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Showing posts from May, 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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Marginal Productivity of Labour and Wages : A Note

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In economics, there is a considerable interest and natural one at that about the wages. There is a question about the ideal wages that an employee would secure. Karl Marx had posited that the labour produce the goods yet it is the capitalists who appropriate all the profit. In Marx’s words, if a shoe were to cost to produce $1 and a labour produces four shoes in an hour, he would have produced the output equivalent to $4. Yet while the capitalist would gain a revenue of $4, he would at best let’s say given $1 to the labour. Assuming the fixed costs and non-labour costs to be $1, the capitalist still makes a profit of $2. This in the long run would lead to income disparities and become a cause for the revolution. The Marxian theory was later criticized on the grounds of human capital theory. In the past, the posts have sought to link for instance Smiley Curve with the Marxian propositions. Marx did face a challenge from what was emergent as the neo-classical theory. The neo-classicalist
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Lakshadweep Connundrum

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  Lakshadweep is the smallest Union Territory in terms of population but is now in the news for perhaps wrong reasons. The islands are strategically important given their location. The island is predominantly Islamic with more than 97% of the population following the religion. The island was relatively free of COVID-19 cases till early this year before the explosion took place. This is primarily attributed to the dependency on Kerala from where most of the goods are procured of. To add, the increased tourists would have added to the number of cases. Historically, the territory has remained sort of isolated from the rest of the country. The tribals were generally Buddhist followers before they were sort of Arabized. Islam followed later as an outcome of Arabization. The influence could very well been an outcome of it being strategic maritime location. The linkage with Maldives too existed in some ways especially with the island of Minicoy. Minicoy during the British days came under the
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Archeo-Astronomy- A Note

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  To many history might appear boring, yet it is equally fascinating to a number of others. History is about the past. Yet history teaches us about the present and the future. History is about learning the right lessons. History often repeats itself as a farce often as a tragedy. Avoiding this tragedy is something that becomes critical. It is about regressing the past towards forecasting the future. In quantitative methods, regression is a standard tool to understand the future through the past correlations. History too is about building correlations of the past to project the future. History of course differs from statistical tools in terms of its qualitative and often subjective analysis. History is about decoding the conditions that existed resulting in a war for instance. If a war were to be a dependent variable, then the question would be about those independent variables as also the interaction variables while controlling for certain variables that determined the trajectory of th
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Indian Vaccine Story

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  The vaccination process in India continues to fumble on. The process had begun relatively smooth but soon encountered troubles partly due to the vaccine hesitancy thus certain wastage coupled with the second wave of the Wuhan pandemic which devastated urban and the rural alike. It was aggravated by the shortage of vaccines. India had approved two vaccines, yet their supply was limited and could not be scaled up. While the Covishield being marketed by Serum Institute, but developed by Oxford and Astra Zeneca, was also to be exported to meet its global commitments the Covaxin developed by the domestic vaccine producer Bharat Biotech could not be scaled up because of technical issues. The Sputnik, developed by Russian scientists and marketed by Dr. Reddy’s Labs too is facing issues of manufacturing, which is likely to start in a month or so.   There was no doubt as mentioned in the previous columns too that the government strategy on vaccines lacked homework. There has been a talk a
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A Dutch DIsease for Kerala

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  As the Pinrayi Vijayan government took office for the second time in Kerala, they made an interesting announcement. The government announced a programme to launched from August 15, to remove extreme poverty from the state. This apparently could have been an innocuous statement but given the reputation of Kerala and the public relations associated with the same, it did set off some debate and perhaps more memes among the social media circles. There were people who were wondering what would that mean and perhaps it meant exporting Kerala labour to more regions both within and outside India.   Kerala has boasted itself of being the most literate state in the country. It is supposed to be the role model for development across the world. Amartya Sen has often highlighted how Kerala shows the path in terms of human development. To economists like Sen, it is the Human Development Index that would indicate the level of economic and social progress rather than the Gross Domestic Product o
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Pinrayi Games

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  Kerala Chief Minister Pinrayi Vijayan created history when he became the first to retain power in the state in more than forty years. The state has seen rotation of power between the two fronts, the United Democratic Front (UDF) and the Left Democratic Front (LDF) over the last forty years. The ruling LDF not only retained power but did in a comprehensive manner winning more than ninety seats in the 140 member assembly. The Congress led UDF bit dust which perhaps might lead to realignment of forces within the state. Interestingly, the election campaign on corruption scandals especially the gold smuggling case did not find traction with the voters. The involvement of the top leadership of the ruling coalition did not seem to have influenced the voters. The Chief Minister was seen as a benevolent patriarch trying to handle the COVID-19 pandemic induced by the Wuhan virus. It did not apparently matter that Kerala performed relatively worse in terms of number of cases detected. It did re
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Economics of Conflicting Dietary Preferences

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  The world is by and large consumers of meat and related products as part of their diet. Humans from time immemorial are omnivores. The notion of vegetarian food is something fairly recent in human history, perhaps with the advent of the settled life and agricultural civilization. Geography has determined food preferences and thus in large parts of the world agriculture was not possible till fairly recent centuries in history. This meant the option was animal food for survival. Wild fruits or nuts or even honey might have been discovered millennia ago and formed part of the human diet thus enabling it to accommodate to the omnivorous diet. This also perhaps helped in rapid adoption of vegetarianism as diet preferences in agrarian societies. Yet in history the notion of vegetarianism is about minorities rather than of the majority. Till date, most humans eat animal food as their choice rather than vegetarian. However, choice of animal based food is not exclusive of vegetarian choices.
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Countering Bengal Political Violence

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  While there were expectations that BJP would offer Mamta Banerjee a stiff fight in the Bengal elections, the end outcome was a decisive victory for her. The BJP however which used to struggle to open its account managed to become the largest opposition party. In fact, the entire opposition space is occupied by the party with the Left and the Congress drawing a blank. It was a sad ending for the Left which had once ruled the state for 34 years. The moment election results were out, there was sporadic violence with the Trinamool cadre attacking the BJP voters. Disturbing videos were seen floating through the social media. The Governor had to publicly reprimand the Chief Minister at her swearing in. Apparently, it is the force from the minority community that seems to be attacking the majority. The political violence is not something unusual.   Bengal has been witness to political violence for decades. The Senbari killings to the burning of Anand Marg monks to Marchijhappi violence
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A Note on Economic Growth

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  When one talks about progress, they usually refer to economic growth. Therefore it would be interesting to decode the dynamics of economic growth. It is quite usual to find in the media reports on how India or for that matter any other country is growing at a certain rate. There is usually talk of how a certain country is experiencing high growth rates. There are reports of how certain countries are experiencing sluggish growth rates. There are reports on how some countries are actually experiencing a negative growth. The latter is of course being pretty common news as the world grapples with the impact of the Chinese virus. In this context, it would be prudent to begin the discussion with the concept of growth.   Economic growth refers usually to the growth in the Gross Domestic Product (GDP) of a country on a year over year basis. In simple terms, the GDP of a country can be defined as the aggregate market value of all final goods and services produced in an economy in a given
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A Course in the Digital Economy

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  It would be an understatement to talk that the world is very different than it was let us say twenty years ago. When the new century dawned, there were number of things that one could not have imagined would exist barely twenty years later. In 2000, the Google was not yet born. While the www was in its infancy about to slowly evolve into an adult, it was very different. The connections were very slow and the internet penetration was minimal. The emails were making an appearance. It would not be unusual to find in those days many creating their first email ids during their post graduation days. Those were the days when the teachers of information technology would offer assignments on basic MS-Word, which perhaps is now taught to kids in the primary school. People were barely exposed to MS-office or its numerous facets. There was hardly anything called a smart phone. The internet enabled phones could perhaps be counted in a hand. Yet twenty years down the line the world has changed. It
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Random Musings on Economics

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  Economics deals with behavior of agents as stated many a times in the past posts. The agents might be individuals, groups of individuals, organizations, families, society, castes, classes, institutions, nations, economies and what not. There might be a behavior observed under individual conditions and something under aggregate conditions. There is behavior which might be innocuous or something independent when viewed through the prism of an individual yet the same when aggregated might result in a totally different behavior. The motives might be micro yet the aggregate behavior might result in something of a macro outcome. It might be simple decision to park a car at some place which if followed by others might set a pattern and thus a macro behavior of sort would emerge. If somebody were to venture a question on why the king has no clothes, there might be no answers. As the economists, Thomas Schelling once remarked, he was addressing a session and he found the first eight rows were
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India's COVID Waves

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  India’s second wave of the pandemic induced by the Chinese virus seems to continue unabated. The experts are forecasting a peak in a day or two. There are some positive signs however feeble they might be about the plateau of cases in a few states. Yet, the devastation seems to ravage. It would nice in statistics to talk about peak and plateau and flattening of the curve. It would be impersonal in statistics to discuss these terms. Yet to those who are suffering from the pandemic and those who have lost their lives and those who have lost their loved ones, it is a different thing altogether. The wreckage it has created besides the impact on the people’s psyche might take years before some normalcy might return. There is in all likelihood an increase in the cases impacting mental health which might not be easy to tackle around. There seems to be around a corner a mental health crisis across the country and perhaps globally. India has been facing the worse in the last month or so especi
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