Understanding Taiwan

A student recently got in touch asking about what he should read when it comes to understanding the current dynamics of Sino-Taiwanese relations.

This blog post is, in a sense, an answer to his question, but also a bookmark-worthy resource for me. And hopefully for you as well!

  • I’d recommend one beings by trying to understand Taiwan: it’s history, it’s society, it’s culture. And a good primer to begin with would be this blogpost by Tanner Greer.
    ..
    “The fact is that younger generations of Taiwanese, including the grandchildren of the waishengren have no memory of pre-communist China, have only distant relatives there, and have spent their entire lives living in freedom. This is an environment where the use of Taiwanese Hokkien is encouraged and Taiwanese nationalism has flourished. Thus very few people under 45 consider themselves Chinese.”
    ..
  • For additional reading, I heavily recommend this post by Noah Smith:
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    “Taiwan has one of the most progressive societies, if not the most progressive, in Asia. It was the first Asian country to legalize gay marriage, and sports a vibrant gay culture. Taiwan ranks as one of the most gender-equal societies in the world, equivalent to Norway and higher than France on the commonly used GII scale. The President, Tsai Ing-Wen, is a woman, and women make up 42% of the legislature. The country has actively pushed for gender equality in business, and the gender pay gap, at 14% in 2018, is smaller than in the U.S.”
    ..
  • Taiwan is big on democracy (and if you read Greer’s post linked to above, you will begin to understand why), and Taiwan is a good way to start to learn more about digital democracy. A useful way to begin would be to learn more about Audrey Tang. Listen to these two podcasts as well in this regard: the first one is with Azeem Azhar, and the second with Tyler Cowen.
    ..
  • Now, a post written in 2022 has to be about Sino-Taiwanese relations, right? The Wikipedia article about Cross-Strait relations is a good place to begin, and you may want to read this Wikipedia article too. (And while you’re at it, this one too!)
    ..
  • And it also has to be about semi-conductors, and that one company in particular. Read this briefing from The Economist as well, along with this essay by Pranay Kotasthane. One thing I have realized is that I haven’t read books about the emergence of the semi-conductor industry in general, and about TSMC in particular. If you have any recommendations, please send them my way. Thank you.
    ..
  • And after all that, perhaps one can then delve deeper into the issue that my student really wanted to get at: present-day geopolitics and strategy. Edward Luttwak on Twitter is an excellent source of information, and this essay by him is good reading. Tyler Cowen’s essay in Bloomberg is also good reading in this regard. And in a slightly older essay, Greer thinks through the implications of America not doing so well in a all-but-inevitable conflict with China over Taiwan.
    ..
  • If you are an Indian reading this blogpost, and are curious about how to think about this conflict from an Indian viewpoint, here are articles you might want to start out with. Here’s Nitin Pai on the issue, here is Shyam Saran, and here is an interview with Pranay over on Scroll on related issues.
    ..
  • What else? Well, follow Constantino Xavier on Twitter, and also Hamsini Hariharan, Ananth Krishnan (who also has a Substack on Indo-Chinese relations) and Manoj Kewalramani (ditto). Also Vijay Gokhale! Here is Takshashila Institute’s page on Taiwan, try this search link on for size too.
    ..
  • Finally, try using game theory to think through the implications? Use this as a starting point, but have fun (well, as much fun as is possible given the topic!) coming up with outrageous theories, and thinking through the consequences in game theoretic terms.
    ..
    There must be a million other things I could have linked to but didn’t. I look forward to adding more, so don’t hesitate to send in links to help that student of mine. Thank you in advance!

Catch ’em Young!

I spent the last week of 2021 teaching young kids economics, and what a time I had.


This academic year (2021-22) has been the best ever at the Gokhale Institute where placements at the Master’s level are concerned. More students have been placed than ever before, and at higher average CTC’s (Cost to the Company) than ever before. If you’re looking for quasi-anecdotal data about how tight this particular segment of the labour market is in India, I’ve got a story to tell you.

But this ought to worry us, as educators. If you believe that the physical, classroom-based education is indispensable when it comes to making people productive in workplaces, then we have a nice little natural experiment coming up. Folks who have graduated this past year, or will graduate this year, will join workplaces without having seen a physical classroom for the better part of the last two years.

If there is no noticeable dent in their productivity, ability to come up to speed, or in the pay they receive over time (relative to folks older by a couple of years or so) then, well, we have problems, no? The Emperor’s New Clothes saga in higher education is upon us, and interesting times lie ahead.

One of the implications of this evolution, I think, will be making explicit something that everybody in higher education has known for years, but have been loathe to admit in public. An MBA degree, or a Master’s degree in econ/stats is a stepping stone to either a job or to further studies. For the most part – not exclusively so – sure, and sure there are students and educators who don’t subscribe to the college-as-a-conveyor-belt philosophy. But they are a fast dwindling breed. The vast majority of higher education isn’t about learning.

And classes, examinations and results have therefore become a sham that we must all pretend to take part in. In private, students will happily tell you how aware they are that this is a sham, as will professors. But one is not supposed to say these things in public – or at least, one wasn’t supposed to say this in public until the pandemic hit.


One of the first things I taught these young kids was the concept of incentive compatibility. And if you think about it, the whole course was an example of this concept, because there were (praise be the lord) no examinations. No marks to be scored, no grades to be obtained, and therefore no comparisons to be made. They were there to learn, which worked out just fine, because I was there to teach.

And I taught ’em! Across the space of five exhausting but exhilarating days, I took them through the principles of economics, introduced to them the headache that is macroeconomics, told them about externalities and other causes of potential market failure, introduced to them the wonder that is the prisoner’s dilemma, and so much more. It was a whistle-stop tour through the kingdom of economic theory, and I had an absolute blast.

The students, if anything, seemed to enjoy the experience even more than I did. Our classes would begin at nine in the morning and get over by four in the afternoon, but the questions would continue beyond, and spill over onto dinner time. And as an econ-nerd who loves introducing new topics to people, I can’t tell you how it gladdened my heart so to be talking about the iron law of diminishing returns at eight in the evening, after a full day’s worth of classes.


Did the students “get” everything, one might quite reasonably ask. And I’ll be honest and say probably not. It was a lot to pack in to just five days, and not all will have been retained. And of what has been retained, not all will be fully understood.

But they left class every day wanting to learn more about the topics that they had learnt. They remained curious and inquisitive, they were willing to push back on topics and concepts they didn’t understand or instinctively disagreed with.

And the feedback session at the end of the fifth day was my favorite bit, for the consensus seemed to be that economics was such a fascinating subject precisely because there were no fixed, definite answers to many big picture problems. For better or for worse, this is exactly what makes the study of economics appealing to me, and that is why this assessment of the subject gladdened my heart so.


I have often wondered what a classroom bereft of both the carrot of marks and the stick of attendance might look like. I have suspected that the only incentive left, then, is the curiosity to learn more about the subject at hand. And my hunch, for a long time, has been that this will make teaching, and learning, a much more pleasant experience.

And while one five-day session is perhaps too little data on the basis of which to make sweeping generalizations, I will say this much: my thesis about learning isn’t quite as hypo as it was before those five days.


There are problems to be solved, of course. Scale was and remains a challenge, the logistics aren’t easy, this isn’t a cost effective way to teach, and the there is no guarantee that the learning will persist over time. And I’m sure you, the reader, can come up with a hundred other things that could be better.

But hey, I have learnt that is possible to teach economics to students between the ages of 13-16. Not just possible, but thoroughly enjoyable.

And I look forward to doing more of it, with many more kids, in the years to come!

Web 3.0: But What Is It Anyway?

The bad news first: I don’t really know. The word “really” is redundant in that sentence, I have no clue what Web 3.0 is about.

But writing about something, and that in the public domain, is a great way to learn, and what I’m going to try and do is build up a series of occasional posts about Web 3.0. Bear in mind that I am the exact opposite of an expert when it comes to this topic, and these posts are being written as much to help myself learn about this topic as anything else. But that being said, I hope you get to learn something from this exercise as well!


What makes for a “good” economic system?

A system, to me, is things that work together to generate some output. That output maybe planned, unplanned or both. The things that are working together may be living, non-living or both. They may be working together on the basis of a conscious plan, or otherwise.

An economic system is one (to me) in which these things that are working together have at least an implicit knowledge of the fact that there is a cost attached to whatever it is that they’re doing when they’re a part of the system. If they were not to be doing x, they could have done y instead. And so choosing to do x has at least the cost of not being able to do something else. There could be other costs as well. These costs could be measured in terms of money, or in terms of time, or perhaps something else. But those costs exist, they matter, and they can be (at least implicitly) priced. That makes it an economic system.

What is a “good” economic system? A good economics system is one in which some (and preferably all) of the following things happen:

  • As much output is generated as is possible…
  • using as little inputs as possible.
  • This output is generated in as sustainable a fashion as possible, that is, without destroying the ability to produce more output in the long run
  • All potential and actual sources of inputs are given a level-playing field as far as possible. One input isn’t discriminated against relative to the other.
  • The system works with as little friction as possible
  • The system has an appropriate level of risk-management built into it.

But what does this mean in practice, using real world examples? Consider the system that I am a part of, the education system at the Gokhale Institute of Politics and Economics, which is where I work.

  • We should be able to produce as much learning as possible
  • using as little of our teaching resources (classrooms, faculty members, software, non-teaching staff, electricity etc) as possible.
  • We should not work our resources into the ground over the long run – we should not work our resources too hard. It shouldn’t, paradoxically, become harder to recruit people into academia.
  • We ought to be indifferent to whether learning happens because of books in the library, faculty members in the classroom, or videos from Coursera or YouTube.
  • Requests such as letters of recommendation, transcripts to apply to foreign universities – all kinds of administrative tasks, really – should be handled as quickly and painlessly as possible
  • The system should be able to handle shocks (big and small). A faculty member not turning up on a particular day shouldn’t bring the system to a halt, and a pandemic shouldn’t bring operations to a halt either.

There’s much, much more to a “good” economic system, of course, but hopefully you see what I mean. Try and build up an idea of what is a good economic system for whatever system you happen to be a part of. It can be your household, your corporate job, this country or any other system, small or large.


Now, Web 3.0: rather than try to understand what it does in terms of the technology, or in terms of the jargon that it seems so very riddled with, let us try and understand it in terms of what makes for a good economic system.

That is, unless Web 3.0 adds to the things that makes a “good” economic system better, or reduces the things that makes a “good” economic system worse (or both), it doesn’t really change the world in any meaningful way.

So, Web 3.0…

  • Does it help increase the output of a system?
  • Or maintain the same level of output, while reducing the commensurate levels of inputs?
  • Does it increase the sustainability of the system?
  • Does it level the playing field for all inputs?
  • Does it reduce friction?
  • Does it help build in better risk management?

If it does all of these things, it really is a magic wand. If it dos at least one of these things better, but not at the cost of making any of the others much worse, then it is a useful thing. If it does none of these, it is plain hype.

This is my framework for trying to wrap my head around, well, anything. And hopefully it helps us understand Web 3.0!


I will say this much: writing this out helped me understand this write-up much better:

Send USDC from a wallet with your ENS to the entity’s ENS and get digital mirror assets back into your wallet. These assets are held in a mirrortable, which is an on-chain replica of a primary cap table maintained in an off-chain system like Carta for compliance purposes. The terms of these assets are kept current via periodic updates of the mirrortable’s smart contract.

https://balajis.com/mirrortable/

Read the rest of this write-up, and try and see if you can fit this use-case into my framework. In my next article in this series, that is exactly what I will try to do – and let’s compare notes! 🙂

Bertrand’s Paradox, Explained By Numberphile and 3Blue1Brown

… which, by definition, makes this self-recommending!

Figuring Out Specificity and Sensitivity

A useful Twitter thread to help you remember the formulas for specificity and sensitivity:

Happy New Year!

Here’s hoping for the best for all of us in 2022.

Happy New Year (in advance), everybody!

The Five Most Popular Posts of 2021 on EFE

5. Team “Kam Nahi Padna Chahiye”: An offbeat take on how to think about formulating the null hypothesis, by asking which problem would you rather avoid when hosting dinner parties:
avoid the problem of too much food (Team No Leftovers)
or
avoid the problem of having too little food to feed your guests (Team By God We Shouldn’t Run Out Of Food as Hosts)

4. Doing a PhD: This was a request post, in which I tried to answer a question a reader sent in. Short answer: PhD is more about signaling than anything else. Do it to earn street cred, but if you really want to learn, work, don’t study.

3. So You Want to Work in Public Policy: A post about how to think about working in the domain of public policy, and my thoughts about a short book that I really enjoyed reading a while ago.

2. Maximizing Soul: An essay about, well, maximizing soul. Read the whole thing, I’d much rather not try and describe this essay in a couple of sentences. My personal favorite among the things I wrote this year.

And finally, the most popular blogpost this year “Help Me Understand This, Somebody“. Why should this post be as popular as it is? I don’t have the faintest idea, but then again, nothing about April and May of 2021 makes any sense, so why should the metrics of this blog?

Visualization and the NFHS

A very quick post today, because the end of the year is proving to be anything but a holiday, alas.

My third post in the series about NFHS was going to be about a pet theme (and peeve) of mine: our inability to get better visualization for our data, and indeed better reporting of data in general. But there is good news on this front, finally – there is now an excellent resource that we can use to visualize the results of the NFHS-5 survey.

Here’s just one chart to whet your appetite: blood sugar level among adult women (high, or very high or taking medicine). Note that the chart for men is largely similar.

https://geographicinsights.iq.harvard.edu/nfhs-tracker-districts

This is great work, and kudos to everybody associated with this visualization project! 🙂

H/T: Shashank Patil

A thought provoking Twitter thread from Anup Malani

I usually keep interesting Twitter threads for Saturdays, but this one is deserving of additional commentary and additional reading links:

Unintended consequences, or externalities, or spillovers (some might say these aren’t really interchangeable terms) are a well studied phenomenon in economics, as Anup Malani himself says. Read the classic paper, and listen to many, many conversations over on EconTalk about the topic to get a better understanding.


Anup Malani says towards the end of that first tweet that he has seen economics give explanations for 1 (but not for 2, which we’ll get to later). So what are the explanations for 1? For us to understand the explanations, let us first take a look at the examples that Anup Malani cites in this thread:

And as he himself says in a subsequent tweet in this thread, these phenomena can be understood using simple price theory. Driving becomes safer as a consequence of the introduction of seat belt laws. What does one do with this increased safety? One can either benefit from it by maintaining the same driving speed as before, or one can “spend” the increased benefit by increasing the driving speed.

If, for example, you are the kind of person who thought you were a safe and competent driver before wearing seat belts, you might now think that wearing the seat belt makes you safer still. But you were ok with the level of safety you had before – you are now “extra” safe. But that’s “too” safe for you, so you up the speed at which you drive. Students who have studied basic micro before, kudos if you were reminded of this. If you haven’t formally studied micro before, please do watch that video.


So, price theory helps us “get” how to think about unintended consequences. Although this does raise the rather interesting question about whether one should have anticipated these effects in advance (us economists, we don’t like using simple words. We say ex-ante instead of in advance. It’s the same thing.)

And if we could have anticipated these effects in advance, then were they really unintended consequences in the first place? Something to think about, eh? Maybe that’s why these terms (externalities, unintended consequences and spillovers) aren’t really interchangeable?


But now we get to the second case. Part two of Anup Malani ‘s first tweet in this thread: that which does not kill you makes you stronger.

What are examples of this phrase? (Here’s the Wikipedia article about the phrase itself)

Vaccines, of course! They make you sick sometimes (you are, after all, injecting yourself with a dramatically weakened version of the virus), but they leave you stronger in the sense that you body “learns” how to cope with the virus if it actually does enter you body. Vaccines don’t kill you, and they make you stronger!

But that’s an example from the field of biology. What about economic systems?

Anup Malani gives excellent three excellent examples in his thread, I’ll just mention one over here. Please take a look at the other two as well.

Import of cloth from India, where wages were low, threatened the domestic British cloth-making industry. It didn’t kill this industry, but it did threaten it. And the British responded by increasing mechanization. And the rest is, well, literally history.


Now, this is where Anup Malani ‘s Twitter thread really takes off for me. Price theory, he says, helps us understand unintended consequences. What theory helps us understand “that which does not kill you makes you stronger”?

Anup Malani says we don’t really know.


Might Nassim Nicholas Taleb’s book, Anti-Fragile, have an answer?

Antifragility is a property of systems in which they increase in capability to thrive as a result of stressors, shocks, volatility, noise, mistakes, faults, attacks, or failures. The concept was developed by Nassim Nicholas Taleb in his book, Antifragile, and in technical papers.

https://en.wikipedia.org/wiki/Antifragility

I’m not sure, and I might be wrong about this, but I think the answer is yes, it does have an answer. Read, in the context of what we’re speaking about in this blog post, chapter 4 from this book very carefully. Here’s one excerpt from that chapter to help you get started:

Nietzsche’s famous expression “what does not kill me makes me stronger” can be easily misinterpreted as meaning Mithridatization or hormesis. It may be one of these two phenomena, very possible, but it could as well mean “what did not kill me did not make me stronger, but spared me because I am stronger than others; but it killed others and the average population is now stronger because the weak are gone.” In other words, I passed an exit exam. I’ve discussed the problem in earlier writings of the false illusion of causality, with a newspaper article saying that the new mafia members, former Soviet exiles, had been “hardened by a visit to the Gulag” (the Soviet concentration camps). Since the sojourn in the Gulag killed the weakest, one had the illusion of strengthening. Sometimes we see people having survived trials and imagine, given that the surviving population is sturdier than the original one, that these trials are good for them. In other words, the trial can just be a ruthless exam that kills those who fail. All we may be witnessing is that transfer of fragility (rather, antifragility) from the individual to the system that I discussed earlier. Let me present it in a different way. The surviving cohort, clearly, is stronger than the initial one—but not quite the individuals, since the weaker ones died. Someone paid a price for the system to improve.

Taleb, Nassim Nicholas. Antifragile (p. 76). Penguin Books Ltd. Kindle Edition.

Mithridization? Here you go. Hormesis? Click here.

This blog post isn’t the place to get into the details of chapter four from Anti-Fragile. Please, do read the entire chapter (and the entire book!)

It is, of course, all too possible that I’m entirely wrong in saying that this is a good answer to Anup Malani’s question. And if you think so, I would love to learn how I’m wrong.

But for the moment, this is my first pass answer to a fascinating question at the end of a lovely thread.

Wendover Productions on The Economics of Airlines’ Loyalty Programmes