Posts

Showing posts from September, 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

Mughal Museum or Shivaji Museum?

-
  The Chief Minister of Uttar Pradesh Yogi Adityanath recently announced the Mughal museum being set up in Agra would be renamed after the legendary Maratha ruler Chatrapati Shivaji. To state this set a cat among the pigeons is perhaps an understatement. There are reams of articles that are appearing in the mainstream highlighting the alleged contributions of the Mughals to the Indian society. News channels gave space perhaps more than sufficient enough to demonstrate the virtues real or imagined of the Mughal rulers. There was further talk of how Mughals are intrinsic to enrichment of Indian culture. There were in parallel attempts to portray Shivaji as a ruler of Marathas with little to contribute to Uttar Pradesh. This despite the fact, Shivaji’s empire was expanded by his successors, the Peshwas to cover significant portion of present day Uttar Pradesh.   Nothing should surprise us. In an earlier post, it has been highlighted that how Mughal Man’s Burden was demolished through
Post a Comment
Read more

Economics in Practice in Work Life

-
  Economics as we have noted before has numerous applications in real life. Each of those past posts that have dealt with economics in action in real life have tended to theorize the practicalities on the ground through the prism of concepts in economics. The present post too would continue to be in the series to demonstrate how economics helps in real life   Real Life Practice/ phenomenon   Economics Linkage   Extending maternity leaves from 90 days to 180 days is counterproductive   This is an argument quite a number of economists and practitioners often make. When the government of India did extend maternity leaves from 90 days to 180 days a few years ago, social media was flooded with comments on how this could be detrimental to the employment of women in the industry. Their reasoning was simple. The firms are constantly endeavouring to reduce costs. If they are faced with the prospects of paying six months of pay wi
Post a Comment
Read more

Economies of Scale and Natural Monopolies- A Note

-
  The world often seems of puzzles yet they go unnoticed. Yet to an economist or rather a student of economics, these puzzles are the ones which challenge their mind and thought process. Let us take a few instances. Across countries, we find a single railway company operating railway lines. If there are multiple companies, they operate in different geographic zones. For example, one would not find multiple companies laying railway lines between two cities let us say Mumbai and Delhi. Similarly electricity transmission too observes just one company operating as the power gets transmitted from the power generation source to the local transmission set ups for further distribution to households, industries and commercial establishments. The same observation can be made of water distribution companies. From the source of water till the local water tanks, one finds only pipeline being laid and there are no competitors found in this instance.   In economics, competition is the bedrock of
Post a Comment
Read more

BCG, PLC and Returns to Scale

-
  Management practitioners have their own jargons. Without doubt these terminologies developed help conceptualize ideas and their implementation in practice. While the observations lead to the formation of theory, it is equally true that the theoretical formulations thus developed play an input in strategy and tactics of a firm. Many management jargons and concepts owe their origin to concepts or models elucidated in economics. It would be prudent to discuss these concepts often used in management to their roots in economics. It must be stated that these roots might have often emerged subconsciously without a reference to the economic underpinnings. The current post will deal with a couple of such concepts.   One of the critical understandings that practitioners seek to pursue in product development is the product life cycle. It conceptualizes the journey of the product from its inception to its end cycle or the decline or perhaps death. It does give insights to the practitioners o
Post a Comment
Read more

Porter and Market Structures

-
  Management students and practitioners are well aware of the Porter’s five forces model. The model seems to underpin the foundations of both strategy and marketing. The forces are some agents that an economic agent has to confront when they enter the competition. In simple terms, Porter’s five forces lists five factor that determine market entry and strategy. It borrows from the Industrial Organization (IO) literature and is a pursuit to measure the competitive intensity of the industry albeit in qualitative terms. While there can be quantification of the competitive intensity, yet there exists a tendency for qualitative analysis for the Porterian framework.   In Porterian framework, the following five forces define the nature of competition in the industry or the market. The first force is the threat of new entrants. This implies the barriers of entry into the industry. if the barriers of entry are low, the new firms are likely to enter given the presence of supernormal profits.
Post a Comment
Read more

The Story of Indian Food

-
  There was an interesting article appearing here on the origins of the popular Indian breakfast the dosa. It goes without saying that Indian food has origins in perhaps most unexpected of the places. The article seems to posit the origins of dosa in Bidar district of Karnataka or at least the recipes were described by the rulers there almost a thousand years ago. It is common knowledge that dosa perhaps originated in the Tamil country but this puts a new theory to play. In this context, it would be interesting to examine book “The Story of our Food” by K T Achaya published by Universities Press (2000). The author does trace the story of our Indian dining table to the Harappan civilization. While the author does add credence to some myths on contributions of others especially the Islamic rulers and the Arab world to the Indian cuisine, the book does touch upon interesting pointers that drove innovation in the Indian kitchen. Therefore, an examination of this short book might well give
Post a Comment
Read more

Indo China Standoff and the World War I

-
  The war clouds seem to be looming around Ladakh and Arunachal Pradesh. A two front war too cannot be ruled out implying the war might expand to Jammu and Kashmir and the Western states. It is not discounting the possibility of war around Himachal Pradesh, Uttarakhand and Sikkim. China seems to be belligerent and the recent setbacks seem to harden its stand. Any backing out would be setback for President Xi himself. It is unlikely they are going back to the 1993 agreement and the subsequent ones. Perhaps too them, it seems a sort of prestige to salvage their setbacks from Galwan till Pangong. India perhaps at this moment has little option but to confront the Chinese. The Indians are demonstrating patience is some indicator to the world that India does not want aggressive posture or solution to the problem but desire a genuine peace. Having demonstrated that, India seems reconciled to the war. With the Chinese virus raging around in the country, it would be a tough task to face the Chi
Post a Comment
Read more

Real Life Applications of Economics: Some Examples

-
  There are many past posts wherein it has been attempted to explore the applications of economics in real life. Many textbooks as noted before, posit economics in abstract terms. Yet, at every stage of life, one finds subconscious applications of economic theories, concepts and models in real life. It is often conceivable that the agent is unaware of economics and is only applying what is common sense. Yet, economists theorise this common sense. In continuation with the past posts on economics and its real life applications, the current post will take a few more examples to illustrate the same. Real Life Practice/ phenomenon     Economics Linkage Rise of Brands Firms operate in the normal course, in theory, in a perfect competition. In perfect competition, goods are homogenous, firms are price takers and thus have no control over the price. They have control only over the output. Yet firms seek some degree of control over the pr
Post a Comment
Read more

Tastes and Preferences in Economics: Some Notes

-
  Tastes and preferences are determinant of demand. The changing taste and preferences determine the changing patterns of demand. If there were to be demand creates supply, it would be reflected through the changing tastes and preferences. An instance would be in order. On September 11, 2020, it marked nineteen years since the two aircraft were hijacked to crash into the World Trade Centre Towers in New York. The Western world was brought to the reality of the gory Islamic terrorism. It is a different matter that war against Islamic terrorism still continues and at times it seems to happen in spits and bursts and not apparent conviction behind the same.   Yet aside from it, was the trauma it created in a whole population in the US. The Americans were terrified without doubt. There were scared to move out, to interact and many having lost their near and dear ones plunged into depression and loneliness. There was certain change in the purchase patterns in the US. Many Americans began
Post a Comment
Read more

Monopolistic Competition and Barriers to Entry: Some Notes

-
  Economic theory advocates competition for social welfare. As the completive intensity increases, there is an increasing rush to reduce prices. Firms reduce price till such a point of time wherein their marginal costs are equated to the prices. In a perfect competition, the firms have control over the output but have no control on the price. They are price takers, in other words, prices are determined by the market. This is so because of the homogeneity of the product thus negating the possibility of differentiation. Furthermore, in perfectly competitive world, the barriers of entry are nil. If there arises the existence of supernormal profit, other prospective suppliers are attracted by this possibility thus planning their entry into the market. As new players enter into the market, the output increases. Implied is an increase in the goods being offered for sale relative to the demand for goods. The imbalances thus created in supply and demand make firms reduce price which will proce
Post a Comment
Read more