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Showing posts from March, 2020

A Background Note on Formation of Karnataka

- March 31, 2020

Karnataka is etymologically said to be derived from the word KaruNadu or loft land referring to the topography of the state. The Kannada speaking population that constitutes the majority in the state has a rich civilization and by many accounts is one of the oldest languages in the country. At its peak, the Kannada speaking population ranged to northern borders of current state of Maharashtra to the northern part of current Uttarandhra to southern reaches of Tamil Nadu. Chalukyas under Pulkeshi II defeated Harsha of Kannauj on the banks of Narmada. Rashtrakutas reigned over Northern Karnataka and Maharashtra. Gangas and Hoysalas ruled over South Karnataka while Kadambas too had their rule in most parts of Karnataka. The Vijayanagara dynasty spread from Goa to Andhra with Hampi being one of the most prominent cities in the world. By the time British consolidated power in India by 1857, the Kannada speaking population was divided across many provinces. Post British victory over

Indian IT Industry and the Udupi Hotel

- March 29, 2020

Mr. Narayan Murthy once described the business model of the Indian IT industry as an Udupi hotel model. The reference originates from the Udupi hotel which have a frugal business model based on cost volume equations. The hotels tracing their roots to coastal Karnataka town of Udupi, are usually frugal, offer no frills, usually standing only and drive their business model through a combination of low prices compensated with high volumes. In economics, the quantity demanded is a function of the price elasticity of demand. As the price increases, the law of demand posits a decline in quantity demanded and vice versa. Yet, what is of interest would be the degree of change in quantity demanded following a change in price. To goods with characteristics of being price elastic, the decline in prices leads to more than a proportionate change in quantity demanded thus the lower prices compensated by higher volumes. For goods which are pretty inelastic, the change in price results in less

A Note on Circular Flow of Income and National Income Accounts

- March 26, 2020

Macroeconomics differs from microeconomics in the mode of analysis. While the latter uses the bottom up approach using a profit maximising firm or utility maximising individual as the starting point, the former uses the geographic construct of an economy as a starting point. To borrow from the forest, one can analyse the forest from the point of the various animals, birds, reptiles, insects, plants, shrubs, creepers, trees, herbs, caves, water bodies, soil among many other entities found in the forest. One can analyse them individually, their functions in a group, their interactions, etc. This is bottom up approach, thus the micro way of analysis. The other way is to have helicopter view or bird’s eye view of the forest. One can observe the total area the forest occupies as percentage of landmass, the oxygen content released by the forest, the carbon dioxide and other green gases absorbed by the forest, the amount of water by volume in the forest, the nature of flora and fauna in th

Migrant Egress, Wuhan Virus and the Indian Shutdown

- March 25, 2020

The three week shutdown has turned the focus on the hundreds of homeless and daily wage laborers. Many of them have migrated from different parts of the country into the metro cities in search of livelihood. Question marks arise about their sustenance given there is no possibility of work in the next three weeks. There are of course vultures who want to scavenge on the living homeless and daily wagers. There are others who too are concerned about their survival. Some organizations are taking up work to provide free food etc. to these bottom of pyramid group yet in the curfew it would be difficult to reach out the genuine needy. Some want the government to implement a Universal Basic Income (UBI) so as to support these families with some nominal amount. Further many living in slums, tents, pipes, roads etc. it would be seen as an easy prey for the China virus. There are of course some voices that have called for egress of these back into their villages. In fact, one of the key cr

Macroeconomics of Pandemics

- March 23, 2020

For many decades preceding the Great Depression, the economic theory was rooted in the production and supply analysis. Say’s law in a simplified form suggested “Supply creates its own Demand”. Implied was firms would produce goods and they would have their takers. If there was excess supply relative to demand, the price mechanism would come into effect creating a drop in prices. The drop in prices thus would increase the quantity demanded while at the same time reducing the quantity supplied thus restoring the equilibrium. The notion of equilibrium was dispelled in the Great Depression when low prices did not create the corresponding increase in demand. The answer to the puzzle was first articulated by John Keynes who argued there is deficiency of demand and thus the government had to play a role in fulfilling the lack of demand. In other words, Keynes suggested that demand creates supply. The Keynesian formulation laid the foundations of macroeconomics and with it the framework

The Convexity of Recovery

- March 20, 2020

As always, Nassim Taleb loves to ruffle the feathers. More often than not he comes with a proposition that seems odd with everybody else. From Black Swan to Anti Fragile to Incerto to Skin in the Game, he has taken very interesting and unusual stands. The line of thinking revolves around the behavior of extremes as opposed to behaviour of means in the orthodox analysis. As the Wuhan pandemic continues unabated in its toll, the discussion has shifted towards the recovery period post the pandemic. There is increasing discussion on the recovery package that needs to be addressed by different governments. The post Second World War led to the development of Marshall Plan that allowed US to offer money to Europe to rebuild their society. The Marshall plan acted as a fiscal and monetary booster in restarting the European economy. The debate therefore today is revolving again on a new Marshall Plan post the pandemic. The devastation it is likely to create will need a huge resources.

A Note on Risk-Uncertainty Trade-offs

- March 17, 2020

There is risk and there is uncertainty. Risk is about factoring a possible positive or adverse occurrence that changes the payoff and in addition there exists a positive probability of the occurrence of the event. Uncertainty is unknown risk. There would be no way of knowing an event happening and its consequent impact either discrete or continuous. Supply chain disruptions due to global wide pandemic with epicentre in the production hub might have a very low positive probability, yet the risk levels would be so low that they would not be factored in. Moreover, the multiplicative nature of the event creates an uncertainty which cannot be factored in. A question like will Olympics happen on schedule is simply not answerable given there is zero clarity on the future directions of the pandemic. The directions of the multiplicative uncertain events often depend on individual motivations and risk assessments and their conflicting nature with the societal assessment and coping with th

O-Ring and the Anti-Commons

- March 16, 2020

The post “ Macrowikinomics of Pandemics ” discusses around the O-Ring effect and its prospective impact on the production and business cycles. Implied is absence of a small element missing in the larger puzzle causing a halt in production. The production is hostage to a few components unimportant in standalone context yet very critical in production of goods and services. The causes of these missing components can be varied. In the current state of things, the supply lines being located in China are disrupted due to the prevailing pandemic thus having cascading effect on the production lines across the world. Economic theorists term the same as supply shock. Redundancies are normally not factored in given these shocks are likely to be rare and short lived. Yet in optimizing for the costs, the ruin events can potentially hinder the manufacture of output thus a downward spiral in the global marketplace. A mechanism to overcome these supply shocks would be to build in the necess

Jim O'Neill, Coronavirus and Indian Response

- March 12, 2020

A report in CNBC quotes Chatham House Chair Jim O’Neill praising China for its response to coronavirus. In a disparaging way, he derides Indian approach expressing fears what would have happened had it originated in India. The report is available here . It is not something new for many Westerners. Their Indophobia or more precisely Hinduphobia makes them inhabit their deluded land of India being haven for snake-charmers and elephants. They are simply unable to come to terms of India emerging on its own and being power contender. To all the praise Jim O’Neill heaps on China it was China’s initial reaction of denial and secrecy that led to the scaling up of the current round of the epidemic. He seeks to explain the same as dichotomy between the dominance of President Xi and the officials at the state level. The explanation simply doesn’t hold well in the light of what has emerged. The virus was noticed first by doctors in Wuhan. The first Chinese reaction was denial. In fa

Sports Organizations and Structures

- March 11, 2020

The post “ Defining a Sport !” attempted to define what constitutes a sport and what does not. It however does not claim to be perfect since there would be grey areas neither it factors in or seeks to define mind sports. Having attempted to define a sport, the next layer would be classifying the sports. The Sports Encyclopaedia of 2003 claims to trace more than 8000 indigenous sports and games. Yet, there are several grey areas. One would wonder whether test cricket, one day cricket and T20 are different sports altogether or should they be classified as variations of a single sport. In athletics where there are numerous events often with tenuous linkages, it is difficult to classify whether all belong to the same sport or some clustering is essential as with sprint running, middle distance, throws, jumps etc. Globally, sports have sought to be classified based on the organizations governing the sport. As the International Olympic Committee (IOC) requires, one only inte

The YES Bank Conundrum

- March 07, 2020

Events around Yes Bank seemed shocking yet expected. The paradox perhaps is an offshoot of the interesting history of Yes Bank. It was founded in 2003-04 by Rana Kapoor and Ashok Kapur. From a symbolic poster boy of modern age Indian private sector banking to being the fall guy of the long term consequences of the crony socialism at play especially in the early half of the current decade, it has been an eventful journey for good or bad. Indian banking sector had been dominated by the public sector following the nationalisation of banks in 1969. As private banks were allowed post 1991, the new ones generally emerged as off shoots of either non-banking financial institutions or development financial institutions. These included ICICI Bank and HDFC Bank among others. The story of Yes Bank however was one of the first to begin as green-field private bank. The death of Ashok Kapur in a terror attack in 2008 saw a monopolization of control by Rana. He was the archetype new age banker

The Semantics of Group Based Discrimination

- March 05, 2020

As one visits Red Fort or Elephanta Caves, there is an interesting anomaly while buying the entrance ticket. Indians and foreign nationals are charged differently for what essentially is the same offer. In railways or in bus services, senior citizens are offered concessions while buying tickets. They normally pay around half the price than the normal customer. Students too have concessions while purchasing a season ticket or as it is popularly known as monthly pass. In Karnataka there is demand for concessions in monthly passes or daily tickets on city bus routes for women engaged in garment factories. Recently as a poll gimmick, Delhi government made travel free for women in Delhi transport buses. Students belonging to Scheduled Castes/ Scheduled Tribes/ Backward Classes etc. often get free studentship to cover their cost of studies. Last year, the central government introduced reservations in government jobs for candidates belonging to Economically Weaker sections. For many year

Wiki'nomics', Narrative Contestations and Indic Ecosystem

- March 02, 2020

Wikipedia monopolizes the online encyclopedia segment for all practical purposes. To an individual, the first link from Google Search results invariably points towards a Wikipedia entry. Given its usual spot in the top 10 Google search results, Wikipedia usually occupies a top of mind recall for many people. Their first source of knowledge ingraining is Wikipedia. Wikipedia is not merely a crowd-sourced encyclopedia but has emerged as authoritative repository of knowledge. With passage of time, Wikipedia is expanding into non English languages too. Even in the context of Indic languages, Wikipedia might emerge as leading information production and dissemination contrary to expectations. Implied is the current and the future generation at least in the immediate future would get their information from Wikipedia. Therefore information as existing on Wikipedia in all likelihood will be treated as truth and even more so as it spreads in the regional languages. Despite no apparent cen

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