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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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Economics of Sports Scoring and Field Measurements

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Two elements stand out in playing and watching sports. First, the playing dimensions and second the scoring system. The former includes the dimensions of the field, nature and specifications of the equipment used, dress code etc. The latter, vital for the very landscape of sports being competitive, defines the process of determination of the winner. A glance at playing dimensions indicate cricket pitch to be of 22 yards, soccer field dimensions at international level being around 100*70 metres or so etc. Similarly we see athletics events being raced over 100 m, 200 m etc. Ditto for swimming contests. The scoring system for sports like tennis is 6 games to a set and best of three or five sets as the case may be. Table tennis, badminton etc similarly are played in sets but rather games, they are played to certain points in each set. Golf is about achieving the target with minimum shots. Shooting is target sport with points offered based on the target hit. While soaking the emo
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The Diminishing Returns of Woke

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Roger Scruton who passed away recently had a reputation for being eternally politically incorrect. Individual preferences are an outcome of several factors. In theory, the right of free speech mandates the protection of these preferences unless it encroaches through a process of physical or mental harm the exercise of preferences of another individual.   In the context, individual could mean group too, an aggregate of all individual preferences in that group. Yet private preferences when expressed in public often create a storm because ostensibly they are not deemed to be views of educated, polished, cultural, literate person. To exhibit one’s literacy, polishness, education etc. individuals are expected to rise above narrow strata of thought, parade their cognizance of the injustices apparent or real across the world around them and must be seen to stand for the alleged victims of these professed injustices being meted out. This is something has come to be termed in popular circles
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Debating GM Food

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Genetic engineering is the process of manipulation of genes in an organism or transplanting genes of one organism to another to create robust effects. Applications are multipurpose from medicine to food to agriculture to host of other unexplored domains. There is significant increase in genetically modified (GM) crops that are resistant to pests. It is feasibly a expedient technique than spraying pesticides and possibly long last effects. There are promises of increasing yield per acre, some evidence of which has been perceived in cotton etc. The agriculture industry across the world is ominously subject to rainfall and irrigation. Given the accumulative scarcity of usable water, it is germane to explore less water intensive methods of growing crops. GM embedded crops are understood as an essential tool towards developing drought resistant /snow resistant/ flood resistant crops etc. If GM agriculture is given a free license, endless possibilities ostensibly will open up. Yet, any di
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Examining Digital Goods

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An earlier piece Examining the Nature of Goods , discussed the classification of goods around the notions of exclusion and rivalry.   The brick and mortar era made it relatively easier to classify goods on this basis. Digital goods emerged on the horizon with the rise in the technology industry. The role of digital goods both in production, consumption and the impact has been swift, wide and deep. Discussions on the nature of digital goods commence from an attempt in defining the good. One such authoritative attempt was by Danny Quah in 2002. For Quah, a digital good is a payoff-relevant bit-string, i.e., a sequence of binary digits, 0s and 1s. These combinations of zeroes and ones potentially impact the efficacy of an individual or an economy. Implied is digital goods is akin to a recipe. Each bit-string is encoded with economically valuable instructions influencing the payoff on both production and consumption. Thus as opposed to orthodox analysis of goods revolving around pro
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Production Malls!

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To Alfred Chandler, the edifice of the business landscape was centred on the domination of the big. As someone described him, he was hunter of big game and collected trophies in both US and Western Europe. For Chandler, scale and scope characterized the flora and fauna of business, thus a critical role for the volume and diversification. The hunters of the small game, in the backdrop of the above, would find difficult to sustain in the long run. Chandler’s assertions, incontestably, command certain merits. Firms whose cost structured is preponderated towards fixed costs necessitate large volumes for subsistence. Fixed costs apportioned over large volumes pull down average fixed costs creating conditions for economies of scale.   Simultaneously, as the firm gains weight, there would be increasing difficulties in organization management thus generating certain diseconomies of scale. The trade-off that firm is able to execute and balance will define its wherewithal.   Large industr
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Examining the Nature of Goods

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Economics literature catalogues goods around two parameters, exclusion and rivalry. Rivalry implies whether the good could be shared by more than one agent without having to produce it more. Inferred is the cost of production of the good to the marginal agent is zero. Excludability is all about the ability or lack of it in preventing another agent from consuming the good. Certain goods like air are inherent in being unexcludable.   In fact, air given its abundance, is non rivalrous, in contrast to let us say, a fruit which if had to be shared, has to be produced more. In other words, in case of rivalrous goods marginal production is positive, for non rivalrous goods, marginal production is practically zero.   The above bounds lead to construction of four types of goods. Those goods inherently excludable and non rivalrous like air etc. are called public goods.   Public roads too have similar characteristics and so do national security, defence etc.   However the inherent of non
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Solving the Food Inflation Puzzle

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The double digit food inflation shows no signs of abatement. Meanwhile, the headline CPI (7.35%) hits the highest point in recent years.   However, the core CPI has stagnated around 3.6%, WPI continues to be low and core WPI is in near zero zone. There is negative inflation in manufacturing sector as also in fuel and power. GDP deflator is less than 2%. In normal course, low real growth will translate into low nominal growth depressing the economic buoyancy. Therefore, barring food inflation, other components are well under control, yet unless food inflation is tamed, political costs are like to be substantial.   There are grounds to suggest the causes to usual inter seasonal volatility, but that would be short-sighted.   There exists an opportunity in the crisis long term solutions to agricultural production. In endeavouring a solution, there however lies a catch. Agriculture is state subject thus resulting in each state adopting a different approach. Further, farmers constitut
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