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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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David vs Goliath, Big Tech and Schumpeter

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In technology industries, often the incumbent seeks to see off the challenges through an attempted blockage of technological progress. The radio industry led the top down development of television industry as visual extension of radio rather than an alternate medium thus hindering its progress for more than half a century. FM radio was literally crushed before it re-emerged in different context at a very different point of time. The crime of FM radio was given its inherent advantage over AM radio, it would have cannibalized the later. The AM radio industry had made significant legacy investment which would have gone begging. To protect their legacy investment against a raging Schumpeter they killed the FM industry or almost so.   The history of such technological battles for supremacy is replete with instances. In 1876, Western Union, ‘misused’ its monopoly in telegraphy, to ensure its candidate Rutherford Hayes get elected as President of United States of America. In fact, one
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RBI, Onions and Monetary Policy

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The outcome of RBI’s sixth and final bimonthly monetary policy statement for the FY 2019-20 is unsurprising. Repo has been retained at 5.15% and therefore the other rates like MSF, reverse repo, bank rate etc. too remain unchanged. RBI projects a growth of 6% something in alignment with what the budget has projected. They anticipate higher uncertainty in inflation. The question however, is given the macroeconomic dynamics at the current instant, could RBI stance been bolder or was it cautious reiteration of its mandate. As one delves in to the RBI monetary policy statement (available here ) some interesting pointers emerge. Global headwinds continue to impact the Indian economy too. There is no respite for European economies like France and Italy on the continued downward growth trend. Britain will have to confront with post Brexit uncertainties. US Iran tensions may have eased down momentarily but the impact might take a time to ease out, US-China trade wars demonstrate ebbs an
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B-School Admission Interviews!

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B-Schools still carry certain prestige despite recent downward trend in salaries on offer. Therefore there is a presumed tough selection process beginning from entrance exams to group discussion to interviews to final selection. Incontestably, given the supply-demand mismatch, more than two thousand B-Schools have mushroomed across the country. To a prospective recruiter, B-School degree of the candidate is essential no doubt but the degree itself carries less weight. It is the prestige of the college that matters more. Harvard graduates do not get jobs because they are Harvard graduates but for the fact they managed to Harvard in the first place itself. Institutions have input barriers and the more tougher the barrier, presumably on   the toughest of the students manage to gain an entry. If someone has gained an entry in an Ivy League B-school, it sends a signal that there is something in the candidate that allowed him or her to crack the Ivy League (global or national). Hence
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Tests of Statistical Similarity, Behaviour and Aftereffects

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Quantification and objectification of compatibility is perhaps a defining feature in navigating the Industry 4.0.   In choice of vendors, franchisees, licensees, franchisors, licensors, customers etc. a key to long last partnership lies often in the compatibility of characteristics between them. Customer and producer journeys in multi sided platform markets evolve out of compatibility development among the various partners. Therefore the platform objective would to sync these mutually similar compatible attributes between the players on the platform. Often a solution to swifter payback period entails following a time tested model of franchising or licensing. In identifying the right vendor, client or partner, a firm often would turn a basic meeting ground of quantitative parameters like financial credibility of the target partner, experience in the relevant field etc. with suitable weightages. In addition, there is a judgmental call based on perhps on gut or qualitative feel whe
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Bond Indices, Public Debt and Impossible Trinity

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The piece Prime Minister Modi’s Foreign Journeys and Forex Reserves   argues an association between foreign capital and geopolitics in formulating a geostrategic doctrine.   What is striking, however, is the fact that a quarter of century of post-cold war and post non-alignment, suspicions about the West have not been erased from the Indian psyche.   However, it would be imprudent to discount overt or covert linkages between aggressive investor wooing with the need to shore up foreign exchange (forex) reserves. Besides accretion to forex reserves, there is added objective to ease access to foreign capital. Domestic investment is financed through a combination of domestic savings, government savings and savings of the rest of the world. Domestic savings are usually constant. The increased level of government dissaving (increasing fiscal deficit) leads to increased current account deficit (savings from the rest of the world). The twin deficit paradox has implications for domestic
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Chronicling Great Indian Test Victories of the Past

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Despite not winning the World Cup since 2011, Indian cricket has been on a roll. The dominance is strong, rarely challenged on home surfaces and currently on the leaderboard of the ongoing World Test Championship. Yet this was not the case long ago. In fact many captains like Sunil Gavaskar adopted safety first strategy and ensured India did not lose. It was world cup victory of 1983 that changed in many ways the Indians performed in cricket. However, there were turning points in Test cricket much earlier with series wins in West Indies and England in 1971. Indian victories often came through successful defense in the fourth innings than successful chases. Yet India acquired an aura in the earlier days of strong second innings performances. Many even wondered why India did not play the second innings first. The current pieces attempts to chronicle few great chases, some successful, some unsuccessful and some managing to salvage a draw. However, it is during the first sixty odd y
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Union Budget 2020-21: Truth, Perception and Impressions

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Budget 2020-21 apparently has belied many expectations. Given the projected arc of the economy, anticipation abounded on the prospective display of economic fireworks infusing animal spirits in the economy. To a few experts, there was a 2/3 probability of few major reforms being announced.   The seemingly abrupt end of a marathon speech thanks to Nirmala Sitaraman retiring hurt, left many apparently wondering about the objective of the marathon. Given its inability to go in for radical structural reforms, perhaps, there was very little to discern rather than entering Guinness Book of Records   for the longest budget speech in history. She had all the opportunity in the world to go in for some massive announcements. There are no major elections on the anvil. The FDI is at record levels. Political omerta codes are undergoing creative destruction. There are signs of economics Schumpeterianism on the skyline. Global headwinds are causing turbulences in economic growth. There was no
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