Month: November 2022

What Should The Fundamental Unit of Analysis Be, And Why?

https://indianexpress.com/article/opinion/columns/ews-verdict-underscores-that-judiciary-has-been-a-reluctant-supporter-of-caste-based-reservation-8255165/ (Highlight added)

As you might imagine, I’ve been asked about the EWS judgment in class during random question time. And it is something that I’ve been thinking about myself, naturally.

But I have been thinking about a very basic question, and I haven’t yet landed upon an answer that satisfies me. This post is more a request for help, suggestions and reading material, and I do hope some of you end up helping me!

When we’re analyzing something – it could be reservations (affirmative action) or something else altogether – what should we choose as our unit of analysis? Should it be the individual or the group? Whatever one’s answer, why? What are you optimizing for when you choose your answer?

More: say you choose to change your unit of analysis, either while analyzing the same problem, or a related one. Say it is the hijab ban controversy. Or maybe the question of banning beef. Or the Sabarimala issue. Or pick any issue of your choice in any country of your choice – I’m not interested in what your (or my!) opinion is on any of these controversies. I’m interested in what our choice of unit of analysis is, and why. I’m also interested in whether we are tempted to change our unit of analysis depending upon the context, and if yes, on what basis.

I’ve spoken about this with some folks privately, and the best answer I’ve gotten so far is that of “agency”. I’m paraphrasing the argument here, but in effect, one should use an individual as the unit of analysis if that individual has agency – that is, the power to bring about meaningful change in their own circumstances. In the case of the hijab controversy, for example, this line of thinking would imply that we should be leaving the choice to wear (or not wear) the hijab to the individual in question.

Whereas in the case of reservations, it should be the group that is the unit of analysis, because you can’t change your caste, and societal structures impose costs on you for belonging to a particular caste. No agency, therefore the unit of analysis should be a group.

This argument seemed appealing to me when I first heard it, but the more I think about, the more I ask myself if the hijab example really is a good example of agency. You may agree or disagree with me when I say this, but I would argue that girls don’t necessarily have agency in this case. Whether it is rules or laws or norms, they take away this agency no? Again, this isn’t about what is “right” in the case of the hijab controversy – it is an important question, but not the one I’m trying to get at here.

This is, by the way, an important question to ask in economics, with many implications for how research is conducted and policy is designed and implemented. But the importance of this question is much more than that, with implications for fields as diverse as management, sociology, politics and more.

I’m hoping to learn more about how to think about this and why, so please do let me know what you think!

Do border regions have better food?

Do border regions have better food? What exactly counts as a border region? The parts of the United States near Canada? The best food in Italy is not obviously at the (rather skimpy) borders. China and India might be the best food countries in the world, but because they are so large most of their cuisine is not “border cuisine.” So I say no.

https://marginalrevolution.com/marginalrevolution/2022/11/requests-from-benedikt.html

As always, read the whole post – and in particular, the Wikipedia link to James Steuart (not a typo). But given my deep love of all things gastronomical, I wanted to expand on this point a bit.

  1. Tyler’s first question is worth thinking about (what exactly counts as a border region?), and the way I choose to define it more or less defines the direction in which this post is going to go. A border region, for the purposes of this post, is where a confluence of two or more cultures is observed. That is a ridiculously loose definition, I know, but this is a blogpost, so please let’s go with this for the moment.
  2. Does that definition necessarily mean better food? Well, that requires a definition of the phrase “better food”, but more variety and a greater degree of syncretism can reasonably be expected.
    • Think Massaman curry in Phuket, for example. Read this paragraph from that Wikipedia article to get a sense of what I’m trying to get at. This spice, frequently used in both Chinese cuisine and coastal Indian cuisine(s) is another good example.
    • Will the food in Chennai be necessarily better than in the interior parts of Tamil Nadu? Not necessarily, but it will be more varied in terms of influences, and especially as a tourist, that’s a good thing. It’s a good thing in general too, if you ask me!
  3. A confluence of culture is likely to be positively correlated with greater commerce, and that is likely to imply higher rent for real estate. Higher prices will imply a greater incentive to be better at making and selling food, so the quality will likely be higher (so long as you know where to look and how to choose). You could make the same point for costs of labour.
  4. More trade is also likely to imply fresher ingredients, and therefore better food.

What else am I missing?

So my answer would actually be yes, but it very much depends on how you define “border cuisine”.

Externalities, R&D and Public Policy

Amol Agrawal, author of the blog Mostly Economics, linked to a very interesting article from CEPR recently:

How knowledge spillovers operate between academia and private firms remains an open question. This column exploits the Laboratoire d’Excellence, or LabEx, a large-scale funding programme of public research in France implemented in 2010–2011, to understand the spillover process. The authors find strong spillovers through the contracting channel, the mobility channel, and the informal channel, with the contracting channel playing the central role. As financing public research is an indirect way to spur private sector activity, comparing it with more direct instruments would be interesting.

https://cepr.org/voxeu/columns/knowledge-flows-public-labs-private-firms

That publicly funded research and development is a good thing is something I’ve spoken about on this blog before, and I’ve also written about how it could (potentially) be made better. I’ve also written about the fact that India needs to up its spending on publicly funded R&D. But all that, eventually, does beg a rather obvious and important question: how?

That is, imagine that you are the newly appointed czar in charge of deciding how and where a lot of money is to be spent on R&D in India. What you say goes, and you would (naturally) like to make sure you get the maximal bang for your buck. Which states will get more money, and which states will get less? Which geographical clusters within these states will you prioritize and why? Which industries will you focus upon, and why?

These are not easy questions to answer, far from it. There will be economics, politics, geopolitics, sociology, finance, history and geography-based aspects to consider, and there may well be other nuances to this question. Today’s post is about a very simple, specific question, which the authors of the piece that Amol linked to focus upon:

Once there has been some knowledge that has been gleaned, or developed, as a consequence of spending on R&D, how to ensure maximal spillovers into private firms? And even more specifically, through which specific channels will these spillovers be conducted?

Let’s put that into simple English: a university has developed knowledge that is of use to industry. How will this knowledge reach industry? The authors of this piece highlight three different ways (there are others):

  1. The contracting channel: there is direct, explicit cooperation between the academic institution and the private parties. This could involve “subcontracting research by private firms, contracts signed for PhD supervision or for joint research projects”.
  2. The mobility channel: Researchers who worked on the knowledge project in academia could move to the private firm.
  3. The informal channel: events, dinners, conferences etc.

The research mentions that the contracting channel was the most dominant:

We find evidence that firms more exposed to the shock start more PhD co-supervisions with public labs (panel a) and increase their outsourcing to the public research sector (panel b). Both these effects are consistent with the contracting channel being at play. We also find that researchers are more likely to move to the more exposed firms (panel c) and that these firms are more likely to hire fresh PhDs (panel d), evidence of the mobility channels. All channels thus seem at play, but the reports written by the funded units suggest a central role played by the contracting channel.

https://cepr.org/voxeu/columns/knowledge-flows-public-labs-private-firms

But that, of course, was for France. What might the story be like in India? A simple search on Google Scholar and Elicit.org didn’t throw up much that was useful and of recent vintage, but if any of you have any academic references that might be of help, please do send them my way.

In my personal experience, though, as someone who has worked in academia and industry when it comes to analytics, I would say that the mobility channel is by far and away the most dominant. While the contracting channel grows a little bit every year, it is nowhere near enough. And don’t get me started about the under-utilization of the mobility channel – while there is some movement of some faculty members, it can (and should) be a lot more, and in a variety of ways, not just a full time switching of careers.

The development of knowledge clusters, and the free (two-way!) flow of both people and knowledge between academia and industry needs to dramatically increase, and this increase needs to happen with every passing year. Funding R&D is one thing, but this – the exchange of people and ideas – is a relatively low-cost intervention with only upsides.

We should be making this happen!

Incentives Matter, the International Trade Edition

A chart and a paragraph from The Economist to get us started today. First, the chart:

https://www.economist.com/finance-and-economics/2022/11/06/who-wins-from-the-unravelling-of-sino-american-trade

I’ve been a student of economics for a little more than two decades, and the one thing that is quite familiar to me in this chart is how large China’s share is in US imports (that’s what the “17” at the bottom right of the chart represents. Spend some time going over the rest of the numbers on the right of this chart, and come to the realization that China is about 50% more than all of the other nations on this chart combined.)

Being a student of economics in these past two decades makes it inevitable that some notions of how the world works and functions will get deeply ingrained. And the idea that China will be much larger in everything compared to, often, the addition of all other countries performances has become a useful rule of thumb. Note that I am not advocating forming such a rule for the future – I’m simply saying this has been the case for the past two decades.

But as the Nobel Laureate said, the times, they’re a-changin’:

Yet Mr Trump’s tariffs seem to have played an important role. According to recent analysis of industry data by Chad Bown of the Peterson Institute for International Economics, a think-tank, China’s share of America’s imports rose from 36% to 39% this year in goods not covered by tariffs. For goods subject to a 7.5% tariff, however, China’s share sank from 24% to 18%. And for those hit by a whopping 25% tariff, which covers lots of it equipment, China’s share of imports fell from 16% to 10%. Overall America is now much less dependent on Chinese goods, from furniture to semiconductors.

https://www.economist.com/finance-and-economics/2022/11/06/who-wins-from-the-unravelling-of-sino-american-trade (Emphasis added)

This post isn’t about whether Trump should have imposed those tariffs or not, nor is it about whether those tariffs have been worth it. That is an important topic, but we’re going to skip over it in today’s post. Today is just a reaffirmation of a principle of economics:

When something becomes more expensive, there will be lesser demand for it.

That, of course, is just another way to state the law of demand. You can draw a curve, if you like, or you can phrase it the way I did, or you can write out a paragraph that gives an application of the law, like The Economist did. But the next time you read people opining about whether Policy X will work or not, ask yourself how the incentives have been realigned as a consequence of the new policy.

By how much will demand go down (elasticity), should this policy be implemented or not (geopolitics), and what might be the impact of this policy on China and America and other nations (international trade) are all excellent questions, and they will keep all manner of professionals busy for decades to come.

But again, that’s for another day. Today’s post is about helping you realize that the law of demand is one way to understand incentives, and (don’t stop me even if you have heard this before) it is about chanting a mantra that all economics students would do well to internalize:

Incentives Matter

The Long and Winding Road For The First Time

I’ve been on a Beatles spree this week, and have no desire to stop – please feel free to send along thousands of more videos my way!

Safed Jhooth

…’twas too tempting a title to pass up for this twitter thread, because “A White Lie” just doesn’t sound as good.

Ping!

I hadn’t scheduled a post for today, but I was fairly relaxed about it, since I knew both the topic that I wanted to write about and what the entire post would look like. Shouldn’t take me too long, I thought to myself as I went through my to-do list yesterday evening, and I kept some time aside today morning to do just that.

But just as I was about to settle down and thump said post out, my daughter came and asked me if we could “play the geography game”. What is the geography game, you ask? Oh, a very simple thing: we have created chits of paper on which we have written down the names of India’s states and union territories. We pull these chits out, one at a time, from a small pouch, and we have to name the capital of whichever state or union territory we’ve picked. A very simple, but also a very fun way to spend a part of the last chunk of her Diwali holidays.

But as with all young kids, remembering all of them is a little tricky. And even after four or five rounds of the game over the last two days or so, she was having trouble remembering all of them successfully. And so I taught her about ping!

Remembering random things used to be a weird little hobby of mine when I was in school. It helped me win all the quiz contests when I was in school (except for the last one, in my 10th standard, a fact which still upsets me – but let’s not go there), and it helped me mug up dreary old facts while “studying” in school.

I would tell myself little stories about these factoids to help me better remember them. These stories were completely nonsensical, almost utterly random associations, but they seemed to help. And the more I did it, the better I got at memorizing things. Much later, I learnt about neurons, synapses and plasticity (see here for a reasonably simple explanation), and the how and why of my little trick made much more sense. And I now think of the art of memorizing stuff as “ping!” – as neurons and synapses going, well, “ping!” in my head when I think of a particular topic.

To give you just one of literally millions of possible examples, here’s what the word “spice” brings up in my head. I “get” pings about “Spice Kitchen”, one of my favorite restaurants in Pune. I get pings about different kinds of spices, about my trips to Kerala, about Mark Wiens (a YouTuber who loves eating spicy food), about the Carolina Reaper – it goes on and on.

But as it turns out, you can train your brain to associate certain pings with certain things, and help you remember things better. Again, an example from my own experience. The word “ASEAN” I’ve learnt to associate with BIMP-ST-CMLV (I pronounce this as BIMP-ESS-TEE-CEE-EM-ELL-VEE). And that stands for Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Cambodia, Myanmar, Laos and Vietnam.

I’m not for a moment suggesting that you remember the ASEAN countries this way (or indeed, even remember them at all). I’m simply explaining what works for me inside my head. And the more you play this game, the better you get at it. There’s much, much more that’s going on here, and far more than I can hope to condense into a single blogpost, but you might want to learn about more about, say, spaced repetition, eidetic memories and above all, memory of loci – just to get you started. And feel free to go down any rabbit hole that seems particularly interesting – ’tis Friday, after all. If you’re looking for recommendations, memory of loci would be my pick to get you started.

Which is what I call “ping!” I suppose – and isn’t it a much better way to remember this than “memory of loci”? And so we went ahead and “ping!ed” the list of India’s states and Union Territories. Himachal Pradesh, for my daughter, is a cold state, which she remembers now because I explained to her what the word “him” means in Sanskrit, and that reminds her of a trip she’d taken to Simla. Ping!

Tripura she now associates with agratala sancharam (she’s learning bharatanatyam), and that helps her remember the capital, of course. She was wearing pink pyjamas when we were playing this game, and that’s one way to help her remember the capital of Rajasthan! Again, to be clear, the specifics don’t matter, nor does the list of things to be memorized. Getting the idea behind “ping!” – that’s the important bit.

“Why did the pings in panji’s head go wrong?”

My maternal grandmother, and therefore my daughters great-grandmother (panji in Marathi) passed away earlier this year. She was suffering from dementia, besides other complications, and towards the end, she had forgotten almost all of our names. She would often confuse me with my maternal uncle, for example.

I was so happy that my daughter had learnt the concept, enjoyed applying it – and understood it well enough to be able to ask the question that she did – and at the same time, so overcome with emotion at the question and its timing, that I couldn’t fully respond. Kids, I tell you.

We’ll be ping!ing a part of today afternoon with our good friend Sal Khan re: this topic, and if you don’t feel like battling your work, feel free to “join” us instead!

Just one Object

When I teach courses in introductory statistics, my focus isn’t so much on helping students memorize definitions and formulas as it is on helping them understand the point of the core statistical concepts.

I often ask a student in class to tell us about their favorite movie, for example. Let’s assume that the student in question says “Dulhe Raja”.* Ok, I might say, rate the movie for us. And let’s assume that the student says 9.

I then ask the student if every single aspect of the movie is 9/10. All the songs, all of the fight sequences, all of the dialogues, every single directorial decision – is everything a 9/10? And the usual answer, of course, is no. Parts of the movie do much worse, and there might be some that are a perfect 10. But all in all, if the entire movie had to be summarized in just one number, that number would be nine (in that student’s opinion). Which, of course, is one way to think about averages. It’s a great way to summarize, distill or boil down a dataset into just one data point.

Of course, you would want to worry about whether each dimension of the movie has been given equal importance or otherwise. Dilli-6, for example, gets a score of 6/10 from me, but that’s because the music is just so utterly fantastic. But I’m giving much more importance to the music, and not that much importance to anything else (which, for me, was almost uniformly meh). And then, of course, we start to talk about weighted averages. And this also is a great way to segue into what standard deviation is all about. Then come the formulas and the problem solving, but that’s a whole other story.

So why am I speaking about this right now? Because I read an article in The Print the other day, which asked an interesting question that reminded me of all of what I’ve written about above:

If there was a cultural artefact that truly represents everything that is India today, what would it be?

https://theprint.in/opinion/pov/rasgulla-taj-mahal-sanskrit-what-if-i-told-you-to-pick-one-object-that-represents-india/1175979/

What a question to think about, no? Read the rest of the article to find out the author’s own answer, but in what follows, I want to try and think through my own answer to this question.

First, the recognition that we’re talking about a truly multi-dimensional problem. India is diverse in terms of her geography, her languages, her dance forms, her religions, her architecture, her food, her music – I can go on and on. As, I’m sure, can you!

So should we try and come up with an artefact that covers all (or as many dimensions as possible) at once? Maybe a movie, maybe a song, maybe an epic? But can (and should) a movie or a song encompass all of what India is across space and time?

The Mahabharata, maybe? A saga told in multiple languages, in various forms, from the viewpoint of many different protagonists, interpreted in a variety of ways over the centuries, and contains innumerable references to music, dance, food, sport, architecture besides so much else.

The only other artefact that might qualify must have something to do with food. We might have different ingredients, different techniques and different methods of preparing our food, but we all love a good meal, no? So might there be a dish, or a drink, that truly represents everything that India is today?

Tea? Nimbu paani? Khichdi?

Or does this dataset have so much variance that the average isn’t really a good representation?

I haven’t yet found an answer that satisfies me – which is a good thing! – but I do think I have found a good question to teach statistics better. No?

*This is a fantastic movie, and I will not be taking any questions.

Econ Really and Truly For Everybody

I came across an excellent podcast on economics in Marathi recently. A friend had sent me the link about a month ago (and apologies, friend, because I promptly forgot all about it!), but in a happy coincidence, that same podcast linked to one of my posts, and it served as a useful reminder to check it out.

And it is excellent! Here is the post through which I was served the reminder, and here is a brief introduction to the blog itself:

And that also made me think about making it simpler for people at large. Economics and finance are English language topics, by default, due to their design and complexities around the world. But I wanted to bring some change to that by communicating in a regional Indian language, Marathi. That is the reason I have also created ‘econGully Marathi Podcast’. Here, I release three episodes a week and talk about different things happening around the world. Topics covered so far are broad in scope. From Srilanka’s economic crisis to LGBTQ economy and from the commodities market to climate change, the podcast tries to convey new developments and historical references affecting our lives directly or indirectly.

https://econgullyblog.wordpress.com/about/

I want my career to be about helping more people learn about, and fall in love with, economics. But I’m chopping off my own legs, as it were, by writing only in English. All the more reason for me to admire the work that Swapnil is doing, and if you are familiar with the Marathi language, I strongly encourage you to subscribe to his podcast.

On a related note, do also subscribe to Puliyabaazi, a (mostly) Hindi podcast on matters related to public policy. And if you are familiar with Tamil, consider reading Alex Thomas’ excellent textbook on macroeconomics in the Tamil language.

It’s bad enough that people are turned off from learning economics because of badly written textbooks, bored professors and outdated syllabi. But the very thought that lack of accessible material in your mother tongue might be a stumbling block is an especially painful one. All the more reason to celebrate the work that people like Swapnil Karkare, Alex M. Thomas, Pranay Kotasthane and Saurabh Chandra are doing. And there must be many, many more, of course!

Speaking of the many more, a request: if you happen to know of work being done to help spread knowledge of economics (and related fields) in India’s many local languages, please do let me know.

Art and Economics

For the last three years now, I’ve been teaching a course called Principles of Economics to the first year students of the undergraduate program at the Gokhale Institute, and of all the courses I’ve taught over the years, this one is closest to my heart, by far.

This is true for a variety of reasons: introducing a subject (any subject) is always fun, and even more so when you can see students fall in love with it. When students “get” the power of economics – when they learn to see the world as an economist does – it is so much fun to see them realize that there is so much work to be done in this field. And when they begin to apply these principles in their own lives, well, what more could one ask for?

But one reason that is perhaps a little bit underrated is that I get to teach folks who aren’t all that convinced that they should be studying economics in the first place. Some enroll in the course simply because they aren’t sure about what else to do. Some enroll in the course because their parents recommended that they do so. Still others see this as simply a place to spend three years before doing an MBA.

In such cases, the challenge is to teach economics by first latching on to something that they will enjoy learning about. Pick, that is to say, a topic that interests them, and help them understand how economics has a role to play in that topic. And slowly but surely, use that insight to have them then ask the obvious follow-up question: what else becomes clearer for having studied economics? And once they hit upon the answer themselves (“why, everything!”), well, we’re off to the races! (See pt. 4 in this blogpost)

And I’ve tried cricket, movies… and art.

There’s no end to the list of topics I could try this with, of course. Why are YouTube videos typically 10 minutes or so in length is a good question to ask, for example. Or you could talk about how Spotify is changing the way music is created. Or the economics of a bhurji stall. The list is endless.

But precisely because I know so very little about it, I have a soft spot for art.

And the book that started me off on my journey about learning more about economics through art is a lovely little book called Vermeer’s Hat, by Timothy Brook:

Vermeer’s Hat is a brilliant attempt to make us understand the reach and breadth of the first global age. Previously, all those pirates, explorers and merchant seamen seemed to belong to a separate world from the one inhabited by apple-cheeked Dutch girls smiling pensively at bowls of fruit. What Brook wants us to understand, by contrast, is that these domains, the local and the transnational, were intimately connected centuries before anyone came up with the world wide web. A start was made on this kind of work a decade or so ago with all those neat little books on a single commodity – spice, coffee and so on. But lacking the necessary context, they soon started to seem tiresome and slight, a mere listing of unlikely contingencies. What Brook shows is that with a driving intellectual design and a detailed understanding not just of “here” but “there” too, a history of commodities and the way they circulate is no mere novelty but a key to understanding the origins of our own modern age.

https://www.theguardian.com/books/2008/aug/02/art.history

In the book, Timothy Brook speaks about eight of Vermeer’s paintings, and asks a deceptively simple question. What, he says, might we learn about trade in that era by looking at the objects within the paintings? Where did that fur hat come from in the Officer and the Laughing Girl? What about the map behind both of them? What does his painting of the view of Delft tell us about patterns of architecture, commodities trading and globalization more generally?

By the way, if you haven’t clicked on the links of those two paintings, please do take the time to do so. The website in question (essentialvermeer.com) is a lovely resource if you want to learn more about Vermeer, or for that matter about his techniques.

Imagine beginning a semester long course on international trade this way, rather than with a dull recitation of absolute and comparative advantage (I’m not saying the theories are dull, to be clear, but I am saying that the way they’re taught often is!). Economics can be brought alive by helping students realize that economics is about so much more than just one introductory textbook about the subject!

But the other reason for writing this post is that I think this would be a great way to learn more about India’s history (and her ancient patterns of trade) too! What if we tried to take a look at Indian art (paintings, murals, architecture, plays and so much more) and asked about the origins of objects within them, the style of depiction and the influences of different cultures, countries and creators? Both from an intra and an international perspective, my guess is that there would be much to learn and disseminate.

If you happen to know of YouTube channels/books/blogs/podcasts that cover this topic, please, do share!