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Showing posts with the label economies of agglomeration

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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A Primer on Real Life Action and Economics- I

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We often use economics subconsciously as we go about our daily routine. Economics is about human actions and behaviour and we engage in plenty every day from birth to death. These actions consistently demonstrated over period of time reveal patterns that build up the theoretical and conceptual foundations in economics. Quite often, many actions undertaken either in personal, social, or professional capacities might occur without any explicit linkage to economics but each of those actions perhaps reveal something about economics and its idiosyncrasies in life. Presented below are few examples in tabular form. One column highlights the real life phenomenon what we observe, while the second column builds up the theoretical linkage to economics. Real Life Practice/ phenomenon Economics Linkage Free E-mail services It might be puzzling to find why Gmail offers free email services. Given the server capacity they possess, any addition of extra user to
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Bangalore as Cyber Capital- People Respond to Incentives?

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By the late 1990s, the journey of Bangalore to be the Silicon Valley of India was truly under way. Many Information technology companies had set up their shops in Bangalore.   The origins of Bangalore being the Cyber capital lay in establishing the foundations of Electronics City and later the Information Technology Park (ITPL).   Electronics City was developed over 300 acres of land and provided initial impetus to firms setting up their units in electronic production and software.   In the process, it would be interesting to examine why Bangalore became the IT capital. The government went out of its way and facilitated the IT industry with a host of benefits. These included tax holidays, power at cheaper rates, land at cheaper rates etc. When the firm gets power, water and other utilities at lower than market price; it is able to produce at lower costs of production thus passing on the benefit of lower prices to the customers. Further, the presence of similar industries i
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