If you’re wondering, it means “You push, I push”:

In 2012, Mbamba’s leaders signed an agreement with Mariri Investimentos, the organization that runs the project and leases a 224-square-mile conservation concession surrounding the village. An innovative partnership, Tchova-Tchova (meaning “You push, I push”), emerged. Its goal is to boost community income and food production and include villagers in conservation projects while allowing them to manage essential needs, such as water supply, solar lighting, schooling for children, and crop protection against hungry animals. Because of Tchova-Tchova, Mbamba residents find jobs at the environmental center and the Mpopo Ecolodge, in construction, in road maintenance, and as rangers.

Source: National Geographic, “One of Africa’s Largest Wildernesses is Thriving – Because Locals Have a Stake in its Success”

The article (I hope you get to read it by clicking on the link above – and if you can’t, please do figure out how to gain access – it is very much an article worth reading) is a fascinating write-up on how Niassa, a protected area in northern Mozambique is thriving under a very Ostromian model.

If this is the first time you’re hearing the name Elinor Ostrom, I envy you your introduction to her magical world.

Elinor Ostrom was one of the great economists of the twentieth century, and a Nobel prize winner. Here is her Nobel lecture, and here is where you can read it. You’ve already read ChatGPT’s ELI5 above, here is Wikipedia on why Ostrom was so very awesome:

Ostrom studied the interaction of people and ecosystems for many years and showed that the use of exhaustible resources by groups of people (communities, cooperatives, trusts, trade unions) can be rational and prevent depletion of the resource without either state intervention or markets with private property.

Why is the National Geographic article a good example of an Ostromian solution? Because of this problem:

Hunter-gatherers, farmers, rulers of chiefdoms—people have called this region home for thousands of years. But centuries of colonization and a recent civil war have left communities in Niassa desperately poor. If this magnificent wilderness—ancestral lands of people who have lived here for generations—is to be preserved and nurtured for the future, they must be given a direct stake in conservation efforts and tourism.

Source: National Geographic, “One of Africa’s Largest Wildernesses is Thriving – Because Locals Have a Stake in its Success”

What happens if the ancestral lands of people who have lived there for generations are administered without giving them a stake in the conservation efforts being tried there, and without giving them a stake in tourism activities there? Well, no skin in the game is the simplest story.

The slightly more complicated, but rewarding story, is that it (the Ostromian solution) allows for the following:

  1. The preservation of local traditions and beliefs
  2. More involved resource management
  3. Greater community involvement
  4. An application of economic incentives
  5. On the ground partnerships
  6. A sustainable way of addressing human-wildlife conflicts

Fun exercise: team up with somebody else interested in reading this article and see how many of these features you can identify in this article.

Funner exercise: what other features are there in these article that I have not mentioned here?

Ostromian frameworks are a great way to overcome what is known as the “tragedy of the commons” problem, but there is much more to it than “just” this. If you’re looking to learn more about the world in which we live and how it could be made a better place (and why else would you be studying economics?), learning about Elinor Ostrom, her work and its many applications is a great way to start.

Ten other things that I found fascinating in this article, keeping in mind that I’ve limited myself to just ten, there are many more:

  1. The chonde-chonde ceremony
  2. Niassa, the hunting reserve where this solution is being implemented, is larger than the country of Switzerland. Africa is really, really, really big, and learning just how big it is never ceases to surprise me
  3. The economics of a sustainable model (at least on the face of it, at any rate) when it comes to sport-hunting concessions made for fascinating reading
  4. Positive and negative incentives to protect wildlife and habitat was such a great teaching moment!
    “The more animals, the more tourism dollars, the rationale goes. A community conservation fund administered by the villagers rewards wildlife-friendly behavior. For every tourist who visits the environmental center, Mariri Investimentos pays $25 into the fund. For every prize animal a tourist spots—a lion, elephant, leopard, buffalo, wild dog, or hyena—Mariri pays eight dollars into the fund. For every month with no elephant poaching in the vicinity, the fund earns $155. But if Mariri’s rangers find evidence of poaching, money is deducted—$19 for every snare, for example; $232 is docked for every lion killed; and a poached elephant takes $310 from the community fund.”
  5. My word for the day: ungulates
  6. My learning for the day: aardvark means earth-pig. Huh.
  7. Baobab trees live for up to two thousand years. (As you can see, I know very little about biology, so please bear with me if my “discoveries” are old news to you)
  8. Trade is a non-zero sum game across species too! This was such a fascinating thing to learn:
    “Some hives are hidden inside woody nooks or hollow trees far smaller than baobabs. To get to them, Yao honey collectors have struck up a mutually beneficial relationship with the greater honeyguide, a bird they call sego. It’s one of few animals that can digest beeswax. When the birds see a person, and a hive is not far away, they utter a chittering Morse code—tji-tji-tji tji-tji-tji—to signal there’s honey to be had nearby. An attentive Yao answers with a distinctive brrrr-HM, brrrr-HM, brrr-HM.
    The honeyguide leads the way, flitting from tree to tree with the honey hunter in pursuit, calling back and forth as they go. When hunter and bird reach the hive, he pacifies the bees with smoke, chops down the tree, cracks open the bole with an axe, and pulls the honeycomb free. Then he shares the loot, leaving a pile of sugar-laden honeycomb for his guide. 
    In 2015, evolutionary biologist Claire Spottiswoode, from the University of Cape Town, in South Africa, and Cambridge University, in the U.K., teamed up with Yao honey hunters Orlando Yassene and Musaji Muamedi to find out if the birds are responding to any old sound or specifically to the Yao call. The team walked through the woodlands on a series of simulated honey hunts, playing three different sounds on a portable speaker: the Yao’s brrrr-HM call; arbitrary human sounds; and other animal sounds, such as the call of a ring-necked dove. The segos were at least twice as responsive to the brrrr-HM call and led the team to hives three times more often in response to it.”
  9. Grab a cup of coffee, and even if you choose to not read the article, please savor all of the photographs. Do this on a computer, because a phone won’t give you the same experience.
  10. My favorite was the photo of the fisherman with the fish in his mouth. What about you?

Why Everything You Buy Is Worse Now

Po and Ice-Cream

More tales from the joy and delight that is teaching principles of economics.

I explained what Goodhart’s Law is in class the other day, and if you’re wondering what it is, here you go:

Vishesh emailed to ask a very good question (note that I have paraphrased the question to make it easier to understand, this is not verbatim):

Say you want to be more regular at your gym. In order to build this habit, you decide that you will treat yourself to an ice cream after you go to the gym.

At the outset, you want to go to the gym because you want the ice-cream, not because you want to go to the gym.

But eventually, you will start to want to go to the gym for its own sake, rather than for the reward of the ice-cream. The ice-cream won’t matter, managing to deadlift a 100 kilograms will matter more.

So is Goodhart’s Law not applicable here?

My answer to the question went something like this:

Well, if going to the gym has become important, you no longer need to measure it, and so yes, Goodhart’s law is no longer applicable. Note that it hasn’t failed – it is not applicable. Why is it no applicable? Because you aren’t measuring gym attendance, or targeting it. It “just happens”, now for its own sake.

That’s one way to explain it. This is the better way:

Public Policy: The SenKulkarni Household Edition

If you thought economics was hard, wait till you get to public policy.

Last week on Monday, I’d written about screen-time in the SenKulkarni household. If you’d like the TL;DR version here it is:

  1. We had a contest about who would have the least screentime between I, my wife and my daughter.
  2. Winner gets to choose what to do for Sunday lunch, while the loser has a horrific (personalized) punishment inflicted on them.
  3. I promised an update a week down the line.

And so here’s the update: we’ve learnt that designing interventions is tough.

  1. Our daughter simply parked her tablet in our car. Her personalized punishment was ugh vegetables in her lunchbox, and the thought filled her with such horror that she chose to forsake screen-time altogether. That’s the good news.
  2. The better news is that she finished one book, and got started on another. Since she’s not a bookworm, this is a particularly welcome development. (The Young Pandava series, if you’re curious.)
  3. My wife was trailing badly at the end of the first day, and she simply gave up and conceded defeat for the entire week. Lesson learnt.
  4. What lesson, you may ask. Well, if you design a policy, a very long time horizon probably won’t work. Seven daily contests might have been better than one weekly contest.
  5. Since she conceded defeat, she would have to live with our dog’s fur on her favorite sofa in the living room, for that was the punishment for her. She got around the issue by saying that she wouldn’t clean the sofa, but nor would she make tea in the morning.
  6. This is what comes of having two people who’ve been taught game theory in the same household. Pah. Designing incentives is tricky, folks!
  7. My screen-time went down by 20%, roughly speaking, this past week. But that’s not saying much, since it was pretty bad the week before. I simply had no incentive to reduce my screen-time once the contest was “over” after the first day.
  8. I’m not going to be in Pune for much of this week because of work, so we’ll get back to this contest with some tweaks next Monday.
  9. If, in the meantime, you have suggestions and tips, send ’em in.
  10. Navin tweeted about last week’s post, and got some fascinating responses. This one was my favorite:

11. Goodhart’s law is everywhere!

But in all seriousness, think about this:

This was a simple policy designed to get three people in one household to reduce their screen-times, and the first iteration has been a glorious failure. The next time you want to blame any government the world over for a poorly thought out public policy, do keep in mind that it is harder than it seems. Don’t get me wrong, blame ’em, make fun of ’em, and feel free to lament about how things never work around here.

But throw in a sprinkling of grudging respect for having tried at all in the first place 🙂

Incentives Matter, The SenKulkarni Household Edition

The other day, I, the wife, and the daughter were driving somewhere in the car. We stay near Baner Road in Pune, and with the ongoing Metro construction, and the top-notch condition of Pune’s roads, traffic was inching along at best.

And so I wondered how to pass the time.

I keep fiddling around with the home screen on my phone. The row of icons on the dock stays the same, the folders above it stays the same, but I like trying out different widgets every now and then. And one of the widgets that I had tried just that morning was a rather sobering one. It was the Digital Wellbeing widget.

Three hours isn’t, I suspect, all that bad. But that was on a Saturday. As you can see from the graph, Tuesday and Thursday were particularly bad days for me this past week – nearly six hours on both these days!

Now, in my defence, I read a fair bit on my phone. Feedly, Chrome and the Kindle app are all part of the six hours, so it isn’t quite as bad as all that. But, I must confess, I am being rather manipulative in my reporting. The biggest culprit is YouTube.

YouTube’s accursed algorithm has figured out that I like watching cricket, tennis and football videos, along with recipes. And so the damn thing will parade an endless list of videos for my viewing pleasure, and I will happily watch ’em all. And don’t even get me started on YouTube shorts.

My phone addiction, in other words, is a major problem, and my YouTube addiction is a rather large chunk of my phone addiction.

“So how about this”, I said by way of conversation in the car the other day. “How about we have a contest to see who has the highest amount of screentime between the three of us?”

“We can all check our stats, Monday through Saturday, both days included. The person who has the least amount of screentime can decide where we go to have lunch on Sunday afternoon.”

We’re big on celebratory Sunday meals in these parts. It’s usually either mutton at home, or pigging out at some suitably gourmandish restaurant. A lavish Sunday brunch, in other words.

This idea was met with wholehearted approval on part of the rest of the car’s population, and all would have been well if that’s where we had stopped.

But do I even deserve to call myself an economist if I don’t complicate a simple fun game?

Positive incentives are all well and good, but with the carrot should also come the stick. What about the person who has the most amount of screentime? What “punishment” should that person get?

And by the way, it’s not just because us economists don’t know when to stop. Negative incentives work better than positive ones (of course).

And so we spent a pleasant few minutes thinking about what punishment would work best for all three of us. And after some moments of mirth, this is what we have:

  1. If the daughter should end up having the most screen-time, she will have to take the most ugh vegetables ever in her school tiffin for three days running. Most ugh vegetables ever is an intensely subjective call, of course, and I’ll spare you the gory details. (We all agreed that karela would be taking things too far, if you were wondering).
  2. If the wife should end up having the most screen-time, we will remove a protective drape over her favorite piece of furniture in the living room. Said drape protects a particularly cozy sofa in our living room from being liberally festooned with our dog’s fur. I, the daughter and the dog are perfectly fine with fur on the sofa, but the wife isn’t. So for three long days, she can’t clean the sofa of all that fur, and nor can she cover it with a protective rug. Oh, the horror.
  3. And me? If it is me, then I have to make the first cup of chai in the morning, three days running. This is a horrific punishment, since I only take on a somewhat human form about ten minutes after the first cup of chai in the morning. And even that, my near and dear ones will tell you, isn’t a guarantee.

Phone calls are fine, they do not count towards screen time. Ordering groceries, ditto. But everything else does, and today onwards, we’re off to the races.

I’ll let you know come next Monday who won, promise.

But half a day into the contest, here’s where we stand:

  1. My daughter doesn’t even have her tablet with her. She’s kept it in our car, rather than at home.
  2. I’m at 19 minutes for the day (of which 11 minutes have been on the phone, so 8 in all)
  3. The wife was at 20 as of three hours ago.

God help that sofa.

Incentives Matter, Labor Regulations Edition

Paul Graham tweeted something interesting about a month ago:

Anything that the French can do, we can too, of course:

To the extent that the labor regulations impose significant costs on an individual firm, we can expect an incentive for firms to stay below the relevant threshold, all else being equal.
The specific regulations that have been pointed to by analysts as being especially onerous from the perspective of firm owners include Chapter VB of the Industrial Disputes Act (IDA) and Section 9A of the IDA and the Industrial Employment (Standing Orders) Act (see, for example, the arguments of Panagariya 2008; see also Anant et al. 2006 for a comprehensive discussion of Indian labor regulations). The first of these makes it necessary for firms employing more than 50–100 workers to obtain the permission of
state governments in order to retrench or lay off workers—permission that some argue is rarely forthcoming and thereby ends up raising the effective cost of labor usage in production. The second regulation pertains to terms and conditions of work and applies to firms employing over 10 workers (20 if the production process does not use electricity) that are legally mandated to operate in the registered sector of manufacturing. While these two regulations seek to make labor contracts complete, fair, and legally binding, they can constrain firms from making quick adjustments to changing conditions, especially in view of weaknesses in collective bargaining mechanisms

Hasan, R., & Jandoc, K. R. (2010). The distribution of firm size in India: What can survey data tell us?. Asian Development Bank Economics Working Paper Series, (213).

“…they can constrain firms from making quick adjustments to changing conditions” simply means “it becomes expensive for firms to comply with these regulations”.

How do firms respond to these incentives? Here’s one of my favorite charts of all time:

Hasan, R., & Jandoc, K. R. (2010). The distribution of firm size in India: What can survey data tell us?. Asian Development Bank Economics Working Paper Series, (213).

The darker shade of grey is China, while the lighter one is India. This data is as of 2010, of course, and I hope that an updated chart will tell a better story.

But as a person who loves teaching principles of economics, the power of incentives comes across very nicely in both the chart about France, and alas, so also the chart about India.

Tusks, Slavery and Economics is just a magical website if you are a student of economics, and one of my favorite videos on it is the one below. It’s only four minutes long, please do watch it if you haven’t seen it already:

The noblest of intentions, you’ll agree – but one of the most important lessons of economics is that the principles of economics really and truly matter. And in this case, the noblest of intentions had one of the most tragic outcomes possible.

That’s slavery. Now let’s talk about elephant tusks. Specifically, burnt and powdered elephant tusks:

If you visit Nairobi National Park, you will see rhinos, hippos, and giraffes, all within sight of the city skyline. You also will see an organized site showing several large mounds of burnt and powdered elephant tusks. They are a tribute to the elephant, and along with the accompanying signs, a condemnation of elephant poaching.
Starting in 1989, the government had confiscated a large number of tusks from the poachers, and as part of their anti-poaching campaign they burnt those tusks and placed the burnt ashes on display in the form of mounds. There are also several signs telling visitors that it is forbidden to take the ashes from the site. There have since been subsequent organized tusk burns.
In essence, the government is trying to communicate the notion that the elephant tusks are sacred, and should not be regarded as material for either commerce or poaching or for that matter souvenir collecting. “We will even destroy this, rather than let you trade it.”

If you have seen (or are already familiar with) the video, how might you make use of your knowledge to think about this problem? Will burning these tusks make the situation better, or worse? Tyler answers the obvious question in his post:

“The economist of course is tempted to look beneath the surface of such a policy. If the government destroys a large number of elephant tusks, the price of tusks on the black market might go up. The higher tusk price could in turn motivate yet more poaching and tusk trading, thus countermanding the original intent of the policy.”

Why does he say that the “higher tusk price could in turn motivate yet more poaching”? Why does he not say it will motivate more poaching? Well, he’d have to calculate the elasticity of the supply curve to make a definitive statement one way or the other.

Read the rest of his post for some typically delightful Tylerian takeaways, including an academic paper called “Elephants“.

But whether it is the poaching of elephants or the slave trade, there is a deeper question at play here which Tyler alludes to towards the end of his post. But before we get there, a little anecdote which I once read in a cookbook. I’ve forgotten which cookbook (of course!), but the idea was that while in the process of cooking dinner for everyone, the author would simply fry some onions and garlic to start with. The aroma of these ingredients being fried would let everybody know that dinner was Being Prepared.

That is, Something Was Happening, And That’s Good Enough For Now.

Why do I bring this up now? Because in some cases, under some time horizons, and for some areas of optimization, a non-optimal response from an economic theory perspective may actually be… optimal.

Should vaccines be free or not? Should healthcare be free or not? Should education be free or not? If this raises your hackles, go with these: should tusks be burnt or not? Should slaves in a slave market be purchased and then set free or not?

Well, in the first set of questions, ask these additional questions: should be free or not for whom? For how long? Are you optimizing for more people staying alive and healthy, or are you optimizing for the fiscal health of the government? What if the long term fiscal health of the government allows you to save more lives in the future? What if giving vaccines away for free allows you to save lives that are here and present now? Will the government be able to run such programmes efficiently? Is it worth running these programmes even after knowing that governments can’t run these programmes efficiently? Why? Why not?

Or as Tyler puts it:

Many non-economists think only in terms of the sacred and the symbolic goods in human society. They ignore incentives. Furthermore, our politics and religious sects encourage such modes of evaluation.
Many economists think only in terms of incentives, and they do not have a good sense of how to integrate symbolic goods into their analysis. They often come up with policy proposals that either offend people or simply fall flat.

Wisdom in balancing these two perspectives, he ends his post, is often at the heart of good social science (and, I would add, therefore at the heart of good policymaking). Or, as I like to put it, the truth always lies somewhere in the middle.

Economists would be better off if they didn’t use only economic analysis all the time. Non-economists would be better off if they used economic analysis some of the time. The trick lies in knowing when to stop in the first instance, and when to start in the second instance.

If only we had definitive answers to both, life would be so much easier.

But then again, I would then have had no reason to write here on EFE either.

So it goes!

Incentives Matter | What Are You Optimizing For?

Please, listen to the whole thing, but my EFE antenna really started twitching at around the 7:45 mark.

The truth lies somewhere in the middle, so I don’t agree with John Cochrane 100%, but as always, definitely worth a listen:

Lenny’s Newsletter on Reigniting Duolingo’s User Growth

I’ve written about Duolingo before, and I have no doubt that I will write about it again.

Why? Because I am a very lazy person, and I appreciate all the help I can get when it comes to building good habits. Writing daily on this blog is a good habit – it is, alas, not one that I have perfected yet. Taking my dog out for a walk everyday is a good habit – a necessary one for the dog, and so also for me now. Practicing a language (currently Italian) daily on Duolingo is a good habit, and while I’m not at 1435 days yet, I’m a little more than halfway there, and hey, that’s progress!

Exercising daily is a habit I’ve tried to build and failed at (one day, one day). Eating healthy on a daily basis is a habit I don’t want to build, but eating mostly healthy on a weekly basis is something I’ve more or less succeeded at – and that’s good enough for me. The point is that given that I’m so lazy, building up a habit is the only way to stick at doing something. And anything that helps me enjoy getting into a habit is, to me, a fascinating thing to study.

Which is why I have no doubt I will write about Duolingo again.

Lenny’s newsletter is worth reading in any case, but his latest post is really very, very good. It’s not written by him – this one is a guest post by Jorge Mazal – but that’s all the more reason to read it. If you’re interested in learning about metrics, user retention, driving growth, this article is self-recommending – and that would be a good reason to read it carefully.

But even if you are not interested in any of those things, it still makes sense to read it. My framing of my own incentive while reading it was “Can this article teach me how to gamify my life?”, and from this perspective, it is an eminently readable article.

I had a very interesting conversation with a friend this past Sunday, and his take on habit formation and productivity techniques was that this has perhaps been taken a little bit too far in today’s day and age. I actually agree with him on that point – we try to wring every little bit out of every little hack, to our overall detriment. But that being said, I think it makes sense to take a look at our own lives and ask to what extent we could make our lives a little bit better along dimensions of our choosing. To each one of us goes the right to choose which dimensions, and to each one of us goes the right to choose how to improve our life along those dimensions, and finally, to each one of us goes the right to choose the magnitude of improvements.

But once you’ve answered those questions – which dimensions, how to improve, and to what extent – you could do with help regarding tips and tricks re: Making It Happen. And that’s where this article is worth reading.

My key takeaways:

  1. Gamification matters, and it helps. Try gamifying those aspects of your life that you want to get better at.
  2. A blind CTRL-C CTRL-V of gamification done well elsewhere is a pretty poor way to go about it. Think carefully about which incentives matter to you, and design your gamification strategy accordingly.
  3. These three questions are a good way to frame this:
    Why is this feature working in this product? | Why might this feature succeed or fail in my context? | What changes do I need to make to make this feature succeed for me?
  4. Compounding the benefits of a habit is an excellent, always underrated idea.
  5. We like to win. Set up a competition for yourself, and make sure there are tangible rewards (and punishments!)
  6. Reminders help, but don’t end up irritating yourself out of a habit.
  7. Streaks are a great way to compete with yourself (related to pt. 5), and preserving that which you have is a great motivator (the endowment effect matters)
  8. The social aspect matters – get other people to join you on your journey (hello to all of my friends on Duolingo, and thank you!)

NAAC Visits and the G20

There is much angst in Pune, about how little time it took for Senapati Bapat Road to look really, really nice.

The G20 summit in Pune concluded recently, and the transformation of the surroundings near where the summit was held was a sight to behold. Neat red markings for a bicycle lane on either side of the road, immaculately painted dividers, spruced up lamp-poles, jazzed up signals, pretty little lights dangling from the many trees that line this road, lovely flowers planted along the median, and a thorough Potemkin-ization of anything deemed even remotely non-presentable – everything was achieved with a speed and efficiency that is scarcely believable.

Although as a true-blue Puneri, it gladdens my heart ever so much to realize that some things will never, ever change:

But this unbelievable improvement in efficency, I’d argue, is very familiar to students who have been in college/University when the NAAC committee has come a-visitin’. It’s the same kind of transformation, and it is equally unbelievable. Flower-pots will appear near entrances, walls will be given a fresh coat of paint, friendly signages will pop up all over campus, washrooms will positively gleam with cleanliness, and the entire campus will look brand new.

Incentives matter.

What happens if you as a citizen complain about, say, a lack of footpaths? You are issued a token, not a footpath. What happens if you as a citizen ask the PMC to repair some broken down traffic signals? You know the answer by now. What happens if those broken down signals are on a road that will be noticed by the G20 dignitaries?

It’s not so much the priority that is missing, which is the only thing I’d correct in Amit’s tweet. What’s missing is the incentive to do the best job possible – when it is the citizens that are doing the belly-aching. When it is the people holding the purse-strings, or the people who call the shots that send along gentle reminders – well, the incentive is clearly present, no?

And that’s why campuses will look their resplendent best during NAAC visits, and that’s why Senapati Bapat Road looks as pretty as it does right now.

Because, alas, incentives matter.

Old timers who have been staying in Sus village for years will regale you with stories of how roads become as smooth as silk literally overnight come the month of December, year after year. It’s the same ol’ story, with the same ol’ underlying reason: incentives matter.

Which begs the question: how can we get the incentives of the PMC to be aligned with our interests? Answering the question is easy. Implementing it? Ah, that is beyond the scope of this blog, for now.

Also, note that this has nothing to do with the BJP, or the Congress, or AAP, or indeed with any Indian political party. We aren’t unique as a nation in this regard, and no political party in our country is uniquely good (or bad) in this regard. All political parties in all nations are staffed with members of the same species that you and I belong to, and we all respond in much the same way to incentives. So please, don’t attack or defend whichever political party you have in mind.

One good thing about the principles of economics is that they work the same way on everybody, everywhere. The sooner we realize this, the better it will be for all of us.