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Showing posts with the label spillovers

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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On Rail Connectivity in Karnataka

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Notwithstanding the abolition of a separate Railway Budget, the Pink Book- zonal wise allocation of funds remain keenly awaited. Quantum of fund allocation zone-wise underscore the requisite to extend rail connectivity to new territories. Nonetheless, superfluity of plans aside, ground work remains intermittent. While India is affianced in ritualistic statements, China introduced and expanded the reach of high speed trains; Tibet came on rail map and is a matter of time before their railways touches Indian borders. Given the increasing Chinese reach, Indian achievements if we can term any, pale in comparison. While speeds in China touch 250-300 kmph, most of our trains average around 50 kmph or perhaps even less. The fastest trains in India currently average in the low 90 kmph range. Railway connectivity is not uniform across the country. Beyond doubt, substantial proportion of railway network traces its foundations to the British days. It was military movements accompanied by a
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Formula 1 Constructors, Champions and Elasticity of Supply

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Formula 1 World Constructors’ Championship is won every year based on the points system determined through the Grand Prix results. It is calculated by adding the drivers points in each Grand Prix. In more than half century of championships only 14 constructors have been successful. Further these constructors have come only from four different nations. The most successful is the Scuderia Ferrari which won it 16 times.   Only 12 teams compete in this race from all across the globe of which one wins the top position. The victory in the championship yields tremendous dividends. As we know, participation is limited implying FIA which runs the races is operating in monopsony market. Demand for slots is high with highly inelastic supply.   Why would firms spend billions of dollars to gain that FIA constructors crown.   In fact in recent years, thanks to increasing expenditure on technological improvements, firms have gone bankrupt. Adding to this cost is the astronomical fee of 4
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SEZs – To Have or Not: A Case of Opportunity Costs

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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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