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Showing posts with the label cost-benefit analysis

The Political Decisions and the Corona Vaccine

- August 25, 2020

“War is too important to be left to the generals”. This statement is something often talked about and bandied about when discussion arise about international relations. Likewise, the current situation makes it apt to add another adage ‘Pandemic is too important to be left to the doctors”. Without doubt, doctors are the frontline warriors in the battles against the Chinese pandemic that is raging across the globe. It is just not the lives that it has taken that matters but the livelihoods it has disrupted. The light at the end of the tunnel though often comes on the horizon but remains elusive. There is no doubt, patience is wearing thin among the population. Disruption is galore all around. The economic growth is in the negative zone with many economies recording fall in excess of 20% and above. The world is likely to be in recession for more time. The lockdown seems to be generating diminishing returns. It was effective when the disease was confined to few clusters but when it has e

Cost Benefit Analysis and the Brazilian Rainforests

- August 03, 2020

Reports all around suggest fires are raging around all over in the Brazilian rainforest. The Amazon rainforests seem to be headed towards deforestation and destruction. Unlike the forest fires of Australia or California or South East Asia, the fires in the Amazon are not due to natural causes but seemingly man made. Apparent encouragement of manmade fires to clear vast swathes of land for cattle grazing to agriculture to possible industrialization is adding to the woes. The global community seems to be overworked especially given the pandemic originating in Wuhan. The government in Brazil is apparently encouraging these fires. Brazil’s President Jair Bolsanaro is perhaps a bete noire to the left liberal chatterati across the world and this has given just another opportunity to go hammer and tongs at him. Woke entails articulation and perhaps practice at least symbolic of environmental protection and towards minimizing pollution. Anything contrary is frowned upon. It is a differen

Economics of Compulsory Safety Enforcement

- January 26, 2020

Certain things when made obligatory invite a recoil. An instance which is observed quite often when helmets are made compulsory for two wheeler riders. The rule is often in the rule book yet the enforcement keeps waxing and waning. Once in a while, the government issues a strict notice of wearing helmets, usually counter-reactions verbally hostile follow and after a cooling off period, the enforcement turns lax. Yet it is interesting to decode why the rule is essential. It is obvious wearing helmet improves personal safety and thus it should be in one’s own self-interest to wear a helmet voluntarily without a need for a rule. At least rationality in economics would assume so. However, life is not shades of white and black but shades of grey. To each individual it is the personal cost-benefit decision that matters. There is obvious discomfort in wearing a helmet. It might be so that it acts as a barrier to side view and to hearing. The benefits is obviously increased safety in case

Economic Theory of Partition

- January 12, 2020

As the world welcomed 1947, the clouds of partition hung around the Indian sky. Jinnah’s intransigence coupled with Congress obduracy to bow to Jinnah’s demands resulted a standstill. To borrow from game theory or chess, it would have been uneasy existence, a cold war but Muslim League had different ideas. Violence was low cost option for breaking the standstill, and therefore riots intensified after the Direct Action Day. Authority collapsed in many places leading to a free for all in some areas. India was on throes of a civil war that might perhaps last more than Byzantine Ottoman War in the Middle Ages. Despite pretensions of neutrality, the British were more than sympathetic to the idea of Pakistan. The roots of British-Jinnah nexus could be traced to the events in the declaration of Second World War and the subsequent Congress reactions to the same. A this stage it is suffice to state heading to 1947, Indian constitutional formation was in a limbo, no agreement on the anvil ove

Perverse Incentives!

- December 20, 2019

There is a proverbial story about snakes in Delhi. During British days, apparently there was a time when Delhi was infested with snakes. The authorities were challenged to find a solution to the snake menace. People respond to incentives and one might not take recourse to economics for the same and instead follow common sense. So the authorities announced a reward for all those who kill snakes. The condition was the dead snake has to be produced as proof for claiming reward. The story goes when the reward was stopped, Delhi was infested with far more snakes than it began with. In other words the problem had multiplied. Without doubt, one needs to look why the policy failed. Does this story remind us that economics is not infallible and incentive mechanism does not work? Let us probe it in some depth. As Adam Smith first pointed out, at least in documented modern times, people function in their self interest. The self interest as an aggregate is what culminates into enlightened c

Pakistan and Role Model Dilemma

- December 16, 2019

As one comes to terms with the horrors of the recent massacre of school children in Peshawar, What probably went unnoticed were the names of the children who either died or escaped. Names like Osama, Dawood Ibrahim seemed common. In a world where names are usually associated with aesthetic or even predictive powers, these names mean something. If names are meant to convey certain signals, these do certainly reflect in a way contemporary mindset of an average Pakistani. Stephen Levitt in his bestseller, Freakonomics goes on to discuss the economics behind names. Yet, the explanation does not answer satisfactorily, the state of affairs. Incidentally, the broader theme around which Levitt’s ideas revolves around- role of incentives; might help us in some way to understand what it means. At the heart of the society and its inhabitants is the need to achieve, urge to succeed, climb the higher layers of the power pyramid, places oneself at the apex of the profession. Yet to

SEZs – To Have or Not: A Case of Opportunity Costs

- July 23, 2012

Ever since India started on the liberalization in 1991, policies regarding the establishment of Special Economic Zones (SEZ) have been fraught with controversy. Simply put, firms in SEZ location allows the developer to get the land, infrastructure, water, electricity and tax concessions thus enabling him to set up manufacturing and processing units in SEZ as opposed to in another location. Further the SEZ remains outside the jurisdiction of the national laws on labour and environment, firms secure an advantage) over non-SEZ locations. Debate between proponents and opponents has rested upon the utility of these SEZs to the economy and the society. Proponents have claimed that SEZ enable channelizing of investment in sectors that hitherto had not attracted sufficient attention. Studies have shown better wages and the forward and the backward linkages create spillovers in terms of greater infrastructure access to the local economy. However there are several costs atta

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