Equivalence

-
As Delhi continues to be rocked by violence instigated by anti-CAA crowd, there apparently an orchestrated movement on the part of mainstream media to build an equivalence between pro-CAA groups and anti-CAA groups. It is sought to be projected if there was violence, the anti-CAA was not alone in its culpability. The perception that is sought to be given is they were provoked by pro-CAA groups who should be held responsible for flare-up. There might be a provocative statements by those counter-protesting against Shaheen Bagh or Jafrabad. Yet these protests were seemingly a reaction to the nearly three month standoff between anti-CAA ‘Dadi’ crowd of Shaheen Bagh. While there cannot be condoning of violence by any individual or group, to the media perhaps it is an occasion to paint false equivalence between the two communities. Without doubt, an intentional attempt to create an equivalence so that the other side too has to pay for the price. Sacrifice of pawns by Shaheen Bagh crow
Post a Comment
Read more

A Primer on Real Life Action and Economics- I

-
We often use economics subconsciously as we go about our daily routine. Economics is about human actions and behaviour and we engage in plenty every day from birth to death. These actions consistently demonstrated over period of time reveal patterns that build up the theoretical and conceptual foundations in economics. Quite often, many actions undertaken either in personal, social, or professional capacities might occur without any explicit linkage to economics but each of those actions perhaps reveal something about economics and its idiosyncrasies in life. Presented below are few examples in tabular form. One column highlights the real life phenomenon what we observe, while the second column builds up the theoretical linkage to economics. Real Life Practice/ phenomenon Economics Linkage Free E-mail services It might be puzzling to find why Gmail offers free email services. Given the server capacity they possess, any addition of extra user to
Post a Comment
Read more

The Decline of B-School Summers

-
To a student of management, corporate internship or summers as is popularly known is an unforgettable moment. The roots can be traced to the early days of management teaching in the US and other Western countries. When a course was introduced on Masters in Business Administration or MBA in popular lingo, it was perceived to be course with practical hands on knowledge to complement the theoretical aspects taught in the class. In fact case study method of teaching, a derivative from the law school, was developed and fostered to build better models and pedagogy to teach the concepts of business decision making. A student would be taught basis foundation skill sets and concepts of business management in the first year. There was to be time for reflection before the student moved on   to the second year. Instead of holidays between the first and second year of course study, the business school culture developed the concept of summer internship. The students were expected to land up a
Post a Comment
Read more

Historical Evolution of Economics Theoretical Thought and Practice in Modern Times

-
In popular perception economics is about demand and supply. Nothing can be farther from the truth. The origin of the word economics can be traced to an ancient Greek word ‘oikonomikos’ which literally meant managing the household.  The French mercantilist thinkers at their peak expanded the definition into one of managing public administration laying the foundations of political economy. Mercantilists like James Stewart conceptualised economics as an art of providing for all wants of the family. In fact, the concept of reciprocal altruism can be traced in its anchors to mercantilist definitions of economics.  The objectives of funding a subsistence level of livelihood, providing employment to inhabitants, providing all necessities for secure livelihood by the state was essentially to create a set of related dependencies thus a motive for reciprocal altruism.  Adam Smith conceptualized economics in terms of national wealth. Therefore his understanding of economics was captured in
Post a Comment
Read more

Woke, Pricing and Corporate Social Responsibility

-
Corporate Social Responsibility (CSR) is a Veblen good. CSR exhibits as a corporate woke. In meeting the wants of materialistic possessions, presumably natural resources are plundered. The resources being non-renewable suffer from exploitation reaching a stage sometime in distant future wherein there will be no resources available for production of future goods and services. In destruction of natural resources, humans in their alleged selfish motives destroy the environment thus laying the foundation for prospective future calamities. Corporate driven capitalism models in pursuit of short term profits destroy resources without inhibition thus allegedly the primary culprit in environmental degradation and destruction. To critics of capitalism, it is not people who demand things but corporates in their goal of profit maximization manufacture demand. As a saying goes, corporates will sell people ropes so that they can hang themselves! Moreover, the resources per se have no ownership, th
Post a Comment
Read more

On Rail Connectivity in Karnataka

-
Notwithstanding the abolition of a separate Railway Budget, the Pink Book- zonal wise allocation of funds remain keenly awaited. Quantum of fund allocation zone-wise underscore the requisite to extend rail connectivity to new territories. Nonetheless, superfluity of plans aside, ground work remains intermittent. While India is affianced in ritualistic statements, China introduced and expanded the reach of high speed trains; Tibet came on rail map and is a matter of time before their railways touches Indian borders. Given the increasing Chinese reach, Indian achievements if we can term any, pale in comparison. While speeds in China touch 250-300 kmph, most of our trains average around 50 kmph or perhaps even less. The fastest trains in India currently average in the low 90 kmph range. Railway connectivity is not uniform across the country. Beyond doubt, substantial proportion of railway network traces its foundations to the British days. It was military movements accompanied by a
Post a Comment
Read more

Networked Information Economy and Social Production

-
A distinctive feature of the digital economy emergent in the last couple of decades or so has been the rise of networked computer mediated communication environment. This is in contrast to scale enabled industrial information economy that permeated the business backdrop for more than three and half centuries. A byproduct of new digital topography has been the movement of   non-market and non-proprietary   means of production and exchange to the core from the periphery. The industrial information ecosystem compelled production on a commercial scale. Given the factors of production and costs associated with them, it was relatively difficult if not impossible to build up alternative models of production based on non-proprietary and non-market models. However, a robust nonprofit sector did exist for centuries. What has however changed is the scale and scope of the operations of the same. The propositions of Alfred Chandler are being restructured and revisualised in the digital era.
Post a Comment
Read more