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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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JP Nadda's New Team

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  Last week, the BJP President Mr. JP Nadda announced his team of office bearers. This was perhaps delayed given the conditions following the lockdown to tackle the pandemic induced by the Chinese virus. There were surprises and also some expected appointments. The surprises too perhaps could have been anticipated. Some of the inclusions or exclusions or non-inclusions do lead to new speculations. These speculations are invariably linked to the expected Cabinet reshuffle and expansion by PM Modi. Thus, it would be in order to understand the logic behind the appointments or non-appointments in the party team.   In the BJP’s organizational structure, few positions are critical and many perhaps ornamental or support staff. While the party president no doubt is the most powerful, one doubts about JP Nadda’s authority to be exercised independently of PM Modi and Home Minster Shah. During the reign of Amit Shah, there was no ambiguity on who called the shots in the party affairs. There w
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Quad and India's Alliance Connunrdum

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  One happened to see an interesting article in the Indian Express by veteran strategic affairs expert C. Raja Mohan. The article is available here . The article highlights the Indian confusion over alliances in the backdrop of the meeting of the Quad foreign ministers in Tokyo. Currently, the Quad is more of an informal alliance between US, Japan, India and Australia ostensibly to counter China. Yet so far, there is no indication of it being institutionalised or morphing into some kind of new NATO. Yet, in the Indian strategic affairs community, the Great Indian Alliance Confusion is well underway. Rather than any confusion, it is about the reluctance to accept the changed state of affairs and the need to abandon certain dogmas. The refusal to abandon self-perpetuated dogmas might well prove to be India’s Achilles heel. It would therefore be pertinent to decode Indian foreign policy and its stance over alliance formation with different countries.   The problem with India forming a
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Controlling the Essential Resource and Firm Monopoly

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  Economic theory begins with the proposition that firms compete in the market on prices. If a firm were to offer higher prices than its competitor, the buyer will shift to those competitors who are offering the lowest price. Therefore, the sales would be nil if the competitor charges higher prices than their rivals. If one firm lowers the price, all firms will follow suit, yet if one firm increases its prices, the others would not follow suit. The assumption of course is the goods are homogenous. There is no differentiation. Therefore, in this scenario of perfect competition, the firms become the price taker with the market setting the price. The firms have control over the output they produce but no control over the price. Yet the firms will seek to control the price.   In absence of control over the price, the firms might not be in a position to gain and sustain supernormal profits in the long run. This is due to the absence in barriers of entry and exit. The presence of superno
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Economic Logic of the Silent and the Shy Voter

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  In politics and elections, there is often a talk about the presence of a silent voter or a shy voter. There is a belief that these voters generally remain silent about their preferences, do not voice any opinion on the same and cast their votes silently for their candidate. These silent votes if large in number can affect the forecasts of the pollsters. This is because of the silent or the shy voter refusing to participate or reveal their choice to the pollsters. Very few pollsters might be in a position to capture their choices.   It is usually believed that these voters belong to the subaltern classes or castes or those groups who are usually outside the power circles. They fear reprisals if their other caste or class groups learn about their choices. It is a different matter that an idea could be obtained on their voting preferences post the election results but that is another story. In India, it is usually believed that the voters of parties such as BSP do not reveal their c
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Some Thoughts on the US Presidential Elections 2020

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  The US presidential election is just over a month away. The early voting has started. There are already accusations of fraud in mail-in voting. While Democrats want to exercise mail-in voting, the Republicans are not. The latter smell some dirty fish in the exercise of postal ballots. Not too long ago there was talk of US Post deliberately delaying delivery of postal ballots so as to not reach on time to the counting centres. There is no doubt, legal battles are shaping up over the postal ballot and their validity. With the conservatives having upper hand in the Supreme Court, it seems they might enjoy some advantage. If Judge Amy Coney Barrett is confirmed before the elections, it might lead to a 6-3 advantage for the conservatives in the Supreme Court.   Nightmarish scenarios are being worked for both Democrats and Republicans. Widespread reports suggest better than expected performance from Joe Biden in the first Presidential candidate debate. Yet, the reaction of Democrats sy
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Mughal Museum or Shivaji Museum?

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  The Chief Minister of Uttar Pradesh Yogi Adityanath recently announced the Mughal museum being set up in Agra would be renamed after the legendary Maratha ruler Chatrapati Shivaji. To state this set a cat among the pigeons is perhaps an understatement. There are reams of articles that are appearing in the mainstream highlighting the alleged contributions of the Mughals to the Indian society. News channels gave space perhaps more than sufficient enough to demonstrate the virtues real or imagined of the Mughal rulers. There was further talk of how Mughals are intrinsic to enrichment of Indian culture. There were in parallel attempts to portray Shivaji as a ruler of Marathas with little to contribute to Uttar Pradesh. This despite the fact, Shivaji’s empire was expanded by his successors, the Peshwas to cover significant portion of present day Uttar Pradesh.   Nothing should surprise us. In an earlier post, it has been highlighted that how Mughal Man’s Burden was demolished through
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Economics in Practice in Work Life

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  Economics as we have noted before has numerous applications in real life. Each of those past posts that have dealt with economics in action in real life have tended to theorize the practicalities on the ground through the prism of concepts in economics. The present post too would continue to be in the series to demonstrate how economics helps in real life   Real Life Practice/ phenomenon   Economics Linkage   Extending maternity leaves from 90 days to 180 days is counterproductive   This is an argument quite a number of economists and practitioners often make. When the government of India did extend maternity leaves from 90 days to 180 days a few years ago, social media was flooded with comments on how this could be detrimental to the employment of women in the industry. Their reasoning was simple. The firms are constantly endeavouring to reduce costs. If they are faced with the prospects of paying six months of pay wi
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