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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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Denisovians and Mystery of Vanara and Asura

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Doordarshan is telecasting Ramayana and Mahabharata daily. Apparently, along with other re-runs, Doordarshan seems to regain its mojo. Yet as one watches two epics in their serialised form, quite a few insights does emerge. At one point, they might be reinforcing the value based system. At another level, they are classical illustrations of societal structures and values of the period. They illustrate the life of a royal as opposed to someone a common man. There are political insights too. The intricacies of power play are well charted out. The role of women does not really build on the stereotype though barriers of entry exist. Castes’ too plays certain role but not in a way that society seems to have perceived to it exist for all over the years. In many ways. Ramayana seems to follow a linear society with high degree of order and hierarchy. Deviations would be frowned severely though they do exist. Mahabharata on the other hand, is a good example of complex society full of realpoli
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A Note of Gartner Hype Curve

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Technology drives human progress. Yet it is not deterministic as believed by section of experts and practitioners. Technology is per se neutral, it is the means through which human ingenuity drives progress. There is of course excitement over the emergent technologies. Individuals as well as societies desire technology to be the catalyst in driving innovation, in making possible what they desire to want, a mechanism that occurs through a series of steps of achieving adjacent possible. Therefore in more ways than one, technology forecasting becomes critical input in planning the future tactics and strategy for any firm, individual or in aggregate terms an economy or a society. However, technology rarely emerges in an orderly fashion. More often than not, it emerges from the most unexpected of the places and at unexpected times. There are more than enough occasions when technology emerged far ahead of its time and thus failed to achieve a critical mass. To understand technology fo
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A Background Note on Formation of Karnataka

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Karnataka is etymologically said to be derived from the word KaruNadu or loft land referring to the topography of the state. The Kannada speaking population that constitutes the majority in the state has a rich civilization and by many accounts is one of the oldest languages in the country. At its peak, the Kannada speaking population ranged to northern borders of current state of Maharashtra to the northern part of current Uttarandhra to southern reaches of Tamil Nadu. Chalukyas under Pulkeshi II defeated Harsha of Kannauj on the banks of Narmada. Rashtrakutas reigned over Northern Karnataka and Maharashtra. Gangas and Hoysalas ruled over South Karnataka while Kadambas too had their rule in most parts of Karnataka.   The Vijayanagara dynasty spread from Goa to Andhra with Hampi being one of the most prominent cities in the world. By the time British consolidated power in India by 1857, the Kannada speaking population was divided across many provinces. Post British victory over
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Indian IT Industry and the Udupi Hotel

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Mr. Narayan Murthy once described the business model of the Indian IT industry as an Udupi hotel model. The reference originates from the Udupi hotel which have a frugal business model based on cost volume equations. The hotels tracing their roots to coastal Karnataka town of Udupi, are usually frugal, offer no frills, usually standing only and drive their business model through a combination of low prices compensated with high volumes. In economics, the quantity demanded is a function of the price elasticity of demand. As the price increases, the law of demand posits a decline in quantity demanded and vice versa. Yet, what is of interest would be the degree of change in quantity demanded following a change in price. To goods with characteristics of being price elastic, the decline in prices leads to more than a proportionate change in quantity demanded thus the lower prices compensated by higher volumes. For goods which are pretty inelastic, the change in price results in less
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A Note on Circular Flow of Income and National Income Accounts

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Macroeconomics differs from microeconomics in the mode of analysis. While the latter uses the bottom up approach using a profit maximising firm or utility maximising individual as the starting point, the former uses the geographic construct of an economy as a starting point. To borrow from the forest, one can analyse the forest from the point of the various animals, birds, reptiles, insects, plants, shrubs, creepers, trees, herbs, caves, water bodies, soil among many other entities found in the forest. One can analyse them individually, their functions in a group, their interactions, etc. This is bottom up approach, thus the micro way of analysis. The other way is to have helicopter view or bird’s eye view of the forest. One can observe the total area the forest occupies as percentage of landmass, the oxygen content released by the forest, the carbon dioxide and other green gases absorbed by the forest, the amount of water by volume in the forest, the nature of flora and fauna in th
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Migrant Egress, Wuhan Virus and the Indian Shutdown

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The three week shutdown has turned the focus on the hundreds of homeless and daily wage laborers. Many of them have migrated from different parts of the country into the metro cities in search of livelihood. Question marks arise about their sustenance given there is no possibility of work in the next three weeks. There are of course vultures who want to scavenge on the living homeless and daily wagers. There are others who too are concerned about their survival. Some organizations are taking up work to provide free food etc. to these bottom of pyramid group yet in the curfew it would be difficult to reach out the genuine needy. Some want the government to implement a Universal Basic Income (UBI) so as to support these families with some nominal amount. Further many living in slums, tents, pipes, roads etc. it would be seen as an easy prey for the China virus. There are of course some voices that have called for egress of these back into their villages. In fact, one of the key cr
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Macroeconomics of Pandemics

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For many decades preceding the Great Depression, the economic theory was rooted in the production and supply analysis. Say’s law in a simplified form suggested “Supply creates its own Demand”. Implied was firms would produce goods and they would have their takers. If there was excess supply relative to demand, the price mechanism would come into effect creating a drop in prices. The drop in prices thus would increase the quantity demanded while at the same time reducing the quantity supplied thus restoring the equilibrium. The notion of equilibrium was dispelled in the Great Depression when low prices did not create the corresponding increase in demand. The answer to the puzzle was first articulated by John Keynes who argued there is deficiency of demand and thus the government had to play a role in fulfilling the lack of demand. In other words, Keynes suggested that demand creates supply. The Keynesian formulation laid the foundations of macroeconomics and with it the framework
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