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

Peak End Experience of Wuhan VIrus Lockdown


Thanks to the virus originating from Wuhan, China and the destruction it has spawned as it traverses across the world, seemingly the whole world is shut down. The economic activity is down to a standstill with experts talking about a long recession ahead globally. There are a few however who believe the world is headed towards a V shaped recovery- a sharp dip in growth rates followed by equally sharp recovery. As the economies shut down, a lot of discussion is happening over the duration of the lockdown. With no vaccine or cure in sight, options seem to be very limited with either a priority on health implying a long lockdown or a priority on economy which carries the burden of swifter spread of the infection. The debate between advocates of economy first and advocates of health first has been captured in this post. Aside of the debate is a serious question of the socio-eco-political consequences that arise of the decision in extending or exiting the lockdown.

In India, political theorists are debating the possibility of the political price, the Modi government might have to pay if it extends the lockdown. There is strong section within the opposition calling for extension of lockdown. Implied in assertions of few right wing thinkers is a conspiracy theory by opposition ruled states to shift the blame for extended lockdown and its consequences on Modi government and thus recapture space. This is despite the vociferous of the arguments in favour of extension have from opposition ruled states. The political price to be paid is based on few factors.

There is strong reasoning that migrants are extremely angry being caught in a ‘Trishanku’ position, neither here nor there. The lockdown was announced all of sudden, the migrants were in severe danger of losing their livelihood thus they began marching long journeys back home. The crisis took a turn for the ugly in Delhi largely due to the machinations of the local government who wanted to put the government of Uttar Pradesh and Bihar in a spot given the elections in near future in those states. Some deft handling at both Centre and many of the States have somewhat alleviated the distress but the feeling in the large body of chatterati in Delhi and elsewhere is these migrants now in refugee camps are angry. If the lockdown is extended, with a long period of unemployment and having to live on charity, this could blow into a serious political crisis. It has been ignored to large extent deliberately that had the migrants been allowed to leave, the crisis might have been severe with the virus from Wuhan possibly spreading to the countryside. A discussion on the egress and the difficulties associated is captured in this post.

The extended lockdown is bound to have an impact on jobs and livelihoods creating a serious crisis both in the countryside and the urban areas. The poor, the low income groups, the daily wagers are the most affected. It is not very easy to sustain the livelihoods without work for long time. These situations once they aggravate might become difficult to recapture the space.

Yet, contrary to the assertions of the chatterati on both left and right spectrum of thought, it is unlikely that there will be repercussions. Two instances capture this contradiction. Modi’s call for sounds to cheer up the front-line health and security personnel during Janata Curfew on March 22 and his call for lighting diyas on April 5, to demonstrate of unity received huge response perhaps far higher than anticipated. There is a sense of despair yet people realise that there is very little option in the current context. One is dealing with an uncontrollable external factor that seems to brook no solution at the current stage. There will be intense experience at the moment but there is a hope that things will turnaround at some stage. In the age of social media, communication flows fast and rather than vertical flow, results in horizontal flow of information.

When the battle is over, people tend to recall experiences not in a sequential manner but only select bits of the same. They in all probability recall the tough times they underwent during the crisis. They would recall the dark days that seemed to flow endlessly as they stood helpless before the Chinese epidemic. Yet at the end of the day, the feeling would more perhaps transform into a sense of victory. As Daniel Kahneman points out, people’s recollection of memories tend to revolve around two points. The first is the peak experience. This is the experience at the height of the lockdown or the crisis. This would be the time when one would run out of supplies, when one is struck in an unknown land, one when thinks there is no hope ahead. The end experience is the one which happens when the crisis ends. There would be sense of victory and perhaps in the months and years ahead there would be a discussion on the emotional bonding that got generated despite social distancing. They would fondly recollect how they won the battle in toughest of the times and faintest of the hopes. In fact, if India comes through with minimum of damage unlike Europe or US,, there would be sense of satisfaction. There would be air of romanticism over the struggles. The peak end experience theory might bring the manifestation of the societal resilience. Future generations would be told stories about the resilience the current generation manifested as it waged a battle in the dark alley against an invisible virus from China.

There can be endless debate over the feasibility of extending the lockdown or otherwise, there might be endless talk over the political ramifications of either of the strategies, serious discussion could revolve on the economic destruction. However, what remains in the end is the recollection of the peak and end experiences of this exercise. The people’s preferences social, economic and political would rest on the internalization of these experiences going forward. The current analysis is incomplete without factoring the peak end experience analysis of the population across the country and the world.



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