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Showing posts from February, 2021

Decision Making as Output and Bounded Rationality

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  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
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The Message from Gujarat

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  Local body election results tend to favour the ruling party in the state and prima facie, the results from Gujarat seem to reinforce that. One witnessed something similar in Punjab where the ruling Congress swept the polls with the other parties performing very badly and nearly wiped out. In Gujarat too, the ruling BJP has ensured it swept the urban body elections across all six corporations. It did so in resounding manner. The opposition was left to clutch some straws for hope. It is more remarkable given the BJP is ruling these corporations for nearly three decades. In 2016, there were some setbacks, the party barely managed to hold on a few of these corporations though the urban voter by and large stood with it even in those tough times, the Patidar agitation at its peak.   The remarkable feature of the Gujarat polls is not merely in the BJP sweeping the stakes. It is the changes that seem to be occurring in the landscape of the political opposition in the state. this changing
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Seth Godin and the Laggard

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  Seth Godin has once again come up with provocative post complete with calculations. The post (available here ) is on laggards. He terms it the opportunity of laggards and suggests the only solution to deal with laggards would be to bring them up rather than bring up the averages. It is normal to find people obsessed with averages. Averages are pulled down by laggards. Eugenics might suggest an extreme step to eliminate laggards. There are many others who advocate laggards being brought up to the standard of the average. The bell curve does exist, yet it’s skewness needs to be smoothened at its lower tail. Increasing the upper bounds will not seemingly solve the problem, the only mechanism as Godin seems to put forth is bringing up the laggards. \ His examples are very interesting. He uses the example of the road, party laden with dirt, the rest a smooth highway. His argument as his calculations suggest is not about building a vehicle that drives faster on the highway but developi
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One Crore Vaccinations- What Next?

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  It has taken 35 days for India to reach one crore vaccination mark as it battles the pandemic induced by the Chinese virus. It indicates roughly three lakh vaccines being administered every day. The second round of vaccinations are underway. The coverage of frontline workers is expanding and hope to achieve 90%+ mark in a couple of weeks or so. It is perhaps with anticipation that the Indian population looks to expanding the vaccination drive to the next phase of the elderly and the vulnerable. There was no doubt given the frontline workers have performed over the last year or so in combating the pandemic, they needed to be administered the vaccine at first priority. The doctors and other healthcare workers are needed to combat with preparedness in case of any eventuality. There is further no doubt that there needed to be observed on the effects of the vaccine in terms of immediate side effects or so. It would need some time before the health care authorities could unearth some insig
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Counter-Cultures- Some Notes

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  The recent arrest of activists on grounds of anti-India activities does portend a disturbing signal. The signal is about the activists engaging in anti-India acts and perhaps treating them as anti-establishment or anti-government acts. There is a difference between anti-government and anti-country. Yet there is a very little distinction in the minds of these activists as they seek to move past that line however thick it might be into a realm of anti-national. In quite a number of cases, it is evident, there is a political thought that is behind the line of thinking. There are egged on political ideologies to combat the existing government and the establishment on a number of grounds and seek to foster disunity into the country. An instance of the same was the JNU protests and the chants of Tukde Tukde Bharat. This was overtly political and the activists knew of their intentions. But what is surprising in recent times, is activists from overtly non-political areas like environmentalis
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Economics Motivators of Activism

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  There is apparently quite a bit of divide that has emerged with the recent arrest of an environmental activist Disha Ravi from Bangalore in connection with the Republic Day violence and aftermath. Disha apparently is aged twenty two and thus seemed to find sympathy among the section of the crowd that is egging on her. Her supporters are of course bounded by a common dislike often degenerating into a pathological hatred for Modi, which would make her their celebrity hero irrespective of her age. Age might just be a number. Conceivably, Disha began her activism at age of nineteen and has evolved from an environmental activist into one of anti-establishment activist. There might be an irony she is fighting in favour of those farming interests, singularly responsible for environmental degradation of Punjab and Haryana. Rather than examining the merits or otherwise of the case, it would be instructive to decode her motivations for activism. It begs to be understood why youngsters are attr
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Crypto Currencies and Sovereign Challenges

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  There is a n interesting article on crypto currencies authored by V Ananta Nageswaran (VAN) in the Mint. The article is available here . It seeks to locate the rise of privately circulated crypto currencies, the government reactions and probable challenges of sovereignty. Crypto currencies are seemingly once again the flavour the season. Elon Musk has announced Tesla would accept Bitcoin as a medium of exchange. There are banks in the US which are in the process of accepting custodianship of crypto currencies. Crypto currencies are privately circulated, highly volatile and do not have the backing of the government. Instead many governments including India are contemplating banning privately circulated crypto currencies like Bitcoin. There are others who view the crypto currencies through the prism of speculative instruments thus a potential lead indicator of the emergent bubble.   The author locates the suspicion of the sovereign to the anonymity provided by the crypto currencies
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Modi and Western Media and Intellectual Perception

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  In the last few weeks, there has been bit of attention in the Western media and celebrity circles about the anti-Modi farm protests. It is being projected as if the whole of India is out on the streets seeking to uproot the alleged dictatorial regime of PM Modi. It is further being projected that PM Modi is trying to suppress these protests, something indicative of India’s backsliding from democracy. These fanciful and wishful projections could have been dismissed as something of fantasy but the forces that seem to be masterminding it seem sinister and would not hesitate to create divide within the country. To add, there is a vast section of the chatterati and the opposition polity that seem ever eager to use any opportunity, however faint it might be to destroy the credibility of Modi even if it meant siding with forces inimical to India’s long term interests.   There might be a puzzle or two to the bystanders why the Western media apart from the intellectual and activist celebr
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Government Twitter Battles and the Market Right

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  In India, it seems set for showdown between the government and Twitter over its policy of moderation and refusal to ban accounts responsible for violence in the national capital on the Republic Day. The government seems in no mood to let Twitter off the hook. On the other hand the platform seems to be vouching for the right of free speech or dissent and seems to argue the government orders are in violation of Indian laws. Twitter obviously cannot sit in judgment of Indian laws. It can however challenge the government orders in the judicial forum for a remedy. Yet Twitter is hardly in a mood for the same. To Twitter riding on a high of left liberal euphoric support on its action post Capitol Hill riots seems to sense this as a move which will fetch rewards from the left liberal elite circuit as it takes on PM Modi who is the object of hate for the leftists. On the other hand, the right wing support base of PM Modi is in a mood for a bloodshed and seemingly wants Modi to crackdown.  
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Balance of Payments:A Note

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  Countries rarely can exist in isolation. There is certain degree of interdependence across countries. Hence cross border transactions are a norm. these transactions manifest in many ways. There would be export of goods in exchange for which foreign currency is received. There are import of goods which have to be paid in foreign currency. There are remittances from domestic residents who would be currently working abroad. There would be banking transactions across border. Firms would invest in assets overseas. All these transactions that have an element of cross-border interaction are recorded in a statement what is popularly as balance of payments. Thus as is obvious, balance of payments (BoP) points to the records of all cross border transactions undertaken by a country in a given period of time. This might be prepared monthly, quarterly, half-yearly or annually.   Scenarios wherein demand for domestic currency exceeds that of the supply of domestic currency results in a surplus
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Demand and Supply of Money: A Primer

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  The execution of monetary policy as an instrument to direct the economy to the needed trajectory is essentially dependent on people’s willingness to use those instruments. As observed in the previous posts, the monetary policy is an indirect attempt to induce an increase or decrease in consumption or investment to the required rate using the cost of money, the interest rates as the guiding principle. By increasing or decreasing the interest rates, the objective would be to keep money supply stable while encouraging or discouraging economic agents to indulge in consumption or investment. Therefore, the context provides the backdrop for understanding money supply and the demand for money thus the foundation of monetary framework. The current note will delve deeper into these aspects.   The understanding would begin with the functions of money. Money has three key functions viz, the unit of account, the store of value and medium of exchange. The inability to perform the first two ro
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A Note on Monetary Polcy

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  The aggregate demand is defined by the identity Y=C+I+G+(X-M). Implied is the aggregate demand is the sum of consumption, investment, government expenditure and net exports. If the government intends to create a trajectory for the AD, it can alter one or more than one of these variables to meet its intended policy objectives. The government itself is autonomous player and thus can influence the economy through increased or decreased government spending G. Indirectly, the government can influence the spending through two different instruments, the fiscal and the monetary policy. The fiscal policy apart from the changes in government expenditure would also comprise of changes in tax rates. The government can increase or decrease tax rates thus influencing consumption, investment and net exports. The second instrument, the government employs is the monetary policy. It is through the instrument of interest rates, the government seeks to control the money supply and thus influence aggrega
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Internal Protests and Global Provocations

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  While the farm protests continue to linger on, there seems to be some new turn every now and then. These turns at times do add some drama and perhaps some comic relief to the observers. One such element that seems to have stirred some debate in the last twenty four hours so has been a few tweets in support of the protests by some celebrities. This might not seem surprising but then those celebrities or so-called celebrities have nothing to do with India. Late evening yesterday, singer Rihanna tweeted in favour of the farm protests followed later by porn actress, Mia Khalifa. If this was not enough, in between them, the child environmental activist Greta decided to add her voice. Meena Harris, whose claim to fame lies in she being the niece of US Vice President also decided to add her voice. These voices were sufficient to be a catalyst to the voices of the Indian opposition and the farm protest supporters. They see this as an internationalisation that would eventually hurt Modi and b
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