I’m so thrilled to be launching @themarkup with my favorite topic: price discrimination. Big data and predictive algorithms can enable the ability to tailor prices to individuals on a massive scale, just the way that online ads are now micro-targeted. https://t.co/bblefA1iA0
Raghuram Rajan's book review of Thomas Piketty's new book is really something that everyone interested in public policy should read: https://t.co/7KdDm3IaAc#thread
Why do people buy #LIC policy when returns are so bad? Long thread: As LIC goes towards divestment, let’s see what makes it policies click. It could save you a fortune, if you get the spirit behind this thread. Please keep your humor cells intact while reading. Let’s begin: pic.twitter.com/x0QkZbDvBa
Five articles I enjoyed reading this week – and hopefully you will as well
The change that is coming over farming can be summarised in simple economic terms. Intensive agriculture prioritises a bumper harvest – the annual dividend – while the new approach emphasises the preservation of the initial capital – the land itself. For a glimpse of how this new investment priority will affect British farming, it suffices to visit those progressives who have already, to varying degrees, made it their own.
The Guardian Long Read on agriculture (in England). Horizons (one out of choices, horizons, incentives and costs) remain underrated in economics classes, as this article points out. But there is much more to read here: recommended!
It developed an app-based platform that registers orders directly from buyers, analyses category-wise demand, fixes dynamic prices depending on daily demand, and transfers the orders to its network of 1,000+ farmers. Farmpal’s price comparison feature ensures that farmers can sell their produce at rates higher by 20 to 30 percent than what they would normally get in the mandis.
“This is one of our main promises to the farming community. We are able to offer them premium prices because technology eliminates at least four to seven middlemen from farm to fork,” the founder explains.
While on the topic of agriculture, this from Maharashtra, India: Farmpal.
Caplan’s case isn’t entirely about economics: he also makes a moral appeal. Consider the case of “Starving Marvin,” who needs food and is prepared to purchase it legally. On his way to the market, he is turned away by an armed guard. If Marvin subsequently dies of starvation, Caplan asks, is the guard guilty of murder? The philosopher Michael Huemer, who first introduced this hypothetical, in 2012, concluded that the answer was yes. He writes, “If a person is starving, and you refuse to give him food, then you allow him to starve, but if you take the extra step of coercively interfering with his obtaining food from someone else, then you do not merely allow him to starve; you starve him.” Caplan doesn’t go that far, but he does argue that the guard is wrong to prevent Marvin from feeding himself.
Geologists and hydrologists, who worked on implementing the project, shared similar views and hailed Jalyukta Shivar. This was mainly due to the interventions undertaken in the existing water reserves, planned de-silting activities, among many others. However, experts agreed that the scheme was not appropriately implemented. Now with Jalyukta Shivar no longer in existence, focused efforts of the past five years, in most likelihood, will go down the drain unless a similar scheme is introduced. With rainfall variations getting more pronounced, in addition to depleting groundwater reserves, the state will need concrete interventions to tackle future water requirements, experts recommended.
America’s mediocre health outcomes can be explained by rapidly diminishing returns to spending and behavioral (lifestyle) risk factors, especially obesity, car accidents, homicide, and (most recently) drug overdose deaths. [Please read this post for the full explanation]
The diminishing returns are evident in cross-sectional analysis. Higher-income countries like Norway and Luxembourg spend twice as much as the likes of Spain and Italy and probably experience worse average outcomes.
Via the excellent Navin Kabra, a very, very long article on healthcare in America. Excellent if you are a student of America, healthcare or microeconomics. At the intersection of the three, it becomes mandatory reading. Pair up with Baumol’s Cost Disease (although the name is misleading, it is the most popular way to this phenomenon is referenced)
It is one of the first concepts to be taught in introductory economics – or it ought to be, at any rate. Value in use, and value in exchange, that is.
The concepts simply mean that any particular thing – “good”, as we economists call it – has potential value either because we use it, or because we are able to sell it. Water, the canonical example, has clear value in use, but as a general rule, not that much value in exchange. That’s debatable, but we’ll move on for now.
You can either consume a good, or sell a good to buy other goods. The first is value in use, and the latter is value in exchange.
One of the most powerful movies I saw this year was 1917. For those of you who haven’t seen it yet, it shows you a slice – and a rather uncomfortable one – of what life was like during the Great War, or WWI. Read the review I’ve linked to, but also please watch the movie.
What do the two things I’ve spoken about have to do with one another?
In the movie 1917, the two protagonists are talking about a medal that one of them received for bravery. The recipient speaks about how he sold it for a bottle of wine.
“After they cross through the German trenches — a sequence that starts with the men staring at bags of shit and only gets more harrowing from there — Blake and Schofield arrive in the open countryside. It’s a view not often seen in World War I movies, which rarely venture beyond the trenches, and it provides an opportunity for the film to slow down and relax. The soldiers get into a debate about whether there’s any meaning to be found in the war. Blake, who, true to his name, is the romantic of the pair, has learned that Schofield traded his Somme medal for a bottle of wine, and berates him. “You should have taken it home,” Blake says. “You should have given it to your family. Men have died for that. If I’d got a medal I’d take it back home. Why didn’t you take it home?”
Schofield disagrees, with the bitterness of a war poet: “Look, it’s just a bit of bloody tin. It doesn’t make you special. It doesn’t make any difference to anyone.””
That excerpt is from an email I sent to Amit Varma. It was meant to be a pitch for a series that used to run on a website called ThinkPragati (no longer up and running as a magazine, alas). The series was called Housefull Economics, and it seems as if I ended up writing the last column to appear in that space.
But what can’t be written there can be written here! That clip, the one that is described in the excerpt above, is a great way to think about value-in-use and value-in-exchange. Of what use is a piece of metal to Schofield? In war torn France, no use at all – in use.
But in exchange? Why, it got him a bottle of wine!
There is another concept at play over here, that of signaling. Blake is clearly horrified at the idea that something as valuable as a medal could be exchanged for something as trivial (to him) as a bottle of wine. Blake is effectively saying that sure, there may not be much value-in-use of the medal right now, but it has tremendous value in terms of signaling.
About which we shall speak a lot more on the coming Thursday, for signaling is a very fascinating topic indeed. But in the meantime, please do read the rest of the columns from the Housefull Economics series – they’re a great way to learn about economics!
I’ve thoroughly enjoyed learning more about Germany as a consequence of writing these articles. Alas, I am all too aware that the learning has been very superficial indeed, but that will hopefully only serve to whet my appetite further. I’ll attempt to summarize my key learnings in a post scheduled for later this week, and in March, we’ll learn more about France.
Onwards then, to the topic of today’s essay: where does Germany go from here?
For many years, Germany’s economic strength has been based on prudent
monetary policy, a highly skilled workforce and a renowned manufacturing
sector that has successfully built up export markets across the world. Germany
has enjoyed political stability and exhibited a contained approach towards
foreign policy, where Germany regularly played by the rules set by others in the
liberal international order.
However, these pillars of Germany’s strength and stability may not be the right
tools to manage the upcoming disruptive changes.
That is from the executive summary of a report titled “Is Germany ready for the future? The case for action in a climate changed world“. The report speaks about how increasing digitilization, rising social inequality (globally), the disruption to the rules based trading order that worked so well for Germany, rising nationalism (again, globally) and low/non-existent aggregate demand will challenge Germany’s current model. The infographic below gives their (the authors) recommendations to deal with these challenges. Also, the word for the day where I am concerned: mittelstand.
Figure 1 from the same report linked to above
“Germany isn’t exactly in a state of disrepair. It doesn’t feel as though it is, even though potholed streets aren’t a rarity, trains often don’t run on time and cellular reception is spotty outside cities. Nor, however, does it feel future-proofed enough, even after a decade and a half of Merkel’s generally successful rule. The WEF touts unshakable financial stability (the country got 100 points out of 100 for it in the competitiveness ranking) as one of Germany’s biggest advantages, but that stability has been achieved, in part, by shifting problems to the local level. “
The World Economic Forum ranks Germany as the world’s seventh-most-competitive economy this year, down from third in 2018. According to WEF, its greatest weakness is in information and communication technology adoption, where it’s ranked 36th in the world; only one German out of 100 has a fiber optic broadband subscription, compared with one out of 32 in South Korea.
In an embarrassing episode on Monday, a state TV broadcast about a special government session on improving mobile coverage was broken off because of a bad connection.
I traveled through parts of Germany last month, and while Internet speeds in both Airbnb’s that I stayed in were slower than in France, they were certainly good enough, and with no loss in connectivity. I’ll note that for about four hours in a town called Gottingen, I lost connectivity on my phone.
Does this report on population trends in Germany by the year 2050 hold a cultural clue that might help us think more about the excerpt above? Pure conjecture on my part, of course, but worth thinking about, perhaps.
As a result, there will be a clear shift in the age structure of working-age people.
At present, 50% of working-age people belong to the medium-age group, which includes people of 30 to 49 years, nearly 20% belong to the young age group of 20 to
29 years and 30% to the older age group of 50 to 64 years. In 2020, the medium-age
group will account for as little as 42%, the older one, however, will remain almost
unchanged at about 40%; the situation will be similar in 2050 (medium group: 43%,
older group: nearly 40%). The percentage of the 20 to under 30-year-olds will not
change very strongly. As a result, older people will clearly prevail among working-age population.
I’d never heard of Strategic Perspective 2040 until I started searching for phrases linked to the future of Germany. But the fact that it was written, leaked, and the responses to it – they’re all equally fascinating.
The assumption behind the UK’s repeated promise of security cooperation with Europe after Brexit is that the core democracies – Germany, France, Italy and Spain – will remain committed to Nato, democracy and the rule of law. And that a reformed and revitalised Europe will deliver enough jobs and growth to sap the energy of the nationalist and xenophobic right. But it would also be wise for politicians to begin admitting that these things are no longer certain. If we want order, we have to create it – through engagement, multilateralism, by accommodating what we can of the demands of rising powers and through the promotion of resilient democratic institutions. If we fail to achieve order, we must deal with disorder when the US is no longer a reliable ally, nor even a stable democracy.
And now for the bonus. I have read quite a few articles/PDF’s/essays about Germany, and given last week’s essay, about the Berlin Wall. None was as gripping as this one. It is titled “The Story of Tunnel 29“, and it is an absolute must read.
My thanks to Gandhar Joshi, a student of the BSc programme at Gokhale Institute, for sharing it with me.
How and why did we move away from desktop computers towards laptops? Although this next question isn’t the focus of today’s links, it is worth asking in this context: has the tendency to miniaturize accelerated over time? Mainframes to desktops, desktops to laptops, and then netbooks, phones, tablets to wearables – and maybe, in the near future, implants?
(Note to self: it might be worth thinking through how attention spans have also been miniaturized over the same period, and the cultural causes and effects of this phenomenon.)
But for us to be able to answer these questions, we first need to lay the groundwork in terms of understanding how we moved away from mainframes to laptops.
The first portable computer was the IBM 5100, released in September 1975. It weighed 55-pounds, which was much lighter and more portable than any other computer to date. While not truly a laptop by today’s standards, it paved the way for the development of truly portable computers, i.e. laptops.
Though the Compass wasn’t the first portable computer, it was the first one with the familiar design we see everywhere now. You might call it the first modern laptop.
The Compass looked quite different than the laptops of 2016 though. It was wildly chunky, heavy and expensive at $8,150. Adjusted for inflation, that’s over $20,000 by today’s standards. It also extended far outward behind the display to help with heating issues and to house the computing components.
The portable micro computer the “Portal” of the French company R2E Micral CCMC officially appeared in September 1980 at the Sicob show in Paris. The Portal was a portable microcomputer designed and marketed by the studies and developments department of the French firm R2E Micral in 1980 at the request of the company CCMC specializing in payroll and accounting. It was based on an Intel 8085 processor, 8-bit, clocked at 2 MHz. It was equipped with a central 64K byte RAM, a keyboard with 58 alphanumeric keys and 11 numeric keys (in separate blocks), a 32-character screen, a floppy disk (capacity – 140,000 characters), a thermal printer (speed – 28 characters/second), an asynchronous channel, a synchronous channel, and a 220-volt power supply. Designed for an operating temperature of 15–35 °C, it weighed 12 kg and its dimensions were 45 × 45 × 15 cm. It ran the Prologue operating system and provided total mobility.
The Wikipedia article on the history of laptops is full of interesting snippets, including the excerpt above. In fact, interesting enough to open up a related article about the history of the Intel 80386, from which the excerpt below:
Early in production, Intel discovered a marginal circuit that could cause a system to return incorrect results from 32-bit multiply operations. Not all of the processors already manufactured were affected, so Intel tested its inventory. Processors that were found to be bug-free were marked with a double sigma (ΣΣ), and affected processors were marked “16 BIT S/W ONLY”. These latter processors were sold as good parts, since at the time 32-bit capability was not relevant for most users. Such chips are now extremely rare and became collectible.
Every now and then, there are entirely unexpected, but immensely joyful payoffs to the task of putting together these set of links. I started off reading about the evolution of laptops, and wanted to post a link about the development of LCD screens, without which laptops simply wouldn’t be laptops. And I ended up reading about, I kid you not, carrots.
Liquid crystals were accidentally discovered in 1888 by Austrian botanist Friedrich Reinitzer while he studied cholesteryl benzoate of carrots. Reinitzer observed that when he heated cholesteryl benzoate it had two melting points. Initially, at 294°F (145°C), it melted and turned into a cloudy fluid. When it reached 353°F (179°C), it changed again, but this time into a clear liquid. He also observed two other characteristics of the substance; it reflected polarized light and could also rotate the polarization direction of light.
Surprised by his findings, Reinitzer sought help from German physicist Otto Lehmann. When Lehmann studied the cloudy fluid under a microscope, he saw crystallites. He noted that the cloudy phase flowed like a liquid, but that there were other characteristics, such as a rod-like molecular structure that was somewhat ordered, that convinced Lehmann that the substance was a solid. Lehmann continued to study cholesteryl benzoate and other related materials. He concluded the cloudy fluid represented a newly discovered phase of matter and called it liquid crystal.
Quite unexpectedly, I have ended up writing what will be an ongoing series about discovering more about the Indian Constitution. It began because I wanted to answer for myself questions about how the Indian Constitution came to be, and reading more about it has become a rather engaging rabbit hole.
Increasingly, it looks as if Mondays (which is when I write about India here) will now alternate between essays on the Indian Constitution and the topic of today’s essay: the state of (higher) education in India.
The series about the Constitution is serendipity; the series about education is an overwhelming passion.
I’ve been teaching at post-graduate institutions for the past decade now, and higher education in India is problematic on many, many counts. I’ll get into all of them in painstaking detail in the weeks to come, today is just about five articles you might want to read to give yourself an overview of where we are.
In the last 30 years, higher education in India has witnessed rapid and impressive growth. The increase in the number of institutions is, however, disproportionate to the quality of education that is being dispersed.
That is from the “Challenges” section of the Wikipedia article on higher education in India. The section highlights financing, enrollment, accreditation and politics as major challenges. To which I will add (and elaborate upon in the weeks to come) signaling, pedagogy, evaluation, overemphasis on classroom teaching, the return on investment – (time and money both), relevance, linkages to the real world, out-of-date syllabi, and finally under-emphasis on critical thinking and writing.
“Educational attainment in present-day India is also not directly correlated to employment prospects—a fact that raises doubts about the quality and relevance of Indian education. Although estimates vary, there is little doubt that unemployment is high among university graduates—Indian authorities noted in 2017 that 60 percent of engineering graduates remain unemployed, while a 2013 study of 60,000 university graduates in different disciplines found that 47 percent of them were unemployable in any skilled occupation. India’s overall youth unemployment rate, meanwhile, has remained stuck above 10 percent for the past decade.”
That is from an excellent summary of higher education in India. It is a very, very long read, but I have not been able to find a better in-one-place summary of education in India.
Overall, it seems from this survey, which shows impressive strides on enrollment, college density and pupil-teacher ratio, that we have finally managed to fix the supply problem. Now, we need to focus on the quality.
Swarajyamag reports on the All India Survey on Higher Education (AISHE) in India, 2016-17. As the report mentions, we have come a long way in terms of fixing the supply problem in higher education – we now need to focus on the much more important (and alas, much more difficult) problem of quality.
“Strange as it might look, the quality of statistics available for our higher education institutes has been much poorer than our statistics on school education. Sensing this gap, the central government instituted AISHE in 2011-12. We now have official (self-reported and unverified) statistics on the number and nature of higher education institutions, student enrolment, and pass-out figures along with the numbers for teaching and non-teaching staff. Sadly, this official survey does not tell us much about the quality of teaching, learning or research. There is no equivalent of Pratham’s ASER survey or the NCERT’s All India School Education Survey.”
That is from The Print ,and it takes a rather dimmer view than does Swarajyamag. With reference to the last two links especially, read both of them without bias for or against, beware of mood affiliation!
Education needs to become much, much, much more relevant than it currently is in India, and half of the Mondays to come in 2020 will be about teaching myself more about this topic. I can’t wait!
I have to kill 30 minutes before a meeting so I'm going to debunk a few cooking myths. Feel free to disagree with them if you like, but also be aware that despite these just being my opinions, I am also correct.
From March 1-December 4 2019, I was in India doing research for my dissertation. I visited several archives and libraries and would like to share some of the helpful resources that made my research experience so beneficial. #Research#ResearchSouthAsia#ResearchIndia 1/10
Can you guess what this article is about, who has written it, and when?
The dirty little secret on Wall Street is that the men responsible for its current reputation were not exceptionally bad. They were just ordinary people placed in unusual circumstances.
“Knowing somebody” to “get the job done” is older than you thought, is applicable in more places than you’d expect, and last across a longer time horizon than you’d have expected. Well, I don’t know about you, but each of these was true in my case.
The main empirical analysis of this article compares a snapshot of the location of mission stations in Africa in 1903 to the precise locations of projects funded by the World Bank in 1995–2014. The unit of analysis is derived from a grid of 55km×55km square cells covering the African mainland and Madagascar. The results imply that the presence of (at least) one mission station increases the probability that an area is allocated a development project by approximately 50 percent.
The first ethnically Indian minister in Britain was Parmjit Dhanda. He too found a rural seat, out in the West Country, in Gloucestershire. People were almost always polite and pleasant to him, but one morning he came out and found a severed pig’s head on the bonnet of his car.
The year was 2010.
Vox explains the current state of affairs when it comes to driverless cars, and how long that might take (short answer? A little bit longer, but no idea exactly how long. Sorry.)
There are two core statistics useful for evaluating how advanced a self-driving car program is. One is how many miles it has driven. That’s a proxy for how much training data the company has, and how much investment it has poured into getting its cars on the road.
The other is disengagements — moments when a human driver has to take over because the computer couldn’t handle a situation — per mile driven. Most companies don’t share these statistics, but the state of California requires that they be reported, and so California’s statistics are the best peek into how various companies are doing.
On both fronts, Google’s sister company Waymo is the clear leader. Waymo just announced 20 million miles driven overall, most of those not in California. In 2018, Waymo drove 1.2 million miles in California, with 0.09 disengagements every 1,000 miles. Coming in second is General Motors’ Cruise, with about half a million miles and 0.19 disengagements per 1,000 miles. (Cruise argues that since it tests its cars on San Francisco’s difficult streets, these numbers are even more impressive than they look.)
A topic that more students of economics should know about: (non)-ergodicity.
First is a very micro level concern: behavioural biases. The whole idea of endowment effects and loses aversion make sense in a world dominated by non-ergodic processes. We hate losing what we have because it decreases our ability to make future gains. Mathematics tells us we should avoid being on one of the many losing trajectories in a non-ergodic process.
Why are there such long lines at all the toll plazas across India at the moment? You may give a lot of answers, and if you have recently passed through a toll plaza yourself, your answer may well be unprintable.
Here’s mine though: you are, currently, assumed guilty until proven innocent.
All cars must wait in line, pay cash/have the RFID tag scanned, and for each car, once the payment is done, the barrier is raised, and you may pass through. The barrier stays put until the verification is done: that’s another way of saying guilty until proven innocent.
But the cool thing, to me, about implementing Fast Tag, is that once a certain percentage of vehicles in India is equipped with Fast Tags, the barriers can stay up. We will transition to a regime in which all vehicles are assumed to be innocent.
Now, as we learnt the previous week, with a large sample, there willbe problems. In the new systems, in which vehicles just pass through because we assume all of them have Fast Tag implemented, there will be exceptions. There will be vehicles that don’t, in fact, have Fast Tag implemented, and so they may end up not paying the toll.
But the vast majority will have Fast Tag, and don’t have to pay with money andwaiting time. The government will miss out on catching a few bad apples, but a lot of Indians will save a lot of time. On balance, everybody wins.
And of course, given technology, it should be possible to have notifications sent to those vehicles that pass through without paying. Yes, I know it seems a long way off right now, but the point is that as a statistician, we move to a world where we assume all vehicles are innocent until proven guilty, rather than the other way around.
Fast Tag implementation, when fully functional, will get the null hypothesis right.
And pre-filled income tax returns, sent to us by the government, with minimum of audits and notices, is exactly the same story. The government assumes innocence until proven otherwise, leading to a system in which every tax-paying Indian is assumed to be an honest tax-payer until proven otherwise. We already have a system that is closer to this ideal than was the case earlier, and hopefully, it will become better still with time.
And now that we’re on a roll, that’s the problem with demonetization, if you were to ask a statistician! All notes were presumed guilty, until proven innocent.
Here’s the point: if you are a student of statistics, struggling with the formation of the null, and wondering what the point is anyways*, the example from last Thursday and the three noted above should help make the topic more relatable.
And to the extent that it does, statistics becomes more relatable, more understandable and – dare I say it – fun!
EconForEverybody 