Tag: alex tabbarok

Is There Such a Thing as Development Economics?

Alex Tabbarok says no:

I used to think there was such a thing as development economics. There are still richer and poorer countries, of course, but is there a “development economics,” a special type of economics for poor countries? I don’t think so. Maybe there once was. In the twentieth century, divergence in per-capita GDP increased big time and it was a burning question why poor countries weren’t on the same development path as the developed nations. Starting around 1990-2000, however, we have seen convergence. Most countries are now on the same path. Poorer countries and richer countries are becoming more alike, sometimes for good and sometimes for bad.

https://marginalrevolution.com/marginalrevolution/2022/08/there-is-no-such-thing-as-development-economics.html

Here’s the Wikipedia article on what constitutes development economics:

Development economics is a branch of economics which deals with economic aspects of the development process in low- and middle- income countries. Its focus is not only on methods of promoting economic development, economic growth and structural change but also on improving the potential for the mass of the population, for example, through health, education and workplace conditions, whether through public or private channels.

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

Both Alex’s definition and the Wikipedia definition focus on how low- and middle- income countries need a different kind of economic theory when it comes to growth in these parts of the world. But why do these countries need a special kind of economics?

I suspect an answer most economists would agree on (talk about courting controversy!) is that these countries are likely to have a poorer quality of institutions and property rights. The legal system may not work as well as intended and the quality of political institutions might be worse along at least some dimensions, and that’s just for starters. So it’s not so much the case that a special kind of growth theory is needed, but that some of the assumptions underpinning the model are fundamentally different.

But as Alex mentions in his post, these assumptions may not be applicable, because convergence has taken place. The post is difficult to extract from, and I would recommend that you go ahead and read it in its entirety. But perhaps the most surprising thing in Alex’s latest post is the fact that this convergence has happened because poorer countries have caught up, more or less – but also because richer countries have become worse along some dimensions:

More generally, poorer and richer countries face many of the same problems today: infrastructure, low-skill workers and technological change, climate adaption and so forth. Is the latest paper on cash transfers, pollution, or corruption about a poor country or a rich country? It’s hard to tell. Poor countries still have their own unique problems, of course, but those problems are best analyzed by country rather than by income category. India is not the same as Thailand or Peru. I see little that unites poor countries under the rubric development economics.

https://marginalrevolution.com/marginalrevolution/2022/08/there-is-no-such-thing-as-development-economics.html

And anecdotally, I’m sure we’ve all experienced ways in which poorer countries are not just better off than before, but also have materially better institutions and processes.

The question is, does that then mean that there is no longer such a thing as development economics?

I would disagree with Alex’s stance, and say that development economics very much remains a relevant subject, and that for two reasons.

First, because with convergence, we’re not answering the same question that we were earlier – it is not so much about the fact that we need to focus on how to have poor countries grow faster, but just about how to make the world grow faster. There still remain, to be clear, countries that remain poor, and even within countries that have developed faster, there are regions that remain poor – but the focus of development economics should be different today than it was, say, in the 1960’s.

But that brings me to my second point. I define development economics slightly differently. When I take classes on development economics, I say that this is a subject that tries to find out the answer to three questions:

  1. What does the world look like?
  2. Why does the world look the way it does?
  3. What can we do to make the world a better place?

And viewed from this framework, it is the answer to the first question that has changed from about sixty years ago. Figuring out why it has changed is now a fascinating part of development studies. And the lessons one can learn by thinking about this helps us try and figure out what we can do to make the world a better place. To give you just one of many possible examples, you might want to think about which factors helped South Korea grow so rapidly in the last six to seven decades, and then ask which of these factors are replicable in an Indian context today. Not all factors will be applicable, and India today is not what India was back then, nor is it today what South Korea was back then.

Also, Pakistan cannot learn the same lessons that India might, because the ground reality in both countries is different in terms of resources, climate, geography, population, income levels, political institutions and so much more. And Sri Lanka will have a different set of lessons that are applicable, and all the African nations is a whole other story… and well, so on. Alex mentions this in his blogpost, of course.

But while it is true that there is little that unites poor countries today under the rubric of development economics, I don’t take that to mean that there is no such thing as development economics. Rather, I would argue that this simply means that the low hanging fruit in development economics have been picked, and development economics has now become an even more challenging and interesting field than before.

But “what can we do to make the world a better place?” will forever remain a valid and urgent question, so development economics, for me, will remain a fascinating subject to think about.

Parsing my Favorite Definition of Economics

My favorite definition of economics can be found at the start of Cowen and Tabbarok’s textbook:

Economics is the study of how to get the most out of life

There is another excerpt that is worth reading in this regard:

Alfred Marshall called economics “the study of mankind in the ordinary business of life.” This was the enterprise of Marshall and Adam Smith and Friedrich Hayek and Milton Friedman: they tried to understand what people do and the implications of their behavior for the society at large.
But my favorite definition of economics is a variant of Marshall’s. It comes from a student who heard it from another teacher of hers: economics is the study of how to get the most out of life. I like this because it strikes at the true heart of economics—the choices we make, given that we can’t have everything we want. Economics is the study of infinite wants and finite means, the study of constrained choices. This is true for individuals and governments, families and nations. Thomas Sowell said it best: no solutions, only tradeoffs. To get the most out of life, to think like an economist, you have to be know what you’re giving up in order to get something else.

https://www.econlib.org/library/Columns/y2007/Robertsopportunitycost.html (Very minor edit in the first sentence to make it more readable)

So: economics is the study of how to get the most out of life. But what does this mean, exactly?

Three questions present themselves almost immediately to me when I think about this sentence:

  1. What exactly does “how to?” mean?
  2. Who defines what “most” means in each context?
  3. Whose life?

I’ll begin with the second question, move on to the third, and finish with the first.

  1. Who defines what “most” means in each context?

    My daughter – all of nine years old – has a very clear answer to this question on, say, a Saturday morning. As many hours as possible on her tablet.
    Given her world, and her time horizons, this makes perfect sense to her.
    As does my definition of “most” when I decide to take a “five minute” break from whatever I’m doing to “quickly” check Twitter, or watch “just one video” on YouTube.

    That’s the trouble with this definition – “most” is a very, very tricky word. It is my job to teach my daughter that “most” has long term implications, and it is my job to remind myself that “most” has long term implications. What seems best at the moment isn’t necessarily the best if you take the long view. Economics will tell you how to get the most out of life, assuming you know what most means for you right now.
    But what is the best definition of “most”, and why, is a question economics doesn’t directly answer. It’ll tell you about the benefits and costs of whatever definition of “most” you happen to choose, but evaluating between these options is left to you. Tricky little thing that way, economics.

  2. Whose life?

    When I make a choice about the word “most”, should I keep in mind just me or other folks too? Watching the tenth YouTube video instead of getting back to work gets the most out of my life is what my brain tells me, but does my income suffer? Does my family’s well-being suffer? How should I balance these conflicting interests? Does that mean that I shouldn’t watch a single YouTube video?

    It gets even more complicated when I realize that I really need to think about four different sets of lives. My own right now, and my own in the future (both near and distant). But also the lives of others, and those right now and in the future.

    Freebies just before an election might win a government an election now, but what about greater indebtedness in future generations? Congo deciding to give oil exploration licenses might mean more dollars in their coffers now, but at what cost to the future lives of everybody on this planet twenty years down the line?

  3. What exactly does “how to” mean?

    My very first manager in the corporate world drummed a lesson into me that I have found very useful, and worth remembering. Everything that I do in any organization, he said, must fulfill one of three aims. It must either help the firm increase revenue, or it must help the firm reduce costs. Or, he said, it should help the firm improve speed-to-market. You might quibble that the third is a restatement of the first, but the point is well-taken, and relevant in this context.
    Economics helps you get the most out of life by either giving you more of whatever it is that you’re aiming for, or by reducing the effort involved in getting it, or both. And the apparatus involved in this is where math and econ begin to intersect. But the idea is summarized very well in the rule my manager set for me.
    For example, if what I want to do is get the most out of writing an examination, there are two things that I can do. Try and maximize my marks (my grades) or try and minimize my efforts. Ideally of course, I should try and get the biggest bang for the buck – maximize my marks while minimizing my efforts. And that, of course, is why most (if not all) students are so curious to learn about the “important questions”, the “pattern of the paper”, the “syllabus” and the “recommended” textbook.

But should one be maximizing marks and minimizing effort in the first place? Isn’t the point to learn as much as possible?

Allow me refer you back to the first question in this series

Maximizing Soul

I wrote this essay yesterday, and spent all day on it. I didn’t get anything else done. And in terms of the week coming up, that was an expensive thing to do. But as will become clear after reading this essay, I do not regret it one little bit.

David Perell on The Microwave Economy

David Perell’s latest essay resonated with me, and for multiple reasons. The essay is centered around a point that I have been playing around with for a while: we live in a society that overrates efficiency.

He uses the metaphor of a microwave meal in this essay. Not the kind of microwave meal that Krish Ashok has in mind, but rather the kind of microwave meal that a large number of urban Indians are increasingly familiar with. Cut packet, dump in a bowl, nuke and eat. That kind of microwave meal.

This is a meal robbed of its soul. It is functional, yes. It is, in its own way, nutritious enough. One could argue that it is tasty enough. But there is no romance, originality or effort in it. As Robert Pirsig might have put it, it is bereft of quality.((I am a huge, unabashed fan of Robert Pirsig, and so is David Perell. Pirsig will make numerous appearances in this essay: consider yourselves warned.))

Perell’s essay extends this point about the microwave meal to the economy.((I’d go a step further and say that it is equally applicable to society at large. But I’d rather not go down the rabbit hole of teasing apart the differences between an economy and society in this essay, so I’ll use society from here on in, unless I’m quoting from Perell’s essay.)) Most of what we do in our lives today is centered around the same misunderstanding of convenience that gave birth to the idea of a microwave meal. The result, as Perell puts it, is “an economy that prizes function over form and calls human nature “irrational”—one that over-applies rationality and undervalues the needs of the soul.”

What if, for example, I and my family decided to drive down to Goa for a holiday? Which route should we take? We would do exactly what every right-thinking person in our place would do: look up Google Maps. Whatever route Google Maps suggests is the one we will take. 

Here’s a quote from Zen and the Art of Motorcycle Maintenance, the first of Pirsig’s two books:

“The best ones connect from nowhere to nowhere, and have an alternative that gets you there quicker.”

He wrote this line in the context of learning which roads in America were the best for motorcycle riding, and the next two to three pages are lessons on how to ignore Google Maps. Google Maps wasn’t even on the horizon when the book was written, of course. It is just that Google Maps is the modern day evolution of the idea that Pirsig was battling when it came to choosing roads to ride on. 

That idea being efficiency.

A long, rambling drive through quiet serene countryside might mean an extra day, sure, but isn’t that a price worth paying – at least  worth considering? Pirsig isn’t arguing for never getting there, wherever “there” may be. He is saying the same thing that the poet did, years and years ago. We have lost the desire to stand and stare. The monk said the same thing when he spoke about the journey being as important as the destination. Getting there is important, of course it is. But how you get there is equally important, and we live in a society that doesn’t care about the journey anymore. ((NH4 until Kolhapur and then turn right for Amboli is what we usually do, in case you were wondering.))

Our society over-applies rationality and undervalues the need of the soul. Pirsig knew this, of course. It is why the last part of his sentence speaks about an alternative that gets you there quicker. He knew the coming of Google Maps was just a matter of time.

Perell’s essay is a lament for what might have been: a world that prioritized the soul and not the other way around. There is a lot of truth in it, and I have absolutely no quarrel with Perell’s solution. But his essay helped me concretize something that I have been playing around with in my mind for quite a while, and that is what this essay is about.

Minimization, not Maximization

“We’ve overwhelmingly used our wealth to make the world cheaper instead of more beautiful, more functional instead of more meaningful.” 

That sentence, to me, is the core focus of David Perell’s essay, and I couldn’t agree more. In fact his argument grows even stronger on reflection, because I think the word cheaper is applicable to more than just prices. 

We have also used our wealth, for example, to make the world cheaper in the case of time.

I read more today than I did about ten years ago, but the reading is infinitely more bite-sized in comparison. I much prefer essays to books, blog posts to essays, and tweets to blog posts. ((“Prefer” here is used in the context of what I end up actually consuming of each, as opposed to what I claim to prefer.)) And I suspect I am not the only one. I can make the same argument in the case of sports. We as a society have deliberately and consciously chosen ODI’s over test matches, T20’s over ODI’s, and now of course we have The Hundred. Another argument: of all the hours that you have spent staring at video content across all devices, how many hours were spent in watching movies – as opposed to TV series, documentaries, YouTube videos or TikTok? 

When David Perell says that we have made the world cheaper, what I think he is saying is that we have figured out ways to cheapen the effort that we are willing to put into the act of consuming something. That something could be a meal, but it could also be extended to reading, viewing, or listening as well – and more besides. ((Perell’s essay has a lovely section on the music bit, especially. Do read it.))

The world has also been made cheaper in terms of effort.

I base my buying decisions on the buying decisions that others have made. My PowerPoint templates are standardized ones that Microsoft offers me. My tables in Excel are formatted as per the default mode, or based on the templates made available within the software. What to eat tonight is a function of an algorithm, the title of which is “popular in your area”. Relying upon my own research, or on serendipity is either a lost art, or has become one that is looked down upon.

I teach economics for a living, and the best definition of the subject that I have found comes from a textbook written by Alex Tabarrok and Tyler Cowen:

Economics is the study of how to get the most out of life.

The word “most” in that sentence necessarily implies optimization. And optimization necessarily implies maximizing something, or minimizing something. Getting the most out of life can be thought of in two ways. It could mean living life to the fullest (however you might define this for your own sake). It could also mean getting the most out of life by minimizing time, effort and cost spent on any activity. ((And it could, of course also mean both at the same time. But even in this scenario, which of the two one focuses on the most is going to get us back to the point of this essay.))

Consider an example from my life. I love eating good food. In fact, the point of life, if you ask me, is to have as many good meals as possible. How can we apply the points in the paragraph above to my life?

A good meal on a Sunday, for example, could mean spending all day researching the best version of a recipe for a dish I have in mind, then walking to the market to get the best, freshest ingredients possible, then lovingly preparing them, and then getting the whole dish together, so that friends and family can have a wonderful, relaxed meal together.

I’d call that living life to the fullest. It is all but a guarantee that I get nothing else done on that Sunday, but I have maximized contentment.

On the other hand, I could just order the dish from a restaurant whose version I really like. Or I could decide that this particular dish is too expensive, and just make myself a sandwich instead.

I’d call this getting the most out of life by minimizing time, effort and cost. I haven’t maximized contentment, of course, but I have saved time and effort.

And as you may have guessed, I end up doing the latter far more than the former.

And this for something I really and truly love: eating. We feed our passions, even, by minimizing time, cost and effort, instead of maximizing contentment. Our necessities don’t stand a chance.

That is what we have become: a microwave economy.

The Rajan Economy

Chef Rajan is the chef de cuisine at the JW Marriott in Pune. He has, over the years, become a really good friend. By rights, he ought to be best friends with my doctor. For Chef Rajan has ensured over the past seven years or so that there are far too many inches on my waist. But it is for that very reason, of course, that he and I are such good friends. The man loves to feed people, bless him. 

The Rajan economy is his fiefdom in the JW Marriott. This fiefdom is the 24-hour restaurant in the lobby, called Spice Kitchen. ((His role has changed over the years, of course, and is greatly expanded today. For the purpose of this essay, I will focus on just the one restaurant.)) Procurement, staffing, menu design, day-to-day operations and customer relationship management – Chef Rajan is involved in all of these in one way or the other.

I, my extended family and a lot of other people in Pune are frequent visitors to his restaurant for a variety of reasons. There’s the attention to detail, the friendly customer service, the frequently changing menu and much else besides. But there is one non-negotiable rule that I’ve never broken, and he won’t consider breaking.

There’s never been a question about a discount on the bill.

Chefs who used to be in charge of the restaurant before him have waived off the bill on a couple of occasions – maybe a birthday being celebrated there, maybe some other occasion. Not, let me be clear, because I asked for it. It was their way of deepening the relationship with a customer. And once offered, of course, I was going to take it. Why wouldn’t I?

But ever since Chef Rajan has been in charge of the kitchen (which, if memory serves me right, was in 2015), there has never once been the suggestion of a discount. Not once.

And that has left me even happier as a customer over these past few years.

Because the Rajan economy is not about cost minimization. It is, instead, about maximizing customer delight. ((Which, over the long run, ought to lead to true profit maximization. But this footnote is another essay in the making, so we will leave it at that.)) The Sunday brunches, or brunches on special occasions such as Christmas day, are expensive affairs. ((By Pune’s standards. They are cheap compared to what’s on offer in Bombay.)) But I doubt anybody can walk away from that spread thinking that they did not get their money’s worth. The extent of the spread, its presentation, the quality of the ingredients, the number of times that freshly prepared batches are brought out of the kitchen – all of these speak to the quality of the restaurant. ((Taste is a subjective thing, and so I’ve left it out of the discussion here.))

Chef Rajan’s philosophy at the Spice Kitchen isn’t about cost minimization, it is about maximizing customer delight. Never once have I sat down for a meal at the Spice Kitchen and not been sent a little something that is over and above whatever is on the menu that day. If it is a special occasion, the little something could be quite elaborate. On other days, not so much. But there will always be a little bit more than expected, or a little bit more than is part of the stated deal.

You will pay full price, in other words, but you will get more than you bargained for.

I signed on for an online course conducted by Amit Varma last year, called The Art of Clear Writing. ((Any shortcomings in this essay are down to me, of course, not Amit!)) It was a wonderfully organized course, and was slated to last a couple of months or so. But it is still not over! There is a community that has been formed of present and past students. Talks about writing are organized and a newsletter is in the works. Regular writing prompts are handed out to those who wish to continue practice writing. This writing regularly receives community-based feedback. Again, the price of the course is non-negotiable, but you will get more than you bargained for.

There are two ways to live life and conduct business, when thought about from the framework we have been dancing around in this essay so far. Charge the bare minimum and provide the bare minimum is one of them.

There is an argument to be made to go the Rajan/Amit way instead.

Soul Satisfaction is the Opposite of Cost Minimization

One of my favorite books to read was Anti-Fragile, by Nicholas Nassim Taleb. The key point in the book for me was that there are certain things in the world that don’t do well when exposed to risk. These things we call fragile. There are other things that don’t do badly when exposed to risk. These we call robust. 

Antifragility isn’t about not doing badly when exposed to risk. It is about getting better because of exposure to that risk. Or as he puts it in the book, robustness isn’t the opposite of fragility – it is antifragility.

In a similar vein, I think we have prayed for far too long at the altar of cost efficiency. We have focussed so much on ridding ourselves of inefficiencies in our society that we have killed off the idea of satisfying the soul.

But there is a very good reason for this – our ability to measure everything, everywhere. It may have been a blessing at one point of time, but today, I would call it a curse.

There is this part in a conversation between Tim Ferriss and Seth Godin in which Tim asks Seth about meditation. After Seth’s answer, Tim has a follow-up question about the length of time that Seth spends in meditating, and if Seth has a preference regarding time of day. Seth’s answer is worth quoting in its entirety:

“No. I don’t quantify that stuff. I quantify almost nothing in my life”

Our ability to measure and therefore quantify every single aspect of our lives is increasingly becoming a problem.((I can measure my pulse rate, my O2 levels, my hours of sound sleep, the number of steps I have walked, the number of calories I have consumed, the number of minutes I have spent looking at my phone (and with drilldowns to boot) and a dozen other things with just a smartwatch and my phone. And then tabulate it, analyze it and improve upon it.)) The reason it is a problem is because quantification gives us the satisfaction of having done something about the task ahead of us – whatever that task may be. We have quantified our effort, and analyzing said quantification allows us to become “better” over time.

Let’s use a concrete example: I can measure the amount of time I spend staring at my phone daily. Apps that allow one to do this are freely available on, or even baked right into, all popular mobile operating systems. The reason I want to do this is because I have a lot of work to do in this quarter, and I want to minimize wasted time.

After a week of logging in the data, I can then decide how to either allocate my time on the phone better (more Kindle app, less Facebook), or reduce the number of minutes I spend on the phone daily. 

I might even get good at this. Maybe, after a month, I now spend markedly less time on the phone, and what little time I spend on it, I spend on “good” apps. The problem, however, is that I now have one more thing to do – track, analyze and optimize how I spend my time on the phone. 

That is, because I could measure time spent, I optimized it. The point, however, was to do more work this quarter, not analyze how I am spending my time instead. The quality of the work – what I refer to in this essay as soul satisfaction – is inherently immeasurable. And so we optimize the measurable, and continue to ignore the immeasurable.

It is, unfortunately, the immeasurable that is important.

Now you could, of course, attempt to measure the immeasurable. Chef Rajan, or somebody else at the Marriott could conduct a survey to find out how satisfied the customers are. Amit Varma might circulate a Google Form to find out how satisfied his students are with the course. ((Neither of them have done any such thing.))

But even if this was attempted, the wrong thing would be quantified. ((And it would be imprecisely quantified, but that is a story for another day)) The customer’s satisfaction would be (imperfectly) measured. 

What we really want to measure is how soul-satisfied are the creators with their work, and measuring this is pointless: the creator already knows.

In our rush to find something to measure in order to prove that we are efficient, we measure, analyze and perfect cost, time and effort minimization. And we therefore fail to do what we set out to in the first place: good, high-quality work.

If you will forgive a lengthy extract in an already lengthy essay, David Perell points this out in his essay as well:

As Mumford observed almost a century ago, the world loses its soul when we place too much weight on the ideal of total quantification. By doing so, we stop valuing what we know to be true, but can’t articulate. Rituals lose their significance, possessions lose their meaning, and things are valued only for their apparent utility. To resist the totalizing, but ultimately short-sighted fingers of quantification, many cultures invented words to describe things that exist but can’t be defined. Chinese architecture follows the philosophy of Feng Shui, which describes the invisible — but very real — forces that bind the earth, the universe, and humanity together. Taoist philosophy understands “the thing that cannot be grasped” as a concept that can be internalized only through the actual experience of living. Moving westward, the French novelist Antoine de Saint-Exupéry said: “It is only with the heart that one can see rightly; what is essential is invisible to the eye.” And in Zen and the Art of Motorcycle Maintenance, Robert Pirsig describes how quality can’t be defined empirically because it transcends the limits of language. He insists that quality can only be explained with analogies, summarizing his ideas as such: “When analytic thought, the knife, is applied to experience, something is always killed in the process.” All these examples use different words to capture the same idea.

https://perell.com/essay/the-microwave-economy/

But a headlong rush to measure, analyze and optimize the measurable has resulted in us losing sight of the big picture. We have become a society of optimization through minimization. We’ve become very good at extracting the very last bit of juice out of a lemon. So good, in fact, that we’ve forgotten all about growing more lemons. ((And if I may be permitted to squeeze every last bit out of this analogy: or growing mangoes instead.))

The point was to be as content as possible. We’ve settled instead for being as content as we possibly can be after minimizing costs, time and effort.

Soul Satisfaction Maximization

It is a mouthful, I’ll be the first to admit. And if anybody reading this can coin a better phrase, I’m all for using that one instead. But call it what you will, it is the idea that I am focused on, not its name. We need to move away from minimizing that which we can measure, and try and move towards maximizing that which we can’t.

Cowen and Tabbarok’s definition remains perfectly valid. Economics is indeed about getting the most out of life. All of us are often unclear about what we are optimizing for in life. Is it a fulfilling family life, or is it income, or is it something else? Every economics professor will sooner and later ask her student: “what are you optimizing for?”

I’d suggest a follow-up question: how are you optimizing for it?

And by way of example, let us return to my favorite thing to think about: food.

If, on a Monday night, you are wondering what to cook, don’t think about which recipe can be made as quickly as possible. That would be time, effort and cost minimization.

Choose instead, the recipe you want to make, and cut out everything else in your life that stops you from making that recipe. And if this still doesn’t give you enough time, then try to see if you can eliminate certain steps in the recipe. See if certain steps can be done in advance. See if hacks can be used to accelerate certain processes.

In other words, what you want to maximize is non-negotiable. Don’t give up on your dream. But compromises in order to achieve that dream – well, that is inevitable. 

Let me put it another way. Consider these two statements:

  1. This is all I have to give. Under these circumstances, which dream is most attainable?
  2. This is my dream. Given my circumstances, what do I need to do to attain it?

I argue that we have, as a society, grown far too comfortable with the first idea, and we need to learn to do more of the second.

But whatever you do, don’t microwave a meal. 

Two articles from Bill Gates about Covid19 that are worth reading

The first is an AMA:

A therapeutic could be available well before a vaccine. Ideally this would reduce the number of people who need intensive care including respirators. The Foundation has organized a Therapeutics Accelerator to look at all the most promising ideas and bring all the capabilities of industry into play. So I am hopeful something will come out of this. It could be an anti-viral or antibodies or something else.

One idea that is being explored is using the blood (plasma) from people who are recovered. This may have antibodies to protect people. If it works it would be the fastest way to protect health care workers and patients who have severe disease.

And speaking of convalescent blood therapy, this is also worth reading:

A simple and medically feasible strategy is available now for treating COVID-19 patients, transfuse blood plasma from recovered patients. The idea is that the antibodies from the recovered patients will help the infected patients. The idea is an old one and has been used before with some success.

And this is the second article by Bill Gates, worth reading in full, and so I will not provide an excerpt. Consistently applied restrictions on movement across the entire country, a clear strategy on how to prioritize testing, and a clear plan on developing a treatment and a vaccine are the key takeaways. Applicable mostly to America, or written with America in mind, but really works across the entire planet. India has applied the first of these as well as she could have.

 

Ec101: Understanding Opportunity Costs

I mean, come on. Who doesn’t understand opportunity costs?

The cost of the next best alternative, of the opportunity foregone. We could have told you this in our sleep.

So answer me this (and please don’t cheat):

“Imagine that you have a free ticket (which you cannot resell) to see Radiohead performing. But, by staggering coincidence, you could also go to see Lady Gaga – there are tickets on sale for £40. You’d be willing to pay £50 to see Lady Gaga on any given night, and her concert is the best alternative to seeing Radiohead. Assume there are no other costs of seeing either gig. What is the opportunity cost of seeing Radiohead? (a) £0, (b), £10, (c) £40, or (d) £50.”

  1. That is from Tim Harford, and is unfortunately behind an FT paywall. But here’s the original paper.
    ..
    ..
    “We were surprised by the diversity of opinion regarding the value to which the
    term “opportunity cost” applies. As Table 2 indicates, the most popular answer
    was $50, with 27.6% of respondents choosing this answer. The second most
    popular answer was $40, with 25.6% of respondents choosing this answer. The
    third most popular answer was $0, with 25.1% of respondents choosing this
    answer. The correct answer, $10, was the least popular, with only 21.6% of
    respondents choosing this answer. In essence, the answers given to us by well trained economists appear to be randomly distributed across possible answers.” (Emphasis added)
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    So what did you guess?
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  2. People got plenty upset about the whole thing – check the comments, especially,
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  3. “I don’t have any quarrel with Alex’s economics; as far as I can see this point is semantic. (I’ll also admit that my gross perspective on opportunity cost is somewhat anachronistic; it is one reason why mainstream economists work directly with consumer surplus.) What disturbs me is how few economists gave $50 or $40 as the right answer; the actual answers were close to randomly distributed. Most Web-based sources appear confused on the net vs. gross issue, but at least they hover across the $40 and $50 options.”
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    Economists don’t always agree, but it mostly comes to down to splitting hairs? If only it were so…
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  4. “This paper analyzes the relationship between opportunity costs of waiting and bribery in rationing by waiting situations. Assuming that a uniform waiting time clears the market for any given bribe and the bureaucrat chooses a bribe to maximize profit, the market equilibrium is characterized in terms of individual valuations of the good and opportunity costs of waiting. If individual valuations take discrete values and opportunity costs of waiting are uniformly distributed, then in an equilibrium individuals with low costs of waiting choose to wait while those with high opportunity costs pay the bribe”
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    While traveling on India’s highways, have you ever seen trucks waiting by the highway for no apparent reason?
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  5. For interested students, a big fat list of examples, drawn from multiple walks of life.

India: Links for 18th November, 2019

  1. ““In the end it was this access to unlimited reserves of credit, partly through stable flows of land revenues, and partly through collaboration of Indian moneylenders and financiers, that in this period finally gave the Company its edge over their Indian rivals. It was no longer superior European military technology, nor powers of administration that made the difference. It was the ability to mobilize and transfer massive financial resources that enabled the Company to put the largest and best-trained army in the eastern world into the field””
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    An excerpt that itself was excerpted, but too delicious to resist – Alex Tabarrok writes an excellent review of William Dalrymple’s latest book on the East India Company.
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  2. “The problem is that, rather than examining independent indicators of economic activity, the Bretton Woods’ forecasts appear to be based primarily on (a) extrapolation of the official growth figures, and (b) some subjective adjustment based on staff’s assessment of policy changes.”
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    CGDEV on reporting of India’s growth numbers.
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  3. “Is all this working? Economists have talked about the possibility of green shoots of recovery in the second half of this financial year. However, looking at the data for July to September 2019, for now the slowdown is well and truly in place.”
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    Vivek Kaul isn’t impressed with the state of the Indian economy.
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  4. And perhaps with good reason: Somesh Jha on the fall(!) in rural demand.
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    “Consumer spending fell for the first time in more than four decades in 2017-18, primarily driven by slackening rural demand, according to the latest consumption expenditure survey by the National Statistical Office (NSO).”
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  5. Slate Star Codex on 1991, and the difficulty of using statistics. Econ nerds only!
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    “…”we need to study and raise awareness of the history of democratic, comparatively “nice” countries that did nothing worse than overregulate business a bit – and investigate whether even these best-case scenarios still doomed millions of people to live in poverty. My (biased) guess is that careful study will show this to be true.”