Macroeconomics: An Introduction, by Alex Thomas (Pt. 1)

About five years ago, I went on a rant on my other blog:

I have developed, over the last seven years or so, a visceral hatred for textbooks. Its not that textbooks are all that bad – they’re limited, they’re expensive and they’re straitjacketed in terms of content and structure, but all of this together isn’t why I hate textbooks.
Its because we have students who demand a textbook in every single course. Over time, we have reached a mentality that says that a course must have a recommended textbook. Instructor must assign chapters from said textbook. Students must read chapters and solve end-of-chapter problems. Instructor will design paper on basis of said textbooks, students will write exam having prepared accordingly, and all is right with the world.

I’m not going to excerpt the entire rant, but on reflection, it is certainly true that I was on a roll:

And it gets even worse with the “end of chapter problems”. The expectation that the examination will have the same “type” of problems as does the textbook might be convenient in the short run, but it doesn’t teach you how to adapt to problems as you might encounter them in real life. Worse, and this is a point I’m going to write about at length in my next post, this approach simply helps you solve problems, not identify them. And in my opinion, identifying problems is a far more important skill today than having the ability to solve them – but more about that in a later post.
In short, then: textbooks are static, limited and structured ways to learn about a subject, and it is entirely possible, and desirable, that we enrich students knowledge about subjects by giving them much, much more to learn than just a textbook.

Five years down the line, my opinion on textbooks haven’t changed all that much. I still cringe when students in courses I am teaching ask me for “a” recommended textbook to “prepare for the examination”.

They’re being quite rational from their perspective: they want to maximize marks while minimizing effort. Their microeconomics professor would be proud. My problem lies beyond their request, and beyond their rationality in having framed their request the way they have. They are simply responding to the environment we’ve placed them in, and it is the environment that I have (serious) issues with.

And the textbook authors are responding to their incentives, in turn. If we accept the educational system as it currently exists, then of course we should have chapters, and end-of-chapter problems, and question banks, and answer keys supplied to accredited professors. It has become an industrial complex, for all the participants respond, rationally, to the incentives the educational system has set up for them.

And so it goes, year after dreary year.

And then you see something like this in the introduction of a text:

I strongly recommend and encourage the use of various texts (books, journal articles, government reports, fiction, newspaper articles and textbooks) in the teaching of any course in economics. This stems from my rather modest experience of just over 15 years as a student and teacher of economics. While the use of varied texts is challenging for both the teacher and the student, I firmly believe that the long-term benefits far outweigh the short-term costs, and that it truly contributes to good learning as it enables the students to become better arbiters of knowledge. After all, we live in the age of information abundance, and perhaps the most valuable skills are the ability to identify credible sources of information and the ability to evaluate, with sufficient confidence, contending arguments, perspectives and standpoints.

Preface, Macroeconomics: An Introduction, by Alex M. Thomas

In other words, this is a textbook that is not looking to minimize the efforts of either the teacher or the student. The very opposite, in fact. As Alex says, he is looking to maximize the long term benefits (one might call this “learning”). Not the short term benefits, note (one might call this “marks”).

And it gets better!

Finally, this book adopts a problem-setting approach rather than a problem-solving one, as is the case with most economics textbooks. To put it more clearly, this text helps you to identify, conceptualise and discipline a macroeconomic problem. Therefore, this book does not contain exercises in problem solving, but it contains discussions and questions that make you think about the nature of assumptions, the logic of the theory, the limits of the theory, the interface between theory and policy, a little bit about the gaps between theory and data, and, occasionally, the nature of past and present economic thought. Therefore, this book aims to provide you with an introductory) immersive experience in macroeconomics.

Preface, Macroeconomics: An Introduction, by Alex M. Thomas

Why do I say it gets better? From another of my blogposts, also written five years ago:

In examinations, teachers frame the questions, and students answer them.
So obvious, so matter of course, so banal is this statement that it takes a little time to realize how horrible a system this is. All we’re doing, when we ask students to do this, is learn the subject well enough to be able to answer whatever question we throw at them. And therefore, when they get out there in, y’know, the real world, they ask for a problem, so that they may solve it.
But in the real world, more often than not, you’re paid to frame the question.

I’m happy to spell this out as many times as it takes: you attend a course in order to learn. A way to check how much you’ve learnt is to write an examination.

Somewhere along the way, this has mutated into: you attend a course in order to score marks in an examination so that you get a job/get into a better college.

Jo kuch ratta maara tha, sab saala pel ke aa gaya, aur doosre din bhool gaya” is funny because it’s true.

So, in a standardized, run of the mill course, this textbook is a nightmare. No end of chapter problems, no question bank, and (the horror!) literary references and (shudder!) poems instead.

Which, of course, is exactly why I can’t wait to read it. I’m done with the first chapter, and will put up my thoughts about it soon. There’s a lot that I love about it, some things that I have questions about, and some areas of disagreements.

But if I’ve understood the spirit in which the book has been written, I think Alex M. Thomas will count my experience thus far as a success.

Quick Thoughts on Google Chat

I’ve been a fan of Google ever since I saw for myself how much better the search engine (how quaint, no?) was compared to the alternatives, and I’m old enough to remember what a revelation 1GB of storage was for inboxes. Chrome in 2008 was a game changer, I’m an unabashed Android fan, and I spend more than half my life in Google Drive.

I’ll never, ever, ever forgive them for their cold blooded murder of Google Reader, but let’s not get hung up on that for now. Feedly is here and it works just fine.

But what was a hobby (learning more about how cool Google can be) suddenly became an utter necessity when the pandemic took over our lives last year. Working remotely has been a challenge for all of us, and utilizing all of Google’s features was no longer a luxury, but a necessity.

Figuring out how to get your colleagues (and in my case, our students) to learn how to use all of Google’s features has been both a challenge and a pleasure, and most of us at the Gokhale Institute are now fairly comfortable with the following tools/apps: GMail, Google Calendar, Google Classroom and Google Drive.

What especially helped was their decision to launch the sidebar on the right, in GMail, that allowed for most (but not all!) of these tools to be accessible from within just the one tab.

One feature in particular that we’ve made fairly heavy use of has been a separate tab for Google Chat (go to Most of us know Google Chat as that little box on the left in our GMail tabs, but the separate stand-alone tab is much better. You could have chat rooms (about which more in a bit). But most importantly, a separate tab made more sense because visually, chatting was easier in a separate tab rather than those little pop-up windows in GMail.

That apart, the ability to use “bots”, such as Polly for conducting polls and the Meeting bot for setting up meetings1 has been really helpful this past year.

But yesterday, they announced some serious updates to all of these features. Dieter Bohn has a quick explainer at The Verge, but as is usual with Google, the full feature set will be “coming soon”. But here are my quick reflections on whatever it is that we’re able to to do right now. Note that I work in a university, not a conventional office. YMMV, as they say:

  1. Starting projects with colleagues/students is much better in a chat room in Google Chat than via email. The discussion happens much more quickly, responses are searchable, and threaded discussions make it much more convenient.
  2. There are three tabs available up top in all chatrooms: the actual chat itself, files and tasks. Files shared in the chat room are now available to see at any point of time, and now they even open up right there, in the chat window. Much more convenient. Note that seeing comments etc requires the document to be opened up in a separate window/tab. Tasks is basically Google Tasks (a tool which almost nobody uses), but assigned to work for the group that is in that particular chat room. Tasks, used as a group, is much better than Tasks in GMail. A richer feature set here would be awesome, but that’s another blogpost by itself.
  3. Add in the Polly and Meeting bots to your chat rooms (and please let me know if you know of other good bots to deploy)
  4. Stuff I wish they’d add: the ability to pick a message and reply specifically to it (as in Whatsapp) is sorely missed. Conversations would be so much more streamlined if this was around.
  5. Chatrooms are searchable by person and by date, among other things. The trouble is that most people won’t know that this is possible, and Chat doesn’t (yet) have the drop-down menu in search like GMail. Most folks don’t know about the drop-down menu in GMail search, but that’s another story.
  6. Google Chat now has the same bar to the right that GMail does: Calendar, Tasks and Keep show up over there. Education specific request: throw in Classroom there too?
  7. While we’re at it, why can’t all Classrooms automatically have chat rooms created? Why can’t files shared on Classroom automatically sync with this chat room? Why can’t assignments given in Google Classroom automatically sync as tasks in these chatrooms? This would help so much!
  8. Setting up a calendar appointment, or starting a Google Meet call is possible from within the little box you use to type messages in Google Chat. When you set up a calendar invite, it automatically invites all participants in that chat, which is great.
  9. My own personal workflow involves Feedly, Roam, GChat, GDocs, GDrive, GCal. Hopefully, API’s will allow one to add in Roam and Feedly on to the sidebar in the near future. If that becomes possible, I’m happy to live entirely inside Google Chat when I’m working, with minor excursions into the Twitter tab every now and then. From a purely selfish perspective, maybe Google can buy out Feedly and Roam (hint, hint)? Keep as a note-taking tool just isn’t good enough!
  10. Finally, any educational institute anywhere: if you need help learning about this, or setting it up, or just a call where you want to see how we use these tools at the Gokhale Institute, I’m just a shout away. Happy to help, any time 🙂
  1. it is a life changer once you get the hang of it, trust me. It uses NLP, and you can type stuff like “set up a meeting with xyz at ten am tomorrow morning” and it does the rest. Yes, really. It is an old feature, used to be available in Google Calendar years ago, but is now sadly missing from there[]

Economist Writing Everyday

That’s a blog I came across thanks to MR, and if you’re a student learning about economics, this is very much the kind of blog you should be reading.


  1. Updated regularly, which should serve as inspiration
  2. Written in an easy, conversational style (ditto)
  3. A lot of interesting blogposts that serve to help you think through concepts you may have learnt recently (students who’ve just embarked on macro might like reading this post, for example)
  4. And a meta point that I’m going to spend the rest of this blog post on, so please continue below the fold 🙂

One post that Tyler Cowen himself linked to in his post on MR was this one, about academic publishing:

There are a lot more people writing academic journal articles.
There is a lot more well-executed economic research.
The teams of co-authors on papers/projects have become much larger.
The number of journals whose prestige is commensurate with a tenured position at an elite school has grown slower than the total faculty employed by elite schools.
Economics research has become more expensive and labor intensive.
  1. I’ll get to my thoughts about this in just a bit, but I want to spend a little bit of time in helping you learn how to draw parallels.
    1. Those points noted above, they work just as well if you replace journals with universities, and faculty with applicants.
    2. Further reading, if you’re now suddenly interested in the topic. Also ask yourself if your answer changes depending upon whether you’re in Harvard or not (or have been published in a top-tier journal or not – same thing, for the purposes of this post)
    3. “Where else can this be applied?” is a question that should be front and center when you’re learning a new concept is the larger point I want to make.
    4. So when you learn about the pyramid in publishing, ask if it can be applied to the world of student applications. To, say, the IPL. To, say, becoming a “top lawyer”, or a “top doctor”…. you get the drift.
  2. The rest of the post is a wonderful explanation of how to build a simple model to help you arrive at the equilibrium. More people should learn this skill, and more universities should teach this skill!
  3. The author’s conclusion? More papers should be published by top journals, which is tantamount to saying more students should be accepted by Harvard. Who is right? Mike Makowsky or Tyler Cowen? Why? If your answer is both, what makes student applications different from paper submissions? What a wonderful set of questions to think about!
  4. This blog (not just the blogpost, the blog) gets better from here on in because they’ve published a follow-up post on this topic!
    1. It’s written in “yes, and” style, rather than a “no, but” style, which is a lovely thing to see
    2. It asks this question: “As an academician, what are you optimizing for?” And employing the concept of division of labor, Jeremy Horpedahl argues that if you’re the kind of academician who likes to teach, maybe it’s ok to not be published in a top 5 journal. If you’re the kind of academician who likes to research, on the other hand…
    3. Homework: how does this work in the case of student applications?
  5. And all this from just two posts on the blog! I’ve subscribed, of course, and I would strongly recommend you to do the same.
  6. I’m going to be a little greedy, and give one final recommendation. This post on Identifying Ideas That Motivate You is great reading for young would-be researchers.

3Blue1Brown on linear transformations and matrices

The whole series is excellent, but this video in particular – right from the first quote onwards – might help you understand what the point of matrix algebra is. Visualization really, really helps.

3Blue1Brown is magic: all hail the comedy of the commons!

Surekha Pillai

Twitter is poorer today, not by design, but by absence.

I never met Surekha Pillai, never even spoke with her on Twitter. I discovered yesterday that she was in PR. My point is that I followed her on Twitter for no other reason than the fact that she was the definition of Twitter done right. Always positive, always cheerful, always ready to help, and the number of times she used Twitter’s magic to amplify voices is beyond reckoning.

Search for “Surekha Pillai” on Twitter, and read what people have to say about her, and learn therefore what “yes, and” as opposed to “no, but” means in practice.

Meant in practice.

Screw covid.

What Makes For a Good Communicator?

Sushmitha Kanukurthi, a good friend (and asker of difficult questions!) left this comment on last Friday’s post:

I wish you would elaborate on what it means to be a good communicator … how do you articulate effectively for e.g.?

Nice, easy, no-pressure question to tackle on a Friday morning! 🙂

But let’s go ahead and try and break it down:

  1. One way to think about communication – you have a structure of interlinked thoughts in your head, and you want to transfer it into someone else’s head.
  2. Before you begin this transfer, which is bloody hard, it would help to have your own structure as clearly constructed, and as simply constructed as possible.
  3. At the risk of being a little meta: I have thoughts about what makes a good communicator in my head, and I would like to transfer these thoughts into your head, via this post. This post thus becomes the transference mechanism.
  4. Writing this post is difficult enough. But boss, it would be a lot easier if I was clear in my own head about the topic! Also: being clear about it is different from being “right” about it. That’s a whole other topic, and we’re not getting into it today.
  5. So that’s the first requirement of being a good communicator: being clear in your own head about the topic at hand.
  6. Now, this is where the whole thing becomes tricky, and you’d do well to pay attention: over time, you realize that the best way to be clear in your own head about a topic is by writing it down.
    1. This is not me dispensing gyaan. This is me quoting other folks. I just happen to be in complete agreement.
    2. This is the quote: “The Arabs have an expression for trenchant prose: no skill to understand it, mastery to write it.”
    3. So if you’re asking how to be a better writer, it is about thinking clearly. If you’re asking how to think clearly, write. The bottomline: start writing.
  7. Don’t worry about whether it is badly written or not. Don’t worry about whether it makes sense or not. In fact, you’re guaranteed less than desirable quality the first few times.
  8. No, I’m not going to quantify the word “few”. It would be a very boring world if the answer were to be the same for all of us. But forget about quality, just write.
    It is like learning how to ride a bicycle. We all struggle the first (ahem) few times, and then it comes naturally. But we all have to stumble the first few times, now what to do.
  9. After the first few times, start to worry about “better”. And better is often about removing the bad parts from your essay, rather than trying to add the good stuff in. A sparse, elegant essay isn’t written at the first go. It is what is left at the end of ruthless editing. Write a first draft out, and force yourself to cut it down to 2/3 of the original length. What you’ll be left with will be good communication.
    And if you are the kind of person who is hard on yourself, find solace in this: it may not be good by your standards, but it will be better than the first draft.
  10. Writing is a form of teaching, and teaching forces you to be clear about stuff you are thinking about. Write, therefore with an audience in mind, and that audience is your student. Will your student have learnt for reading what you have written? If not, re-write. If yes, stop rewriting.
  11. Practice. Practice everyday. Everyday you get a little bit better. Have you ever experienced that feeling of surprise at the end of a long walk on the beach, when you glance back and see how far you’ve come? Your writing today won’t be much better than your writing yesterday, but your writing today will be much better than your writing was on the 11th of June, 2020.
    So long as you wrote everyday between that day and today, of course 🙂

That would be my answer to Sushmitha’s question. I wish (for my own sake) that I had an easier answer!

What Have State Legislatures Been Up To Last Year?

First off, have you heard of PRS Legislative?

PRS tracks the functioning of the Indian Parliament and works with MPs from the Lok Sabha and Rajya Sabha across political parties and MLAs from various states. PRS provides a comprehensive and credible resource base to access Parliament-specific data, background information on Parliamentary and governance processes and analysis of key legislative and policy issues.

If you are a student of the social sciences in India (and who isn’t), this is a wonderful resource. It was started in the year 2005, and has provided stellar service to students of India for a very long time. See this, for example, if you are starting out in the study of public finances, or pretty much anything from this page.

But today’s post is about a specific report published by PRS recently: the Annual Review of State Laws 2020.

The Constitution of India provides for a legislature in each State and entrusts it with the responsibility to make laws for the state. They make laws related to subjects in the State List and the Concurrent List of the Seventh Schedule to the Constitution. These include subjects such as agriculture, health, education, and police. At present, there are 30 state legislatures in the country, including in the two union territories of Delhi and Puducherry.
State legislatures also determine the allocation of resources through their budgetary process. They collectively spend about 70% more than the centre. This implies that much of what affects citizens on a regular basis is decided at the level of the state. For a detailed discussion on the budgets of all states, please see our annual State of State Finances report.
This report focuses on the legislative work performed by states in the calendar year 2020. It is based on data compiled from state legislature websites and state gazettes. It covers 19 state legislatures, including the union territory of Delhi, which together account for 90% of the population of the country.

Tucked away under these paragraphs is a short one that will bring a wry smile to any Indian researcher’s face. It speaks about how information (and data) from India’s state legislature’s is hard to obtain. That, trust me, is putting it mildly.

Consider this:

The crowds that throng Mantralaya in Mumbai bear testimony to the fact that, apart from opacity in rules and processes which inhibit the common citizen getting her work done, there is still a lack of access to the right information and to the right persons in government who can and ought to meet the expectations of the common woman/man. The Maharashtra government website is woefully inadequate when it comes to informing the citizen about the procedures she should follow to get a particular work done. The website is focused more on putting forth not-so-useful information on departmental activities rather than on the steps needed to secure a particular benefit or license. Government departments need to focus on online processes for securing permissions, with human
interface being kept to a minimum.

Please read the whole thing, pp 26-37 in this document, to get a sense of what needs to be done for a state like Maharashtra. Leave aside the question of the other states in the country!

But when a person who has definitely not left aside the question of the legislatures of the other states in the country takes note of the PRS’ annual review of state laws, it certainly behooves us to pay close and careful attention.

To return to PRS, the annual review has not been done in the best of times. After all, 2020 saw the first wave of the pandemic, though, in principle, meetings can also be virtual. As a benchmark, the Parliament met for 33 days in 2020. Pre-2020, these 19 states met for an average of 29 days a year. In 2020, they met for an average of 18 days. Before the pandemic, 29 days in a year? Had it not been for this report, I would have expected the number to be much higher.

… and Bibek Debroy’s take on the report is not encouraging. Not, I hasten to add, a criticism of the report itself. Rather a criticism of the subject of the report: the state legislature and the job they’ve done this past year.


Read the whole report, please, but this chart is perhaps the most instructive:


3 out of every four bills that have been passed in state legislative assemblies were passed not more than one day after they were introduced. That, if you ask me, is too little debate.

There is a lot more at the link, of course – please do read the whole report. And if you’re looking for additional reading, this speech by Bibek Debroy would be a good place to start.

The Via Negativas of Public Policy

I learnt of the phrase by reading Taleb:

[I]n practice it is the negative that’s used by the pros, those selected by evolution: chess grandmasters usually win by not losing; people become rich by not going bust (particularly when others do); religions are mostly about interdicts; the learning of life is about what to avoid.

And it is wonderful advice of course, always worth keeping in mind: sometimes the best way to learn is by cutting out the bad parts, rather than trying to add in new good ones. There is merit to both, of course – cutting out the bad and adding in the good. But maybe cutting out the bad ideas first is a, er, good idea?

Losing fat before adding muscle is one way to think about it.1

And so also with public policy! Pranay Kotasthane, co-author of Anticipating the Unintended, has a lovely video out on this topic:

Definitely worth a watch, and while I am tempted to list out the eight, I won’t – for at the margin, some of you might be tempted to not watch the video 🙂

But I’ll militate against the spirit of this post, and add one of my own to the list that you’re about to learn: time.

I think a student of public policy ought to avoid short-termism. Fancy pants speak that simply means don’t just think about the short term benefits, but also worry about the long term consequences.

Unfortunately (public policy is hard!) policies have a way of sticking around for long after they’ve outlived their usefulness, but that’s a story for another day.

For the moment, please watch the video 🙂

  1. I’m good at spouting theory, not so good at the practice![]

The TALISMAN Heuristic

Thinking about real world problems is impossibly hard. Any story you tell yourself about the world is necessarily an abstraction.

What does the world abstraction mean? The Merriam-Webster dictionary tells us that “from its roots, abstraction should mean basically “something pulled or drawn away”.” So when you tell yourself a story about the world, you are pulling something, or drawing something away from reality.

What are you drawing away from reality? The parts of reality that seem important, interlinked and informative to you. So for example, when you wonder why the prices of onions are so damn high, you try to “pull” out of our reality those parts that you think will help you explain why the prices are so damn high.

Now, you are the captain of this ship – the one that is about to undertake this intellectual voyage of discovery. You are free to taken on board any parts of reality that seem relevant to you. Unfortunately you cannot take on all of reality, because then, hey, you aren’t pulling or drawing something away from reality. You’re trying to take on all of reality! And that is difficult impossible to do.

So you might choose to take on weather patterns, inflation, and the part of the country that you live in. These might help you arrive at a way to think about this specific real world problem: what is causing the prices of onions to be so high? Could be, you think to yourself, because of unseasonal rains, could be because of high inflation and it could be because you live in a tony part of a town/city that tends to have high prices of vegetables.

Congratulations, you’ve built a mental model! Don’t worry (yet) about whether the model is correct or incorrect. Don’t worry about whether you can gather the data required to test out your model. Don’t worry about whether the model will work next year, or in another part of the country. You’ve fashioned for yourself a story, and the story goes like this: x is seen in the world because of y. Specifically, high onion prices are seen in your world because of the weather, because of inflation and because you live in (say) Pune.

Savor this moment of victory, for we’re about to add in some complications.

The first complication is that you haven’t taken into account everything that influences the prices of onions. Maybe there’s a transporters strike? Maybe there’s been a pest attack on onion crops? Maybe a restaurant in your area has purchased an unusually large quantity of onions just a little before you went out to buy onions? Maybe the vendor was in a bad mood, and is charging you high prices for no good reason?

Some of these questions make sense, others do not. My point is that once you start to think about the problem in greater detail, you might realize that there are many other things apart from your three factors, that at least have the potential to raise onion prices.

But pah, you say to yourself. By this logic there will be no end to this exercise. You have, you tell yourself, chosen the factors that are likely to explain most of the increase in prices. Sure, you say to yourself, there are other causal factors out there. But these three? These, you aver to yourself, do most of the heavy lifting. And so you have chosen to “pull out of”, or “abstract away from”, reality these three alone.

A good modeler always bears two things in mind, therefore: her skill is about identifying1 the factors that are most important. But a good modeler also always worries about whether she has missed an important factor. A good modeler therefore always walks that painfully thin line between certitude and hubris. And this is hard.

But now we’re faced with a new problem. Of the three factors that we have chosen, which is the most important? Is it all about weather, and not at all about inflation and location? Or is it almost entirely about inflation, and not so much about the other two? Or… you get the drift.

Which, finally, brings us to the point of this essay: The Truth Always Lies Somewhere in the Middle. Corner solutions aren’t impossible – it is certainly possible that it is only the weather that is causing the prices of onions in your neighbourhood to be so damn high. But I would say that it is unlikely. Location almost certainly is an influencing factor. And so also is inflation.

In fact, it’s worse, because for reasons discussed above, the truest shape to surround The Truth is some impossibly complicated polygon. We’ve chosen to abstract away from this polygon only three factors, and so we have the luxury of thinking about where The Truth might lie in this triangle.

But even in this simplified model, we should fight the urge to corner The Truth into a single vertex. It’s almost always more complicated than that.

  1. Is Thai cuisine good or bad?
    If you were to ask me, good! But are there Thai dishes that I don’t like? I should be clear: this is not a dish I have eaten, but I (unfortunately) have a mental bias against even trying this dish. Given what little I know of Thai cuisine, the loss is almost certainly mine – but hey, it is what it is.
    So is Thai cuisine good or bad? If you were to ask me now, after that last paragraph, almost entirely good.
    You see how what I choose to abstract away from reality helps me learn more about where The Truth might lie?
  2. Is Sachin Tendulkar a great batsman?
    In my opinion, almost definitely so. Now, I’m a Sachin acolyte. But even I, a rabid Sachin fan if ever there was one, know about his fourth innings average. I know that McGrath got the better of him in ’99 and (sigh) ’03. And so on and so forth. So on the Great-Not Great spectrum, I would place him very very close to the Great end of the spectrum.

Reasonable people can and should disagree about where on the spectrum The Truth lies. But a discussion becomes impossible, and therefore counterproductive, if you insist on clinging to just one tiny little dot in reality called Great (or Not Great).

This applies to economic models, political leaders, vaccination policies, American Presidents – and Thai cuisine and Sachin’s greatness, and everything else besides.

The Truth is mostly unknowable (and that is bad enough). But for us to have the hubris to think that we can pin it down to just one part of a binary is an extremely dangerous thing, and I think we would all do well to try and not fall into that error.

What explains the title of this post?

Well, I have Aadisht to thank for it. He has noticed, as perhaps you have, my tendency to use this phrase quite often in my posts here: The Truth Lies Somewhere in the Middle. Now, the abbreviation of this phrase doesn’t exactly roll off the tongue easily. TTLSITM isn’t likely to win me any marketing awards, alas.

But consider this magnificent wordplay:

Truth Always Lies Inexorably Somewhere in the Middle of Assertion and Negation

That’s a talisman I’m very happy to claim ownership of!

There just remains the small matter of deciding upon a suitable compensation for Aadisht’s time and expertise. But if you think about it, the idea was mine, and it was just the acronym formation that he contributed.

So between refusing to even acknowledge his contribution and giving him all the credit…

  1. and then verifying – this exercise us economists call econometrics, and we get very excited about it[]

On The Optimal Incentivization of Bureaucracy

Incentives matter. That is how I (and every other economics professor lucky enough to teach principles of economics) begin my classes every year.

Consider these sentences:

The central tasks of a modern state can be placed in three broad categories — maintaining the rule of law, providing public goods to citizens and using fiscal tools to redistribute income.

An efficient bureaucracy is essential for a successful state.

The efficacy of a bureaucracy is dependent on the incentives or disincentives that individual civil servants face when they take decisions.

Bureaucrats, policymakers, students of public policy and us professors should read this excellent paper. But if you are a student of economics, just beginning your journey in the Dark Arts, you should definitely read this paper.

Why? Three main reasons:

  1. It is a wonderful way to understand why incentives matter
  2. It helps you understand why government offices (and their cousins) function the way they do
  3. Trying to understand the Indian economy without understanding this aspect of it is an impossible task.

The paper is titled “Bureaucratic Indecision and Risk Aversion in India”, and is freely available here. The authors are Sneha P, Neha Sinha, Avanti Durani, Ayush Patel and Ashwin Varghese. It is an extremely accessible paper, in the sense that there are hardly any pre-requisites for you to read it in its entirety, and if you take notes, the paper is guaranteed to leave you with a ton of reading material. All those are the cherries on top: the biggest advantage is that you get a much better understanding of why the Indian bureaucracy is the way it is, and what could be done about it.

Here are my quick reflections after having read the paper:

  1. If you are a student reading this paper, you might enjoy encountering prospect theory at the outset. Again, it is a great way to connect the dots between what you learn in a classroom and its real life application. (There’s further reading, if you are so inclined)
  2. The second section is (to me) the meat of the paper. The title is “The Causes of Bureaucratic Risk Aversion”, and the authors list out 12 in all. These are grouped under three separate headings. As a mnemonic for myself, I think of them as Structure, Culture and Nurture
    1. Structure is Organizational Design: whether through over-monitoring, not enough discretion being given, an overload of bureaucratic responsibilities, the typical bureaucrat simply doesn’t get the time, the bandwidth or the incentive to not be risk averse. In plain simple English, the authors are saying this: if you or I had been a bureaucrat, we would have done exactly the same things that our bureaucrats have been doing for years. And this is so because like our bureaucrats, we too would have responded rationally to the operating structure we are a part of. It is not the bureaucrats that need to be changed, in other words, it is the organization design of bureaucracy that needs to change. Or that is my understanding of the first half of this section.
      But when it comes to structure, the latter half of this section speaks about the way candidates are selected, about how they are trained and mentored and about how they are (under)paid. Each of these are important to understand, and I especially liked how benchmarking and comparisons were made using examples from Singapore, Malaysia and Indonesia. Speaking of which, please read Gulzar Natarajan on entrepreneurship as a desirable trait in a bureaucrat, and please see this website from Malaysia.
    2. Culture is Institutional Norms and Culture: Please (pretty please!) read the whole section. It is an eye-opener. Plus, it is full of delightful nuggets. For example, I learnt by reading this section that the Official Secrets Act doesn’t define what a secret is, but forbids government employees from revealing them.
      The authors say that accountability to process, rather than outcomes is a problem. Now that gives me a delightful problem to mull over for a long time to come. How to reconcile this point (which is, I think, fair and valid) with this post (which also, I think, is fair and valid? Thoughts and suggestions welcome!
      Shleifer and Vishny (1993) and Becker and Stigler (1974) are two papers cited in the last part of this section, and as a student, they are absolute must-reads.
    3. Finally, Nurture is Political Pressure: This section is about your political boss (or bosses, in some unfortunate cases). Anybody from the corporate world will immediately draw the link between this and the dreaded “dotted line manager”. Similar problem, and similar outcomes.
  3. What can (and should) change is what this concluding section is about.
    1. I loved the idea of linking public sector salaries to private sector wage levels (although as statistician I can’t help but think about how that might actually work in India)
    2. The Committees timeline is wonderful for students, in the sense that gives you a quick way to understand what has happened in this space since independence, and the enthu-cutlets can dramatically expand their “To Read” list.

As additional reading, should you have the appetite for it, here is what I would recommend:

  1. All posts tagged “Bureaucracy” from Gulzar Natarajan’s excellent, excellent blog.
  2. An old, tangential but delightful read: English August
  3. Ch06 of this year’s Economic Survey