Month: April 2021

Navin Kabra on the Power of Networking

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Besides putting out super-awesome threads on Twitter, Navin Kabra also writes a newsletter. (He also runs a firm, and makes time for being interviewed for podcasts, and much else besides, but thinking about that will only depress the rest of us, so let’s stop)

So he sent out a post yesterday on that newsletter, which I found fascinating:

There are 3 kinds of power in an organization and most people focus on the wrong ones.
Jacob Kaplan-Moss has a great article about The Three Kinds of Organizational Power: role power, expertise power, and power through relationships. Most people focus on the less important ones. Understanding what these powers are and how to use them is key to becoming effective at your work.

https://futureiq.substack.com/p/understanding-organizational-power

First, if you haven’t already, please subscribe to his newsletter. It’s not just free, it ends up being worth more than the time you spend reading it, and if that is not a bargain, I don’t know what is. Second, maybe I’m guilty of over-fitting, but it was fascinating to me how role power is LinkedIn, expertise power is Coursera and networking power is Starbucks:

College is a bundle: education | credentialing | peer networks

https://econforeverybody.com/2020/03/12/signaling-bundling-and-college/

If I were to write that blog post again today, I would remove the word peer. That part, I really do think that role power is about signaling, expertise power is about learning, and relationship power is about networks (the last one is obviously true, it is the others that make me think I might be over-reaching).

Food for thought, as they say.

Navin’s article speaks about the last bit, relationship power, as the most powerful/useful one. And anybody who is in any part of the higher education supply chain would likely agree: it is networks that get things done.

Now, as a student, what should you take away from this?

You need to consciously spend some time in developing your networks. And that means putting yourself out there as often as possible. Write blogposts. Make videos. Start podcasts. Make TikTok or Takatak (or whatever else we’re calling it these days) clips.

And once you do all of that, as often as possible, start sending those links to folks. Ask them for feedback, and ask them specifically for areas of improvement. Ask them for learning recommendations. The magic of the internet will mean that conversations, debates and opportunities will crop up on their own.

But networking does not mean sending people requests on LinkedIn. That just means you’re added to a person’s network. Networking matters, not the network itself. It is a garden that needs regular tending to. The bad news is that it is hard work, the good news is that there are surprisingly large payoffs, and over surprisingly large periods of time.

Make connections with your peers, your professors and your potential mentors. Use this network to share your thoughts, and put those thoughts out for public consumption. Optimize for quantity, and quality will be the eventual outcome. Respond to other people’s publicly available output.

Most importantly, do this for its own sake.

Job opportunities is one of the benefits of doing all this. It is not the only goal, and it is not the end-goal.

For you will change your job eventually, but your network will either shrivel or grow. Please, learn how to nurture it, and keep at it every day.

Navin promises towards the end of his post that he will share his own tips about networking. I’ll link to that post whenever it comes out, of course. But in the meantime, start learning, and help others learn, and build out your network.

Why would you want to not acquire a superpower, eh?

Help Me Understand This, Somebody…

Ashish3 Comments

A fellow Puneri citizen sent out this tweet yesterday:

It was hard not to be snarky, and I didn’t even bother trying to resist:

But in my day job, I try to be an economist, and so I have questions. Just two of them, and they’re fairly simple ones. Here they are:

  1. He (or SII) was free to set the price, correct? Free market economics: let the seller decide the price, and let the buyer decide if she wants to buy at that price.


    So the price now stands reduced by a whopping 25%. Does that mean that it was set too high in the first place?


    That is, let us assume that SII is able to increase capacity expansion at a price of 300 per dose. Also assume that it can make a normal or “super” profit at this price – then was 400 not too high?


    If we assume that he was going to earn an extra 100 rupees per vaccine sold, and that he was going to sell say 200 million vaccines to the states, that’s 200 million into 100 rupees.1

    I don’t want to do the math, but were we ok with at least that much “extra” money going into the Poonawalla coffers until yesterday?

    If yes, why?


  2. Unless, of course, that was not the case, and capacity expansion will suffer at a price of 300. A raise in the minimum wage will mean switched-off air-conditioning, correct? Well, in that case, is it not our moral duty to ask him to take the price back up to 400? Because if the opportunity cost of his philanthropy is reduced capacity expansion, isn’t that worse?

(By the way, all this is taking the assumption that SII “needs” the proceeds from the sale of this one vaccine alone to fund capacity expansion. That may or may not be true. And this also assumes that this is the only vaccine that SII will be producing and selling, which is obviously not true. Even in this “best-case” scenario, my questions hold up – if we do a full reckoning, they become even more important!)

If it is the first point above, us economists must explain why we think it is ok for those 100 rupees (per dose) to go into SII’s coffers.

If it is the latter, there ought to be a stream of op-eds beseeching Mr. Poonawalla to roll back his offer, for that would be truly philanthropic.

Which will it be?

And I know I said only two questions, but forgive me my greed, and let me ask one more: what is the definition of “transparent pricing”?

  1. Where do I get that number 200 million from? Who knows? I assumed that for the 960 million people in total who become/continue to be eligible on the 1st of May, he gets to sell only 200 million doses to the states. And yes, I am assuming only a single dose for these 200 million. Since nobody knows what the quantities are actually going to be, this is as reasonable an assumption as any other. If anything, this is a very conservative estimate. No?[↩]

Taiwan, China and TSMC

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Let’s say you knew nothing about Taiwan, China and TSMC. Where to start?

You don’t really hear about Taiwanese pop music, TV, or other pop culture. Taiwanese food exists, but except possibly for bubble tea, most Americans probably wouldn’t recognize it.
This seems like something that ought to change. Most importantly, because Taiwan seems really cool. But also because it’s geopolitically important, because it’s probably the most likely flashpoint for great-power war.

https://noahpinion.substack.com/p/taiwan-is-a-civilization

Flashpoint for a great power war? Unfortunately, yes:

Taiwanese President Tsai Ing-wen’s election in January 2016 upended Beijing’s plans for reconciliation with the Nationalists. Tsai, whose Democratic Progressive Party was founded on the promise of independence, refused to accept Ma’s position that both sides belong to “One China.” Beijing responded by cutting off communication, curbing travel and resuming efforts to lure away Taiwan’s few remaining diplomatic partners. Beijing has also withdrawn its support for Taipei’s participation in global bodies such as the World Health Assembly and pressured airlines, retailers and other multinationals to revise policies that treat Taiwan as a country. More recently, the People’s Liberation Army has stepped up exercises around the island, including “encirclement patrols” and incursions into Taiwan’s air defense identification zone.

https://www.bloomberg.com/news/articles/2021-01-27/why-taiwan-is-the-biggest-risk-for-a-u-s-china-clash-quicktake

Ok, so that would be worrying, but a great power war? Because of chips. Microchips, to be more precise. And manufactured by a firm that you may not have read of: TSMC. Don’t blame yourself if you haven’t heard of it – and even if you have heard of it, this chart will still be informative:

Original Article in The Economist is here.

I don’t know about you, but I was amazed by that chart.

From that same article, here is additional information about the firm:

The most important firm in this critical business is Taiwan Semiconductor Manufacturing Company (TSMC). It controls 84% of the market of chips with the smallest, most efficient circuits on which the world’s biggest technology brands, from Apple in America to Alibaba in China, rely to make their snazzy products and services possible. As demand for the most sophisticated chips surges thanks to the expansion of fast communication networks and cloud computing, TSMC is pouring vast additional sums of money into expanding its dominance of the cutting edge.

https://www.economist.com/business/2021/04/26/how-tsmc-has-mastered-the-geopolitics-of-chipmaking

By the way, the story of the founder is fascinating in its own right:

Read the whole thread, of course, but also note that you should also really read… and stop me if you have heard this from me before… How Asia Works by Joe Studwell.

Now, about China and the TSMC:

First, read this article for some useful background. Second:

Some experts claim that China now has the military capacity to quickly overwhelm Taiwan. Even if this is correct, invasion remains a high-risk endeavor that, even if successful, would still entail major negative ramifications for China. It can be expected only in conditions under which China’s leaders see the immediate political stakes outweighing the military risks, implying a narrow range of scenarios.

https://thediplomat.com/2020/12/would-china-invade-taiwan-for-tsmc/

The rest of the article goes on to explain the supply chain considerations in light of a war. And they’re very real indeed!

On January 13th Honda, a Japanese carmaker, said it had to shut its factory in Swindon, a town in southern England, for a while. Not because of Brexit, or workers sick with covid-19. The reason was a shortage of microchips. Other car firms are suffering, too. Volkswagen, which produces more vehicles than any other firm, has said it will make 100,000 fewer this quarter as a result. Like just about everything else these days—from banks to combine harvesters—cars cannot run without computers.

https://www.economist.com/business/2021/01/23/chipmaking-is-being-redesigned-effects-will-be-far-reaching

Finally, read this for further details. (Long, but very detailed, and therefore very interesting)

If you are a student of economics in 2021, this is one story you want to keep an eye on, apart from the other, obvious ones.

The Vaccine Responsibility by K. Sujatha Rao

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I and a friend have been exchanging messages about the idiocy that was the European Super League (or whatever the name was. I’m not even going to bother looking it up). He asked me if I would post anything here about the economics behind the league, either defending the idea or refuting it.

Here’s one paragraph from a previous post of mine that I would want to base that essay (if I ever write it) on:

When David Perell says that we have made the world cheaper, what I think he is saying is that we have figured out ways to cheapen the effort that we are willing to put into the act of consuming something. That something could be a meal, but it could also be extended to reading, viewing, or listening as well – and more besides.

https://econforeverybody.com/2021/03/08/maximizing_soul/

To me, the ESL is based on the assumption that a large number of us fans are willing to cheapen the effort that we are willing to put into the act of consuming football matches – that we are not looking to maximize soul. Thankfully, so far, that assumption seems to have been ever-so-slightly off the mark.1

Anyways, he wrote a post about it, and we’ve been sharing stuff about it on and off. I sent him one written by Jonathan Wilson, and he sent me this response: “I seem to have covered largely the same points with way less finesse.”

To which my response was, that is my middle name.

Now, I didn’t need to write any of that, and any half-decent editor would have lopped off that whole bit – and quite rightly too. But hey, this is my blog, I had fun writing it, and it was a welcome break from you-know-what.

But “I seem to have covered largely the same points with way less finesse” is all too applicable in my case when reading K. Sujatha Rao’s excellent article in the Indian Express today on India’s vaccination drive. It is worse in my case of course, because I haven’t even covered largely the same points, forget the finesse.

I won’t excerpt from it, because it deserves to be read in its entirety.

But I will reiterate (in my won words) points that I thought were especially crucial, and also list out some questions that I had after I finished reading it.

  1. The point about the utilization of the vaccines that will be procured by the Government of India (GoI) is really a request for clearer communication. You simply cannot overstate the importance of clear communication.
  2. If SII has received grants from GAVI and from the Central government, would a publicly available dashboard about capacity, supply chain bottlenecks, vaccine allocation by states/countries and specific timelines for capacity expansion be possible? I’m not trying to be snarky, I am genuinely asking. What are the reasons against such a dashboard being made publicly available?
  3. I’ll ask again: Imagine a good with large positive externalities. Let’s call this good a vaccine. Let’s say that the supply of these vaccines is going to be tight. Let’s say that demand is very inelastic. Would you recommend fragmenting total market demand into smaller constituent curves? If yes, why?
    K. Sujatha Rao makes the legal argument in her article, and then makes the economic argument. Read both (and again, not being snarky), please tell me why we are choosing to do what we are doing – in this year of all years, and for this good of all goods.
  4. She speaks of halving the estimated cost of INR 60,000 crores by invoking compulsory licensing and expanding production through the 18 manufacturing facilities in India. These must be back of the envelope calculations, obviously. But if anybody reading this has information on how one might create such an estimate (and an estimate of how much production will go up by via this route), please let me know.

Please, do read the article.

  1. Sarcasm alert: the evil idiots who dreamt up that monstrosity have gotten exactly what they deserved. Not enough of it, if you ask me.[↩]

Some Really Simple Questions about the Supply of Vaccines

Ashish1 Comment

  1. Do we have enough vaccines for India to roll out doses to everybody who is 18+?
    No.

  2. Will increasing the price at which these vaccines are purchased increase the supply?

    Yes. I teach this for a living, as do thousands of economists the world over, and there is no way our answer to this question ought to be anything except a resounding “Yes”.

    An increase in the price at which we’re willing to buy a good will increase the supply of that good.

  3. Is that the only way to increase the supply of these vaccines?

    No. Murali Neelakantan and I outlined some of the possible ways in this article. A fuller explanation is available here, but it is behind a paywall, alas.

  4. But… aren’t we suggesting nationalization, or something like that? It doesn’t sound free-market-ish.

    And indeed it isn’t. Price based market mechanisms are, under normal circumstances, infinitely preferably to other mechanisms. I strongly disagree with anybody who states otherwise.

    Growth maximization above all, subject to the right to live and climate considerations is a philosophy that is hard to argue against. And growth maximization happens best with market based price mechanisms.

    But I also strongly disagree with people who will say that these are normal circumstances!

    And under these circumstances, I think it makes sense to ask if other options have the ability to increase supply. Especially in the short run. A 350,000 daily caseload number with a CFR of even 0.1% is reason enough for me.

    Put another way, if the opportunity cost of sticking to only market-based price mechanisms is lives lost because of insufficient vaccines, is it worth the trade-off?

    To me, no. This is that one year out of a hundred where you do what it takes, no matter what.

  5. So what do we do next?

    Run the numbers! If we adopt the solutions that have been outlined in the Scroll piece, how much does vaccine production go up by? And by when? If we find out that it goes up by only 1% against the baseline (do nothing) scenario, and that only after six months, then it is not worth it.
    But, on the other hand, if we find that it is possible to increase supply by 25% by the end of May as against the do-nothing scenario, then sign me up for this plan.
    Again, run the numbers.

  6. So have we run the numbers?

    As best as I can tell, no. There is no analysis that I can find online (published by the government or otherwise) that has run these scenarios.

    Running the numbers is complicated, I appreciate that. It is not just a simple question of saying “x” is the monthly capacity of plant “y”. There’s supply chain bottlenecks, efficiency considerations, learning curves, technology transfers and much more involved. But is developing this model necessary? For reasons answered in questions 1-5, I think so, yes.

  7. So why don’t I run the numbers?

    Why not indeed? But before I try, if any of you have…
    …any information about whether or not this has already been done by somebody
    …arguments for why this should not be done…
    Please, do let me know.

    Also, if any of you have any links that will be helpful in this analysis, please, do let me know.


Education and Signaling

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I’d linked to this video this past Friday too, but just in case you haven’t seen it yet:

And a bonus today, Bryan Caplan on the same topic:

About Ergodicity

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Anything that Zeynep Tufekci writes is worth reading, and people like Navin Kabra make Twitter a place of learning and knowledge. Therefore this tweet is worth the price of admission twice over.

But it gets better!

Because the replies took me to this excellent essay on ergodicity:

In an ergodic scenario, the average outcome of the group is the same as the average outcome of the individual over time. An example of an ergodic systems would be the outcomes of a coin toss (heads/tails). If 100 people flip a coin once or 1 person flips a coin 100 times, you get the same outcome. (Though the consequences of those outcomes (e.g. win/lose money) are typically not ergodic)!
In a non-ergodic system, the individual, over time, does not get the average outcome of the group.

https://taylorpearson.me/ergodicity/

… And therefore this set of essays and this newsletter.

As the kids say these days: sorted.

Certificates and College Degrees

Ashish1 Comment

A past student of mine (and now a good friend) Alankar Pednekar shared a video with me recently.

Alankar mentions how at around the 10:15 mark in this video, an article is cited which speaks about how a certificate like this could potentially disrupt the college degree.

He had some questions about the video, and about the article. I answer them below (please note that I have lightly edited his questions for clarity. Any confusions that remain are down to me!):

  1. Logically speaking this sounds true, but is it really possible? Do you see this happening sometime soon, maybe?
    …
    …
    It’s already happening, of course. I wrote about it earlier, and you might also want to take a look at Lambda School, or STOA School. In different ways, the idea of college is being challenged. And if you ask me, it is high time it was challenged! Higher education has remained far too hide-bound for far too long, and technology, resistance to outdated ways of teaching and weirdly, the pandemic have made all of us aware of what is possible, if only we kept our minds open.
    …
    …
  2. Will there be any scenario where – there won’t be any “Middle Men”- The colleges – in the education sector (As Professor Tyler and Professor Alex debate about in one of their “Duels”), and companies would prefer to educate (or should I say ‘Train’?) to people who are willing to learn and hire them directly?
    …
    …
    Part of the answer lies in we not being clear about what we’re buying when we pay money to a college for higher education.
    For some folks (in many places, at least in India, these folks are the majority), higher education is about a job, and that is it. Of course, it is impolite to admit this in public, but this is the stark truth: higher education is about a job. Contrast the enthusiasm with which placement talks are planned and attended with regular classes in your own college if you are a student, for example.
    For other people, higher education is about higher education – that is, about learning for its own sake. Until colleges, students, parents and firms acknowledge that this difference exists, we will have the confused system that we live in right now. This really deserves book length treatment, but I’ll stop here for now.
    ..
    ..
  3. Assuming this happens in reality, will that be an end of colleges and universities, or they will get replaced by training centers (which we already see in today’s markets). Will there be any existence for pure joy of learning and immense pleasure of understanding things around us (even though they might not directly help us in anything)?
    ..
    ..
    Training centres exist today to train people to write exams to get into colleges. And colleges are viewed as a way to get jobs. So why not have training centres to get people jobs?
    That then leaves us free to have colleges be about “the pure joy of learning”, as both David Perell and Alankar point out. The trick, if you ask me, lies in unbundling college. You should be able to purchase courses rather than degrees.
    The trouble is that a blogpost is easy to write, and to change a system that we are all so used to is all but impossible to do.
    But I’ve said it before, and I’ll say it again. College as it exists today solves efficiently neither the problem of training people well for jobs in the real world, nor the problem of delivering quality education for its own sake. And the growing discontent is palpable.
    ..
    ..
    Palpable to me, at any rate.

The Contours of the NCDVP

Ashish1 Comment

That’s the Nationalized Centrally Driven Vaccination Programme.1

The article in Scroll that I linked to yesterday was the easy part. The much more difficult part is to work out what might come in its place.

We (Murali Neelakantan and I) attempt to outline such a plan in this document. (PDF version 1.0 here)

It is a document written literally on the fly, and there are bound to be errors. Equally, there are bound to be aspects we have not thought of at all, or not thought out well enough. That’s the point of this post: please, read and let us know what we’re missing, and how it can be made better. If it is the most hare-brained thing you’ve ever read, let us know that too – but please, also do tell us why you think so.

Please note that we will continue improving upon the Google doc as we go along, so it will naturally keep on changing.

Finally, if you find merit in the arguments we have made, please, help it reach a wider audience.

Thank you!

(@ashish2727 for me on Twitter, and @grumpeoldman for Murali Neelakantan on Twitter)

  1. As you can tell, marketing is not our forte[↩]

Vaccinations: Quantity and Pricing

Ashish1 Comment

I and Murali Neelakantan have a piece out today in Scroll about the economics of the vaccination programme that is due to start in May ’21. Feedback most welcome – in particular, points we may have missed. Please, I’d love to hear your thoughts.

But it isn’t enough to talk about how current policy isn’t the best way of going about it. You also need to be thinking about what is the best (or at the very least, the least bad) way of going about it.

So, well, ok, let’s assume for the moment that the states will cough up the amount, one way or the other. But which way (or the other)?

Here are some ideas:

His back of the envelope calculations peg the tab for West Bengal at Rs. 8000 crores (do read the thread for his assumptions). As he says, that’s 2.6% of the state’s budgeted expenditure, and given the large positive externalities spillovers, subsidization wouldn’t be a bad idea.1

You could do similar exercises for each state – but for the moment, let’s just assume that it’s around 2.5% of each state’s budgeted expenditure.2.

What might that do to state finances?

The covid-19 pandemic disrupted the finances of India’s states in the ongoing fiscal year. Expense needs grew and public debt swelled, while revenues shrank. While most states could return to pre-pandemic output levels next year, their fiscal indicators are likely to remain strained for much longer, projections by the 15th Finance Commission (15-FC) show.
States’ combined fiscal deficit is likely to have risen to 4.5% of their total gross state domestic product (GSDP) in 2020-21, from 2.5% in 2018-19, the panel said. The commission’s fiscal roadmap puts the figure at 3% by 2025-26. Debts by that year could still be 32.5% of the total GSDP, against 27.3% in FY20, the estimates show.

https://www.livemint.com/news/world/states-may-not-return-to-pre-covid-debt-levels-by-fy26-finance-comm-roadmap-11612765562078.html

The kicker? That article is from the 8th of February, 2021. Things have, um, changed since then. The “while most states could return to pre-pandemic output levels next year” bit, in particular, now looks a bit iffy.

Next, Arvind Chari ran the numbers, and he comes up with a number of INR 50,000 crores for free universal vaccination:

He also advocates direct monetizing of state government vaccination programs via the RBI:

Niranjan Rajadhakshya refers us to an article in which Maitreesh Ghatak and Tarun Jain recommend the issuance of public health bonds (not that this is from 2020):

Issuing bonds for 30 years’ duration matches the decades-long returns from investments in healthcare, and is about the time taken for a young child who benefits from health investments to become an active taxpaying adult. Very short-duration bonds mean that the repayment schedule will not match the boosts in tax revenue.

https://m.economictimes.com/news/economy/policy/view-state-governments-can-be-better-armed-financially-to-fight-covid-19-by-issuing-public-health-bonds/amp_articleshow/76202188.cms?__twitter_impression=true

And they thankfully answer the obvious question in the very next paragraph:

Arguably, GoI could raise the same money at lower cost and then transfer to states. But, recently, GoI held up disbursing states’ share of GST collections at precisely the point that states needed those funds the most. Market borrowing limits by states have been raised subject to administrative conditions, and GoI could possibly impose conditions for health funds as well. Finally, borrowing directly allows each state government to prioritise its unique healthcare expenditure needs.

https://m.economictimes.com/news/economy/policy/view-state-governments-can-be-better-armed-financially-to-fight-covid-19-by-issuing-public-health-bonds/amp_articleshow/76202188.cms?__twitter_impression=true

Note that the last sentence in the second excerpt doesn’t apply in today’s context.

What else could be done? I’ll try and update this post with articles as I read them – feel free to keep sharing them we go along.

  1. Truer, if anything, at the central level, but let’s not go there right now[↩]
  2. By the way, any GIPE student reading this: I have a fun project just waiting to be launched[↩]