TN Ninan on The Misery Index

More often than not, inflation and unemployment move in opposite directions. Why this should be so, and whether this actually is so, are questions that can get a lot of economists very hot under the collar very quickly! 

But every now and then, this relationship breaks down very quickly, and we’re then staring at a problem that economists refer to as stagflation. That, in effect, is when inflation is stubbornly high, but unemployment is also stubbornly high. TN Ninan, a columnist for the Business Standard, riffs on this and related concepts in an excellent recent column

In particular, he drags up an idea that most of us haven’t heard about lately, the misery index. Given what’s around us these days, though, you might want to construct such an index for the months to come! What is the misery index, you ask? Well, simply add up the rate of unemployment and the rate of inflation for any given economy! It’s a simple enough index to create, and you can learn a fair bit by taking a look at which countries are doing well (low on the misery index), and which countries are the unfortunate table-toppers. 

As the column points out, Turkey, Argentina and South Africa top these charts, and Brazil and Russia round off the current top five. But most major economies are inching up this particular chart, and this is something you want to keep an eye on in the days to come. Here is more information, if you’re interested in learning more about the misery index.

Now, as with ice-cream flavors, so also with indices such as these. You can add in different flavors and come up with many different variations. So it was only a matter of time before somebody thought of adding in interest rates to create a new version of the misery index. Imagine living in an economy with high inflation, high unemployment and high interest rates! And if you want a little-bit-of-everything-when-it-comes-to-macro index, well, throw in per capita growth rates too. Note that this last addition actually makes it rather less of a misery index, since high per capita growth is a good thing.

And finally, TN Ninan’s column also mentions another interesting, relatively recent idea that you might want to explore yourself: The Great Gatsby curve. Take a look at what it means, and reflect on how appropriate the name is.

Literature and economic theory – who’d have thunk it, eh?

On Hierarchy and Sociology

The Browser (which, if you can, you should seriously consider subscribing to) recently linked to an excellent article by Malcolm Gladwell.

It’s a very short read, but one paragraph stood out for me.

But before we get to that, here is what I wrote a couple of months ago:

The worst kind of zero sum games are those involving status and hierarchy as end goals. Unfortunately, these also are the most prevalent, no matter where you go and what you do.

And now here’s the paragraph from Malcolm’s article:

The first is a sociological observation. One of the core concepts in cross-cultural studies is “power distance,” which refers to the degree to which a culture values hierarchy. Places such as France and Saudi Arabia and Colombia have high power-distance cultures: authority, in all its manifestations, matters a lot there. Places such as Australia and Israel are low power-distance cultures. A friend of mine, who was the Middle East correspondent for a major newspaper, once told me that he would sometimes call the Israeli Prime Minister’s residence, and the Prime Minister would pick up. That’s low power distance. I guarantee you that the President of France does not answer his own phone.

What is “power distance’? As Malcolm himself points out, it is the degree to which a culture values hierarchy. This can be the number of “layers” you must get through before you are able to reach somebody with the ability and willingness to make a decision in an organization, it can the insistence on the use of honorifics, or something much more subtle (but all too noticeable if only your antennae are attuned enough to be able to see).

Consider this explanation:

Power distance refers to the extent to which less powerful members of organizations and institutions (including the family) accept and expect unequal power distributions. This dimension is measured not only from the perspective of the leaders, who hold power, but from the followers. In regard to power distribution, Hofstede notes, “all societies are unequal, but some are more unequal than others.”
In a large power distance society, parents teach children obedience, while in a small power distance society parents treat children as equals. Subordinates expect to be consulted in small power distance societies, versus being told what to do in large power distance societies.

I debated about whether or not to include that second paragraph in the excerpt, because you might be tempted to go down a whole new discussion about parenting (god knows I’m tempted!). But I’ll park that second paragraph here, and maybe return to it in another blogpost.

But a later excerpt from the same article is even more telling: “Individuals with a low power distance cultural background may more openly express agreement and disagreement”

Particularly from the viewpoint of organizations, this ought to set off alarm bells. Any organization that is “high power distance” is likely to be an organization that doesn’t allow bad news to filter up to the highest level, and in my opinion, this is therefore an organization doomed to eventually flounder.

But this is also true in classroom settings! “Ashish, I think you’re talking crap” is far easier to say, and far more honest a comment than “Professor Kulkarni, I’m not sure I understand”. Because let’s be honest, you really want to say the former, but a high-power distance setting like a classroom will almost force you to say the latter. This is why I ask all my students to call me Ashish!

The point for me – and a point I hope you agree with – is that I like to set up for myself low-power distance environments. At home, among my friends, with my colleagues and among my students – it makes sense (to me) to have low power distance settings. Life just seems better that way.

Although I’m not sure I would have been allowed to wear an apron over my kurta pyjama on my wedding day:

The people serving the meal were the wedding party. The bride’s father gave us our picnic basket. The bride’s sister made the pulled pork sandwiches. The groom did the cole slaw. And at the end of the line, the bride—who had put an apron on over her wedding dress—served the mac and cheese. The receiving line was turned into a service line.

The Crypto Trilemma, by The Conversable Economist

I’ve said it before, and I’ll say it again, please subscribe to his blog.

This will be a very short post, for two reasons. One, the more I read about cryptocurrencies and related topics, the more confused I get. Two, given my very limited understanding, there isn’t much more to add to Timothy Taylor‘s post.

But the reason I wanted to write a post is because I found the idea of the crypto trilemma really useful (and hopefully you will too), and writing about it helps make the idea clearer in my head.

My most important takeaway from his post was this diagram. The point is that the crypto trilemma means that any currency can be any two things at any given point of time, but all three at the same time are simply not going to be possible.

  1. Traditional currencies, such as the rupee notes in your pocket are secure and scalable, which means that the rupee system can’t be ‘hacked’ and the system can grow large in terms of transactions per second without any difficulty. But it is not, of course, decentralized.
  2. Bitcoin and Ethereum (and possibly others, but I think these two are by far and away the biggest cryptocurrencies) are secure, and by definition decentralized, but they simply can’t scale. Navin Kabra, who is my guru in these matters (and many others!), tells me that Bitcoin can support 7-10 transactions per second, while Ethereum can do about 30. Even if they implement ‘sharding‘, Navin says they’ll go up to 30 transactions per second. Both the link I’ve given here and Timothy Taylor’s blog explain more about sharding, if you’re interested.
    Visa, on the other hand, can do twenty-four thousand transactions per second.
    TL;DR? Not scalable.
    As with everything in life, it’s more complicated than that. Here are three additional links shared by Navin: Visa’s claims | Bitcoin’s Refutation | An academic paper on the topic (bonus: a helpful table)
  3. And as we’re all discovering over the past few days, the newer cryptocurrencies ain’t quite that secure.

As I said, a useful framework to keep in mind when thinking about crypticurrencies.

What is a Doom Loop?

Is a global recession imminent?

Probably. Macroeconomic forecasting is the stupidest of sports, but it is looking quite likely, yes.

How will recession start, how will it play out, and how long will it last? I don’t have the faintest idea, and trust me, nobody knows for sure.

But certain channels of both cause and effect (and sometimes both at the same time, because macro is hard) can be readily identified. And one such channel in today’s day and age is that of a ‘doom loop’.

A country is at risk of a doom loop when a shock to one part of its economic system is amplified by its effect on another. In rich countries, central banks should have the power to halt such a vicious cycle by standing behind government debt, stabilising financial markets or cutting interest rates to support the economy. But in the euro zone, the ECB can only do this to a degree for individual countries.

I haven’t taught international macro for a while now, but when I used to, I would explain this to my students by calling it the Mamata Banerjee/Narendra Modi/Raj Thackeray problem. I hope your curiosity is piqued!

For an economic union of political entities to work, there are (very broadly speaking) four things that must be present:

  1. A monetary union (which the EU has)
  2. A fiscal union (this is the Mamata Banerjee angle, explained below)
  3. Capital mobility (Narendra Modi)
  4. Labor mobility (Raj Thackeray)

Now, bear in mind that my examples are from a while back. I am referring to Mamata Banerjee’s first stint as Chief Minister, and the version of Narendra Modi I have in mind is the Chief Minister of Gujarat.

But back when Mamata Banerjee became Chief Minister of Bengal for the first time, one of the first things she did was to ask the Centre for help given West Bengal’s precarious finances. The point is not about whether it was given or not (as far as this blogpost is concerned), the point is that states routinely ask for, and sometimes get, aid from the centre. This may be because of natural disasters, or man made ones, financial ones or otherwise. The point is that the central government has the ability to ‘help’ out states if necessary. It is, of course, more complicated than that, and a fiscal union also implies the ability to raise and share taxes, but the central point is the fact there is help available, if needed.

But the ability of the European Union to do so is severely constrained, because you will need a lot of good luck to convince, for example, German voters that their taxes might be used to help the Spanish economy in its time of need. And for somewhat similar reasons, you can make more or less the same argument for the inability of the European Central Bank to chip in when necessary.

Or consider Narendra Modi’s invitation to Ratan Tata, to have his Tata Nano factory be relocated from West Bengal to Sanand in Gujarat. That’s an example of capital mobility, and again, this is much easier to achieve within a country.

And finally, Raj Thackeray, and his opposition to workers from outside Maharashtra ‘taking’ jobs within the state – that is a great way to understand what (lack of) labor mobility means.

The point is that an economic union must necessarily have these four things in place for it to be a meaningful, stable and well-functioning European Union. The idea isn’t new, of course – Robert Mundell‘s idea has been around since the late 1950’s, and there have been others who have worked on related ideas. Also read Paul Krugman on the topic.

But the point is that if a crisis strikes the EU, they have a limited range of weaponry that they can deploy.

Please read the rest of the article to get a sense of how linkages between European governments and its banks, the banks and the broader economy, and the broader economy and the European governments can both cause and exacerbate a crisis.

And as usual, the concluding paragraph for your perusal:

The euro zone is at less risk from doom loops than it was ten years ago, thanks to reforms to the banking system, the ECB’s commitment to preserve the euro and some embryonic fiscal integration. But the danger has not disappeared. And reforms to the euro zone’s architecture that would further reduce the risk have stalled⁠—in part because in 2012 the ECB boldly stepped in, easing the pressure on governments to make difficult decisions. As the ECB once again intervenes, the prospects for deep euro-zone reform look increasingly remote.

Basketball’s 3 Point Line

I’ve lost count of the number of times I’ve rewatched parts of The Last Dance, the documentary on Michael Jordan, and now, in the 40th year of my life, I’ve slowly started to develop more than a passing interest in basketball.

This video, about the 3 point line in basketball, might not resonate much if you haven’t seen a single game of basketball, but I would argue it is worth thinking about how your sport has changed over time, and how players are responding to these changed (non-monetary) incentives.

On Cows, Coagulants and an American president who was Given Rat Poison

And that’s not clickbait, which is the best part. The utterly awesome @bhalomanush on Twitter with a magnificent thread for your perusal.

Notes from Tyler Cowen’s Conversation with Marc Andreessen

Background info on Marc Andreessen is here. This is his page on the a16z website. Here are two other podcasts on which he has appeared as a guest that I enjoyed listening to: EconTalk, and The Tim Ferriss Show.

  1. He’s a fan of Knight Rider! I know this is something only folks of my age will get and appreciate, but Knight Rider was special when I was growing up.
  2. “Basically, it was an endurance competition to see who could outlast who, me or them.” That’s Marc talking about his school, but a semi-cynical take is that this could be about most higher education in general.
  3. The discussion on having kids (and at what age) is a great way to both understand and explain opportunity costs
  4. The two questions about Florence and the Neolithic era might seem funny and light-hearted, and on the face of it, they are. But to me, the answers are revealing: no matter what era, and no matter where in the world, he (Marc) would have wanted to make the world around him better. Better is a tricky word, and you may not agree with his (or my) definition of the word better, but that part of this answer doesn’t change. Does yours?
  5. “Economics pre — what was it — the 1950s, 1960s, it wasn’t all these formulas. It wasn’t all these formulas. It wasn’t a branch of physics, like it seems like it is today. It was descriptive. It was verbal. If you read Keynes, it’s like this, and even the people that preceded him.”
    This is true, and I do think we’ve gone too far over to the other side.
    “The form of humanities that resonates me is like that. It’s history, economics, philosophy, politics merged.”
  6. “What I’m figuring out over time is the psychology-sociology elements are as important or more important than the business finance elements or the technology elements.”
    Read more! That is as much a request to you as it is me admonishing myself.
  7. “In fact, he was the first customer of Edison’s light bulb system for the house. Edison came and installed the first indoor lighting in the world in J.P. Morgan’s library. Then it caught on fire and burnt the library down, and then J.P. Morgan, to his enormous credit, rebuilt the library and hired Edison to do it all over again.”
  8. Marc is a fan of Google Reader, and I cannot begin to tell you how much I miss it. Like Marc, I also use Feedly (and pay for the Pro version), but nothing comes close to Google Reader. And the most underrated part, to me, was the in-built social aspect of Google Reader. It was Facebook, but for nerds, and it was fantastic.
  9. The part of the conversation where Tyler asks about how exactly Web 3.0 will be useful for producers of content is interesting, because the answers (to me) still don’t make sense. I still don’t “get it”. That’s not me expressing scepticism, it is me expressing befuddlement. And a very similar exchange takes place in Russ Roberts’ conversation with Marc, and there too, I didn’t “get it”.
  10. The office is a solution to a problem that no longer exists is a wonderful way to think about, well, working from home, and it ties in nicely with my conviction that classrooms are (slowly but surely) on their way out.
  11. “My mental model of what Peter does is, I use the metaphor, the Bat-Signal. Peter puts out the Bat-Signal, and then he basically sees who shows up. He’s basically been doing this since college. That’s very interesting.”
    That’s Peter Thiel, of course, and the idea of attracting the best talent, rather than having to sort it, is a wonderful idea.
  12. “He basically says it was the foundational science and advanced technology basically developed in the computer world for 50 years by DARPA and its succeeding technological agencies, and then by big industrial research labs like IBM Research and others, that created the preconditions for computer-based start-ups. There was a 50-year backstory to that by the time Silicon Valley really got going. He said, also, the reason biotech’s half successful is because there was 25 years of biotech — NIH and all these very aggressive biotech biological science–investing programs.”
    Is Mazzucato underrated, or am I misunderstanding his point?

David Samuels Interviews Edward Luttwak

and what an excellent, enjoyable read this was!

I hadn’t read anything by David Samuels before, and my reading list is now considerably expanded. The reason I bring this up is because this is one of those rare interviews where you find yourself wanting to learn at least as much about the interviewer as you do about the interviewee!

But speaking of the interviewee, this is where you can learn more about Edward Luttwak. Here is an old article written by him that I am currently struggling with (and I mean that as a compliment). And here is a longish profile of Luttwak in The Guardian.

The interview was wide-ranging, detailed and I’m not sure I got all the references and implications (and don’t get me wrong, that is a wonderful thing). My notes follow.

  1. As with Mark Mobius yesterday, so with Edward Luttwak today. Travel, especially at a young age, really matters.
  2. The sociology of playing with the children of the Mafia bosses was fascinating
  3. The anticipated rolling over of the Ukrainian forces, why it didn’t happen, and the parallels with the fighting in the first world war reminded me of parts of Adam Tooze’s very long essay about the D-Day landings.
  4. Warfare 4.0 reminds me very strongly of Industry 4.0, because I understand neither of them.
  5. The art of acquiring information by looking, thinking and inferring is a valuable one in other fields too. Savor the bit about figuring out how to kill a general.
  6. “One book I’ve never written, is “The Impact of the Arrival of Nicotine and the Scientific Revolution.” A big jump in intellectual achievement that took place among Europeans, all of whom smoked. The social history of nicotine begins with the sharpening of the brain. I stopped smoking long ago but still I miss it.”
    I don’t smoke, but this reminded me of the story about mandated caffeine breaks.
  7. If you read enough Frederick Forsyth novels, you will eventually come to be familiar with two words: elint and humint. Electronic intelligence and human intelligence. Luttwak is, to put it mildly, disparaging towards elint, and it is interesting to draw parallels between this and Mark Mobius’ insistence that nothing beats traveling and seeing things for yourself.
  8. “Well, how I would like it [The Ukrainian war] to end is with a weak and contemptible compromise. I would like it to end with the Russians being offered the opportunity to have a properly supervised plebiscite in Luhansk and Donetsk oblasts, and may the best man win. Putin can turn around and tell the Russian people he won a great victory, the right of plebiscites for the poor Russians. If he loses the plebiscites, so be it. To have a plebiscite you have to have first a negotiation, which requires an armistice. To have an armistice you have to have a cease-fire. The moment there is a cease-fire, you lift all the sanctions, so that the Russians have a reason to respect the cease-fire. Lift them all at once. And that’s how we get out.”
  9. “In Vladivostok, there is a wonderful female scholar at the Navy University, this is the university run by the Russian Navy. She wrote an article about Chinese border policy and about active claims and dormant claims. In that article, she says that the Chinese are advancing many territorial claims against the Japanese, for the Senkakus, against the Philippines, against the Indonesians for the Natuna offshore, and for almost the whole of Arunachal state in India and part of Ladakh. Then she said, “And then there are the dormant claims that will be activated when the Chinese feel strong enough to do so.” Two of them, the most important, are the Treaty of Aigun in 1858 and the Beijing Convention of 1860, involving the transfer of the maritime provinces to Russia.”
  10. “Now, the official translation of Vladivostok into Chinese is a straight transliteration, Fúlādíwòsītuōkè, that is Vladivostok in Chinese characters. But unofficially, they use Haishenwai, which is not of course Chinese, it’s Manchurian, because the whole Chinese claim to Manchuria, Tibet, and Xinjiang is bogus because they were all under Manchu rule when the Chinese themselves were under the rule of the Manchu. It’s like Sri Lanka claiming to rule India because both were ruled by the British, and this false claim is the basis of everything there.”
    Also huh.
  11. His reasoning for why “Taiwan is off the table” is fascinating, precisely because the previous answer emphasizes Xi’s ego. Does economics trump (pun not intended) ego? Or is it the other way around?
  12. David Saul’s very long question about America is a great read, never mind the answer. And the Biden-Obama equation was an eye-opener for me.

Notes from Barry Ritholtz’s Interview of Mark Mobius

There have been three excellent interviews that I came across this week, and the next three posts are my notes from having read these interviews. The first one is Barry Ritholtz interviewing Mark Mobius.

First off, if you don’t know who Mark Mobius is, here’s some background. This is his Wikipedia page, this is his Twitter handle, and this is information about him from his own website.

  1. Mark has worked at a talent agency, has worked as a communications teacher, a political consultant and has sold Snoopy merchandise in South Asia. Doing a variety of things in your career is a plus, not a minus! Or that, at any rate, is how I interpret this.
  2. And on a related note, being exposed to a variety of cultures, especially when you’re young, is also a good thing. He speaks about the culture shock of having visited Japan on a scholarship after getting his Master’s degree, and towards the end of the interview, he also speaks about his recommendations yo young folks starting out in investing. His first piece of advice? Travel!
  3. Mark has been to a 112 countries (!), a point that comes up in the podcast, and I found myself wishing that Barry had asked him a question (or two) about getting a feel for a new place. What do you look for in a new neighborhood, or a new city? What thumb rules has Mark developed for figuring out a city from the point of view of the quality of its administration, where to eat, how markets work over there, law and order and so much more.
  4. “Don’t just speak to top management” is excellent advice, and applies to much more than just financial investing. Get a sense of the place (any place!) by talking to everybody, and if possible, speak to top management last.
  5. Nothing beats actually visiting a company before investing, and it is best if you do that yourself. Travel, meet people, ask interesting questions, and keep doing that for as long as you can is excellent advice, always. Read (kind of) more about it here.
  6. As a student of finance, reflect on the part of the interview where Mark Mobius talks about the importance of well developed equity markets, the need for liquidity and private equity investments as an alternative.
  7. “One thing you’ve got to realize is that the world has changed to the extent that a lot of the emerging markets growth is now in the United States, because U.S. companies are manufacturing and selling and buying from emerging countries.”
    What is the appropriate unit of analysis for international trade, international finance and international investing? Why?
  8. Airlines and time-zones helped Mark Mobius decide where to base himself. Looking for underrated factors while making decisions need not be restricted to just financial investing!
  9. The reflection on China and Venezuela, and the impact that government policies (or even strong leaders) can have on domestic firms is worth reading and thinking about.
  10. Maybe I’m too much of an economist, but I don’t get the deflation is actually a good thing argument. More reading and thinking to do!
  11. And finally a book recommendation: about the history of double entry book-keeping. Note that the transcript donesn’t link to the book that Mark is talking about, so I may well be wrong about the hyper-link.

On Muddling Through

Anticipating the Unintended is an excellent newsletter, and you should subscribe to it. This past Sunday, the authors came up with a lovely read on the Agnipath scheme. You may or may not agree with their analysis, but I would heavily recommend that you read it. There’s a lot that is important in it, but for today’s blogpost, I want to focus on this excerpt:

Considering the constraints, it is difficult to see what else the government could have done here. The need to reduce wage and pension costs to fund modernisation is real. And given the fiscally conservative instinct of this government, it won’t deficit fund the modernisation programme. As is its wont, it has chosen to put a bold announcement with emphasis on other benefits while trying to solve its key problems under cover. There’s this myth that a big bang approach to reform is the only model that works in India. That’s wrong. A lot of what has looked like big reforms in India have actually had a long runway that’s often invisible to people. A more comprehensive reading of the history of ‘91 reforms makes this clear.
So, the usual template has been followed so far: minimal consultation, no plans to test it out at a smaller scale and instant big bang implementation. The results are unsurprising.

Let’s figure out they key questions at play:

  1. What is the problem?: Wage and pension costs for the military spiraling out of control. You could argue that this is an old, inevitable problem made worse by the implementation of the OROP scheme, but for the moment, look past the cause and consider the effect. And the effect is that the Indian government spends over half of it’s budget on pension benefits (24%) and on wages (28%).
  2. What is the proposed solution?: That’s the Agnipath scheme in its entirety. I invite you, once again, to read the whole thing, but the first two to three paragraphs in the newsletter summarize the scheme very well, if you are not familiar with it yet.
  3. Why is this solution important?: Their takeaway is that the main focus of the Agnipath program is to reduce wage and pension costs, and that this is necessary. I agree on both counts – no matter what else is being said, and no matter what else Agnipath might achieve (a younger military, among other things) it’s main aim is to reduce wage and pension costs. And even a cursory glance at our government’s finances should make clear that this is necessary.
  4. The How: That’s what the rest of today’s blogpost is about! Here’s the thing: there is a problem, and it needs a solution. That (to me, at any rate) is clear. But is this (Agnipath) the best possible solution? And even if it is, is the current method of implementation the best way of going about it?

I don’t mean to get into a discussion of whether Agnipath is the best possible solution for this specific problem, nor do I mean to definitively answer the question of whether the method of implementation is optimal.

Instead, I hope to help you build a framework to start to think about the answer to these two questions (is this the best solution | is this the best way to implement said solution) in general. And then, if you like, you might want to use said framework to judge for yourself the Agnipath solution. I do exactly that in what follows: outline the principle, and apply it to the Agnipath case.

Minimal Consultation | No Plans to Test It Out | Instant Big Bang Implementation

Of the three things that RSJ and Pranay have highlighted in their excerpt , I plan to focus on the latter two in terms of the how question. The answer to the question about whether consultations were done or not, and whether they were minimal or not is essentially a grotesque Rorschach test, and I’ll skip it entirely. But the latter two – no plans to test it out, and instant big bang implementation – don’t just ring true, but are also truly important, especially if you are a student of public policy.

Let’s focus on the word “It” in the second phrase, “No Plans To Test It Out”. What does “it” mean, in this context? That’s simple, you might say – test the solution out.

And what’s the solution? Agnipath, you might answer a tad impatiently. Ah, but how do we know that this is the best possible solution? And here’s the simple answer to this question: you don’t know that this is the best possible solution, because as with everything else in life, the proof of the pudding is in the eating of it. Your models might tell you that this solution is the best one, but all models work well, if at all, only in theory. To mix an apt metaphor, no battle plan survives contact with the enemy.

In other words, Agnipath is one of many different solutions to this problem. Moving to something like the NPS might be one, a modified version of Agnipath might be another, curtailing expenditures in other areas might be a third (to those who know their public finances in an Indian context, no I don’t think so either, but play along for the moment). May be the final solution that will be implemented at scale will be a mix of all these and more, who knows – but the point is, there are many possible solutions, of which at least some are worth trying out in an experimental sense.

The process should be seen as experimental, and probably involve acting on multiple potential solution ideas at a time (instead of just one). It can also be accelerated to ensure the change process gains and keeps momentum (to more or less degree, depending on where one is in the change process and what
problems, causes or sub-causes are being addressed). Trying a number of small interventions in rapid “experiments” like this helps to assuage common risks in reform and policy processes, of either appearing too slow in responding to a problem or of leading a large and expensive capacity building failure. This is
because each step offers quick action that is relatively cheap and open to adjustment; and with multiple actions at any one time there is an enhanced prospect of early successes (commonly called “quick wins”).

Andrews, M., Pritchett, L., & Woolcock, M. (2017). Building state capability: Evidence, analysis, action (p. 288). Oxford University Press., pp 170

So begin small, and begin with many different potential solutions. See which of these work and which don’t – which need tiny modifications to be better, and which need major surgery. Which might be usefully combined with some other solution(s)? Iterate towards a solution set that works “best” – and then implement this solution set at scale. But never presume, and especially without on the ground small scale implementation, that a proposed solution is necessarily the best one.

Pritchett and Woodcock have an excellent diagram for helping us think through this:

Andrews, M., Pritchett, L., & Woolcock, M. (2017). Building state capability: Evidence, analysis, action (p. 288). Oxford University Press., pp 172

“A.” in this case is the status quo, and given that there are no overt protests about it, we can say that the status quo is administratively and politically possible. But it is, as we have discussed, not fiscally sustainable, and hence undesirable.

“D.” in this case is the Agnipath solution. Let’s assume that it is a technically correct solution, and let’s assume that it (or something very similar to it) has either solved a similar problem in other countries (empirically validated) or has solved this exact problem, but in a simulation (theoretically validated). But it is not, as we are observing, politically possible. Now, sure, you can talk about the political motivations of the organizers of the protests, you can (and you should!) condemn the use of arson and wanton violence, and you can bemoan the role of the media. But if you accept that there is at least an inconvenient iota of truth in the idea that some sections of society feel hard done by this decision (warranted or otherwise), then you do in effect accept that it is not altogether politically possible. Your assessment may well differ from mine (and that is fine) but hopefully only in magnitude and not in direction.

The point is that we are trying to move from “A” to “D” in one fell swoop. Not only is that not a good idea in public policy, but we don’t even know if Agnipath is “D”! The very definition of D (or Agnipath) has changed in the recent past, is changing as we speak, and is likely to further iterate in the days/weeks/months/years to come. Which is as it should be, of course – my point simply is that these iterations and experimentations should happen in the design stage, not the roll-out stage.

So the general principle is that iterating through potential solutions at restricted scales is better. Even better when you learn from these iterations, modify your solutions, and come up with a hybrid that stands a better chance of working at scale. This helps in building out buy-in for your proposed solution as well. Won’t work perfectly, because nothing ever does, but remember that in public policy utopia ain’t our aim, being better than the status quo is.

Also, if you’re wondering about the title of the blog post, it is a tribute of sorts to a paper that ‘started’ studies in this particular area. Look up that phrase and the the name “Charles Lindblom” to go down a very nice little rabbit hole.

Bottomline: Crossing the river by feeling the stones remains excellent advice.