The Delhi Walla: The Library Category

Via the excellent Divyanshu Dembi. He spent an hour on this category, as per his tweet, but I’m going to end up spending way more. What a lovely, lovely website for a relaxed Sunday morning!

https://www.thedelhiwalla.com/2020/02/22/city-library-shakespearean-jonathan-gil-harriss-books-hauz-khas/ Credit: Mayank Austen Soofi

Divyanshu tweeted about the category titled library on this magnificent website, but the other sections are worth a look too.

The Vajpayee Moment in Telecom, IO and Porter’s Five Forces

Vijay Kelkar and Niranjan Rajadhakshya had on op-ed out in Livemint recently on the mess in the telecom sector, and their suggestions for (at least partially) resolving it:

It has been about a year since the Supreme Court instructed telecom companies to share not just their core telecom revenues with the government, but also to take into account promotional offers to consumers, income from the sale of assets, bad debts that were written off, and dealer commissions. The apex court has allowed the affected telecom companies to make a small upfront payment and then pay their excess AGR dues to the government in ten annual instalments, from fiscal year 2021-22 to 2030-31, in an attempt to ease their immediate burden, which has raised concerns about the financial stability of Bharti Airtel and Vodafone Idea. Analysts estimate that the extra annual payments by all telecom firms could be around ₹22,000 crore a year.

https://www.livemint.com/opinion/online-views/a-new-vajpayee-moment-for-the-troubled-indian-telecom-sector-11631123688457.html

Their suggestions for the resolution of this problem involve the issuance of zero-coupon bonds by the telecom companies, along with an option for the government to acquire a 10% equity stake. As always, please read the whole thing.


Now, this may work, this may not work. The more I try to read about this issue, the more pessimistic I get about a workable solution. But we’re not going to get into the issue of finding a “workable” solution today. We’re going to learn about how to think about this issue.

That is, what model/framework should we be using to assess a situation such as this? Kelkar and Rajadhakshya obviously have a model in mind, and they hint at it in this excerpt:

There are three broad policy concerns that need to be addressed in the context of the telecom sector: consumer welfare, competition and financial stability. Possible tariff hikes to generate extra revenues to meet AGR commitments will hurt consumer access. The inability to charge consumers more could mean that the three-player telecom market becomes a duopoly, through either a firm’s failure or acquisition. The banks that have lent to domestic telecom companies are also worried about their exposure in case AGR dues overwhelm the operating cash flows of these companies.

https://www.livemint.com/opinion/online-views/a-new-vajpayee-moment-for-the-troubled-indian-telecom-sector-11631123688457.html

So a solution is necessary, they say, because we need to have a stable telecom market that doesn’t hurt

a) the consumers,

b) the current players in this sector and

c) the financial sector that has exposure in terms of loans to the telecom sector

To this list I would add the following:

d) make sure the government doesn’t get a raw deal (and raw is a tricky, contentious and vague word to use here, but we’ll go with it for now)

e) make sure new entrants aren’t deterred from entering this space (if and when that will happen)

f) suppliers to the telecom sector shouldn’t be negatively impacted

In other words, any solution to the problem must be as fair as possible to all involved parties, shouldn’t change the status quo far too much in any direction, shouldn’t hinder the entry of new competition, and should give as fair a deal as possible to consumers.


Take a look at this diagram:

https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis#/media/File:Elements_of_Industry_Structure.svg (Credit: Denis Fadeev)

Students who are familiar with marketing theory are going to roll their eyes at this, but for the blissfully uninitiated, this is the famous Five Forces Analysis.

Porter’s Five Forces Framework is a method for analysing competition of a business. It draws from industrial organization (IO) economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness (or lack thereof) of an industry in terms of its profitability.

https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis

Michael Porter’s Five Forces Framework can be traced back to the structure-conduct-performance paradigm, so in a sense, it really is an industrial organization framework:

In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets. Industrial organization adds real-world complications to the perfectly competitive model, complications such as transaction costs, limited information, and barriers to entry of new firms that may be associated with imperfect competition. It analyzes determinants of firm and market organization and behavior on a continuum between competition and monopoly, including from government actions.

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

The point is that if you are a student trying to think through this (or any other problem of a similar nature), you should have a model/framework in mind. “If I am going to recommend policy X”, you should be thinking to yourself, “how will that impact Jio? Airtel? Vi? How will that impact government revenues? What signals will I be sending to potential market entrants? Will consumers be better off, and if so, are we saying that they will be better off in the short run, or on a more sustainable basis?”

Now sure, the diagram doesn’t include government, but the Wikipedia article on the Five Forces does speak about it later, as does the excerpt above from the Wikipedia article on Industrial Organization. More importantly, this framework gives one the impression that we’re dealing with a static problem, with no considerations given for time.

I would urge you to think about time, always, as a student of economics. Whether it be the circular flow of income diagram, or the five forces diagram, remember that your actions will have repercussions on the industry in question not just today, but for some time to come.


So whether you’re the one coming up with a solution, or you’re the one evaluating somebody else’s solution, you should always be evaluating these solutions with some framework in your mind. And tweaking the Five Forces model to suit your requirements is a good place to start!

Industrial Policy, South Korea and Learning by Doing

Amol Agarwal points us to an excellent paper, the title of which is “The Long Term Effects of Industrial Policy“. Here is the abstract:

This paper provides causal evidence of the impact of industrial policy on firms’ long-term performance and quantifies industrial policy’s long-term welfare effects. Using a natural experiment and unique historical data during the Heavy and Chemical Industry (HCI) Drive in South Korea, we find large and persistent effects of firm-level subsidies on firm size. Subsidized firms are larger than those never subsidized even 30 years after subsidies ended. Motivated by this empirical finding, we build a quantitative heterogeneous firm model that rationalizes these persistent effects through a combination of learning-by-doing (LBD) and financial frictions that hinder firms from internalizing LBD. The model is calibrated to firm-level micro data, and its key parameters are disciplined with the econometric estimates. Counterfactual analysis implies that the industrial policy generated larger benefits than costs. If the industrial policy had not been implemented, South Korea’s welfare would have been 22-31% lower, depending on how long lived are the productivity benefits of LBD. Between one-half and two-thirds of the total welfare difference comes from the long-term effects of the policy.

https://www.nber.org/papers/w29263

Why should you read this paper if you are a student of the Indian economy?

Because industrial policy has been, i,s and will be critical for long run growth in India, and South Korea is an excellent example of getting industrial policy “right”. The reason I put “right” in inverted quotes is because there is still debate about whether South Korea really got it right or not.

If you are interested in reading more about this, part of footnote 4 from the paper is worth reading in greater detail (And the papers that are cited there, naturally):

However, many economists have been skeptical of the effectiveness of industrial policy (e.g. Baldwin, 1969; Lederman and Maloney, 2012). Lee (1996) did not find a positive correlation between sectoral TFP growth and tariff rates in South Korea during the 1970s and interpreted the correlation as the ineffectiveness of industrial policy.

https://www.nber.org/system/files/working_papers/w29263/w29263.pdf, footnote 4, page 5

Me, I’m very Studwellian in my outlook, and am therefore a sucker for papers such as these. And even if the paper were to show that industrial policy had not worked, that in itself is also a lesson worth learning, no? But if you ask me, something worked in South Korea at that point of time, and while causality is tricky, Industrial Policy (IP) certainly seems to have been at least partially at play:

Between 1973 and 1979, the average annual real GDP growth rate of South Korea was 10.3%, and the average export growth rate was around 28%. The HCI sectors increased their share of manufacturing output from 40% to 56% and their share of total exports from 12.9% to 37%.

https://www.nber.org/system/files/working_papers/w29263/w29263.pdf pp 6

The paper does three things, in my opinion:

  1. Establishes that Industrial Policy did too have a role to play in South Korea’s development
  2. That role has had effects that have persisted well beyond the years in which that specific industrial policy was “in play”
  3. Makes the case for how South Korea’s welfare would have been lower had this policy not been implemented

Your mileage may vary with regards to point 3, no matter how careful the econometric modeling (and it’s pretty careful, if you ask me). But this paper is worth reading because it reinforces my opinion that industrial policy, when done well, can have meaningful impacts upon the development of a nation.


There is a citation in this paper that is worth reading in its entirety (if you go in for that sort of thing). The citation is that of a chapter in The Handbook of Development Economics, Vol. 5. The title of the chapter is “Trade, Foreign Investment, and Industrial Policy for Developing Countries

I really do mean the “if you go in for that sort of thing”, because this is assuredly not light reading. Why, the section titled “Concluding Comments” takes up a solid four and a half pages! But I’ll speak here about three things that I found especially relevant from that section alone. Note that this is my paraphrasing, not a direct quote.

  1. The infant industry argument is, on the whole, overrated.
  2. In general industrial policy that promotes more exposure to international trade is likelier to be more successful
  3. The authors say that more work is urgently needed to understand, as they put it, “the human cost of adjustment to trade and FDI reforms”. Maskin and Kremer’s work is worth reading in this regard.

Finally, “Learning By Doing“. What does it mean, exactly? The classic paper to read is by Lucas, titled “On the Mechanics of Economic Development“, and the classic-er (est?) paper is, of course, “The Economic Implications of Learning by Doing“. But simply put, it is this:

Learning-by-doing is a concept in economic theory by which productivity is achieved through practice, self-perfection and minor innovations. An example is a factory that increases output by learning how to use equipment better without adding workers or investing significant amounts of capital.

https://en.wikipedia.org/wiki/Learning-by-doing_(economics)

It remains underrated at all levels of economic organization, if you ask me.

The State of America, Circa 2021

Kevin Drum has an excellent article out on where the United States of America finds itself in the year 2021, in terms of both medium and long term trends along a variety of dimensions. Here are just the first three from “The Good” section:

  1. Income is up for everyone: men, women, Black, white, Hispanic, rich, poor, and middle class. Data from the CBO is here. UPDATE: Confused by this chart? Explanation here.
  2. Poverty is down by five percentage points since the ’70s.
  3. Federal income taxes are lower for practically everyone.

I found it instructive that he chose to go with 28 Things that he found to be Good, but only 5 that were Bad. That, in a meta-sense is worthy of being included as a 29th Good Thing!

Here are the five Bad Things:

  1. The worst trend of the past couple of decades has been a steady deterioration in average health outside of the upper middle class. Life expectancy has stopped increasing; obesity is up; opioid addiction is up; and deaths of despair are up.
  2. The labor force participation rate has been steadily dropping.
  3. The Black-white education gap has been stubbornly resistant to improvement.
  4. Climate change continues unabated.
  5. Political polarization has gotten worse, thanks mostly to Fox News and, more recently, the rise of Trumpism.

(I haven’t formatted both excerpts as quotes because the WordPress editor, best as I can tell, allows you to either format a piece of text as a numbered list, or as a quote, but not both at the same time. They call this the improved editor, and that makes me weep.)


What might India’s list look like? What do you choose to include and exclude in the good, the bad and the ugly, and what does that tell us about both the country we live in, and the biases that we reveal?

If any student reading this is looking to start a YouTube channel around a fun theme, I have, um, a suggestion for you 🙂

What Year in History? A Fun Way to Understand Development in India

Ajay Shah, Renuka Sane and Ananya Goyal have a very interesting blogpost out, the title of which is “What year in the history of an advanced economy is like India today?”

India has been stepping out from poverty into middle income. It is estimated that the proportion of persons below the PPP$1.90 poverty line has dropped to an estimated 87 million in 2020. In thinking about India’s journey, it is interesting to ask: In the historical journey of advanced economies, What year in the history of the US or UK roughly corresponds to India of 2021? This is a good way to obtain intuition on where India is, in the development journey.

https://blog.theleapjournal.org/2021/08/what-year-in-history-of-advanced.html

It’s a good blogpost, and the section before they get to comparisons about GDP is worth reading in full, because they come up with a good set of warnings about overdoing analysis like this. Read it, but we’ll get down to the fun part right away. As they mention in the blogpost, India today is at about 6800 dollars per person in terms of GDP, adjusted for PPP and inflation. When in its history was the UK at this point? What about the US? Well, the blogpost gives the answers, but I prefer to show you screenshots of my favorite software, Gapminder:

And I won’t show you the United States here, but it’s around the same point – the late 1800’s, in effect. Or put another way, if you want to use a this very simple way of asking how long to go before we reach the same level of per capita GDP as the United States, we have about 140 years to go.


And Gapminder, of course, has the ability to allow you to do this for every single metric that is available on the software. The blogpost written by Ajay Shah, Renuka Sane and Ananya Goyal speaks about asset ownership and women’s labor participation as other things to compare India’s current level of development with America’s past – but you can, of course, take a look at whichever metric you want.

This blogpost reminded me of a chart that The Economist had come up with earlier:

https://www.economist.com/graphic-detail/2011/10/03/chasing-the-dragon

As with many charts from The Economist, it takes a while to get what is going on, but the chart is worth that effort. Here’s a quick explanation to get you started: life expectancy at birth for China is 73. India is at 65. And China was at 65 36 years ago. Once you get this, the other rows in the chart become easy to interpret. Note that this chart was published by The Economist a decade ago.


These sort of analyses are fun, but of course one shouldn’t take them too seriously. There are other things that are at play beyond the data points that are worth taking into account, but are difficult to quantify. And most notable among these is culture.

That is, sure, China was at 65 in terms of life expectancy 36 years ago, but that doesn’t necessarily mean that we will take even approximately the same amount of time to reach 73. Could be lesser, could be more – and that because of changing technology, different culture, different political structures, different – well, a whole host of things.

But this much is true: both the blogpost that I cited and the chart above shows that we have, as the poet put it, miles to go before we sleep.


By the way, a fun exercise if you are a student today is to see if you can recreate The Economist’s chart updated with today’s numbers. Give it a shot, why don’t you?

Cory Doctrow on Byju’s

This Twitter thread, and its implications deserve deep reflection about Twitter, Cory Doctrow, India, and education in India. And not in that order.

On Valuing Zomato, But Don’t Stop There

If you are a student of economics, you should be able to understand the basics of valuation. It is up to each one of us to determine our level of expertise, but at the very least, we should be able to understand valuations that others have arrived at.

And a great way to learn this is to devour, as greedily as possible, every single blog post written by Professor Aswath Damodaran.

Here’s an excerpt from his blogpost on valuing Zomato:

Eating out and prosperity don’t always go hand in hand, but you are more likely to eat out, as your discretionary income rises. Thus, it should come as no surprise that the number of restaurants increases with per capita GDP, and that one reason for the paucity of restaurants(and food delivery) in India is its low GDP, less than a fifth of per capital GDP in China and a fraction of per capital GDP in the US & EU.

http://aswathdamodaran.blogspot.com/2021/07/the-zomato-ipo-bet-on-big-markets-and.html

Read the whole thing, and if it is your first time reading about this topic, read it three times. I’m quite serious! Also download the spreadsheets, and play around with the assumptions in them. It is a great way to teach yourself Excel and valuations at the same time. Excel and valuations is also a great way to understand the concept of complementary goods, and I’m only half joking.


So, ok, you have now got a little bit of a grip on valuation. That’s great, but you shouldn’t stop there. Valuing a company is fine, but how does one think about the valuation of this company (Zomato) in the context of this sector (online food delivery)?

Here are some facts. Zomato raised $1.3 bn through an IPO which was oversubscribed 38 times and which valued it at $14.2 bn. At about the same time, its competitor Swiggy raised $1.25 bn in a Series J fund raise which gave it a post-money valuation of $5.5 bn.
The post-IPO public market price discovery of Zomato shows that Swiggy is 2.6 times under-valued.

https://gulzar05.blogspot.com/2021/07/some-observations-on-zomato-and-swiggy.html

Also from that post, a great way to understand how to start to think about the price one can get in the market. That is, you can learn all the theory you want about valuation, and pricing and what not. At the end of the day, the price you command in the market is about so much more than that:

4. But, if markets stay as frothy as it’s now, Swiggy’s promoters and investors need not worry. Unlike Zomato’s promoters who, judging from the first day pop left huge money on the table, Swiggy’s promoters could rake in much more by pricing its IPO closer to the comparator market price. Swiggy and other could benefit from the later mover advantage.
5. There appears to have been a first mover disadvantage for Zomato in leaving money at the table and not maximising its IPO takings. Conversely there may have been a first mover advantage for its investors in maximising their returns.

https://gulzar05.blogspot.com/2021/07/some-observations-on-zomato-and-swiggy.html

And you shouldn’t stop there either! Valuing a company is fine. Thinking about that company in the context of its competitors is great. Thinking about the IPO rush in the start-up world, and what it means in the context of the overall economy is fantastic.

The Indian startup scene has been set ablaze by the spectacular IPO of Zomato. In a largely conservative market this constitutes a huge collective leap of faith since the company has consistently made increasing losses and several questions hang on its profitability. With some more blockbuster IPOs lined up, the party is likely to go on for some time. Some high-profile boosters even think of it as a new dawn in risk capital raising. The problem is with those left standing when the party ends, as it must. And it’s most likely to be not pretty.

https://gulzar05.blogspot.com/2021/07/the-startup-ipo-bubble-reaches-india.html

The world’s unicorn herd is multiplying at a clip that is more rabbit-like. The number of such firms has grown from a dozen eight years ago to more than 750, worth a combined $2.4trn. In the first six months of 2021 technology startups raised nearly $300bn globally, almost as much as in the whole of 2020. That money helped add 136 new unicorns between April and June alone, a quarterly record, according to cb Insights, a data provider. Compared with the same period last year the number of funding rounds above $100m tripled, to 390. A lot of this helped fatten older members of the herd: all but four of the 34 that now boast valuations of $10bn or more have received new investments since the start of 2020.

https://www.economist.com/business/2021/07/19/technology-unicorns-are-growing-at-a-record-clip

Why is this happening now? Is it because of loose monetary policy the world over? Is it because of optimism about what the world will look like post-covid? Neither, and something else altogether? Or both and something else also? What might the ramifications be? How should that influence your thinking about the next three to five years in your life – when it comes to going abroad to study, or starting an MBA, or being in the job market?

Note the chain of thought in this blogpost: valuing a company, thinking about that specific sector, thinking about IPO’s in general, thinking about the overall economy… and getting all of that back to your life. Apply this to all of the news you read, everyday, and you’ll soon start to build your own little picture of the world. That is, you’ll start to see the world like an economist. And trust me, that is a superpower. 🙂

Arbitrage and Writing

Here are excerpts from two newsletters that you should consider signing up for if you are a student of economics:

In late June, the Reserve Bank of India (RBI), India’s central bank and the banker to the banks, released the household financial debt figures based on select financial indicators. Household financial debt is basically loans that you and I have taken from the formal financial system of the banks (both commercial and cooperative) and the non-banking finance companies (NBFCs).
Of course, there are other ways to borrow as well. One can borrow against gold as a collateral from a local jeweller or simply borrow from a local money lender or borrow money from friends and family, which is why, the RBI calls it household financial debt based on select indicators.
It needs to be kept in mind here that borrowing from the informal sources is perhaps easier but at the same time more expensive, given that the risk for those lending money is higher.
So, what does the RBI data tell us? In absolute terms, the total household financial debt based on select indicators has gone up from Rs 55.38 lakh crore to Rs 73.13 lakh crore, between June 2018 and December 2020.

https://www.livemint.com/mint-top-newsletter/easynomics09072021.html

That is from Vivek Kaul’s (relatively) new newsletter, Easynomics. It is written in Vivek’s trademark style: easy to read, gloriously simple sentences (which is hard to do!), and sprinkled with just enough additional information to keep you engaged as you read through his main points. In short, really, really well done.

Here’s an excerpt from the second newsletter:

Despite this, it is unreasonable to expect that the government will reduce tax on these two fuels. Why? Sample this: excise duties on petrol and diesel accounted for a whopping 28 per cent of the central government’s tax revenue last year. Which government would let such a bounty slip by, especially when the country’s economic recovery is fragile? Think about it.
And, unlike income tax and goods and services tax, which entail a collection cost, oil marketing companies just have to do a simple RTGS transaction to pay the fuel tax they collect from us to the government! The government then uses the money for a range of welfare schemes.

https://businessstandard.substack.com/p/a-litre-of-petrol-takes-up-30-of

You and I may have our own personal opinions about which of these are better to read, but that’s not the point of this blogpost. The point of this blogpost is to point out that both writers have created simple, easy to understand posts about aspects of the Indian economy that matter to the common Indian citizen.

And they have done this by taking data from government websites. This data, as I have discussed here before, is not always easy to acquire. But those of us who have done the hard work of understanding how it is captured, where it is stored, when it is released, and how to go about making it analyzable1, have an advantage over those of us who remain blissfully unaware of all this.

But those of us who are blissfully unaware wouldn’t mind reading about the implications of this data, only if somebody were to take the time and effort to acquire that data and write simple, useful takeaways about it.

In finance, this is called arbitrage:

In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices at which the unit is traded. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs. For example, an arbitrage opportunity is present when there is the possibility to instantaneously buy something for a low price and sell it for a higher price. (Emphasis added)

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

If you are an economics student, and you know where all this data hides, and you know enough about how this data impacts the daily lives of citizens, and you want to get better at communication, there is riskless profit to be made. Get the data, analyze it, write about it, and give it away for free.

You learn the art and skill of of acquiring this data, you learn the art and skill of analyzing it, you learn the art and skill of writing about it (and you only get better over time, so don’t worry if the first few pieces aren’t “great”). You get to publish stuff that you can put on your CV – in fact, as I am fond of saying, it has the power to quite literally become your CV. Folks get to read what you’ve written, and they therefore understand our field and its implications in their lives a little bit better.

Nobody loses out, and we all win!

And when that great and glorious day arrives, and governments in India acknowledge that the way they make data available to its citizens is crappy, you have the ability to write a series of posts about exactly how the government could do a better job in this regard.

Learn how to work with data if you are a student of economics in India, and then write about it.

It’s a great form of arbitrage.

  1. what an utterly horrible word![]

Professor Nigam’s Twitter Thread on the AIU

Professor Nigam is the registrar at NLSIU, and he was kind enough to read my series of posts on the Almost Ideal University. What’s more, he took the time to respond with a very thoughtful series of tweets, as a part of his excellent series that is freely available on Twitter. I don’t know if he has a name for it, I think of it as the “My Dear Law Students” series.

If you are a student of law, the series ought to be mandatory reading. If you are a student of writing, the series ought to be mandatory reading. I’m quite serious, please do read all of them!

In this post, I’m going to cite some of his tweets, and add my two penn’orth.


And nor will students of economics be able to demonstrate real world potential unless assisted by real economists. You learn best when taught by folks with skin in the game. In my Almost Ideal University, you can’t become a teacher without having worked in the field first. And that’s a non-negotiable requirement.

Yes, of course there are problems with this. Why will folks want to leave a corporate job? Won’t the pay be lesser in academia? Why would firms be ok with having folks just “go away” for six months to teach? All great questions, and valid ones. But that’s exactly what we need to figure out if we’re going to ever get around to building out the AIU.

These problems arise, of course, only because I am in complete agreement with Professor Nigam when he says that you need people with skin in the game.

And I’d much rather solve these (much harder) problems than solve the problem of how to make three hour long in-class theoretical exams more relevant.


The equitable access problem is a real one, and I’ll state upfront that I do not really know how to solve it. Technology can help to an extent, but the AIU won’t be equitable to begin with. Yes, replicability, if it works out, will help. But it won’t ever be a perfectly equitable system. My sole defense is that the system I seek to replace is, if anything, even more inequitable.

Not, I hasten to add, that this should mean that we stop worrying about equitable access in the case of the AIU!

And regarding the second tweet in this section, yes, bureaucracy is inevitable. But if gamified well, there is a chance that the system (again, while not being perfect) will be better than the status quo.

My point is this: if we can get students to view assignments as something to work on cooperatively rather than combatively, the need to monitor is that much lesser. Of course, the need to mentor is that much higher, but isn’t that the point of education in the first place?

But yes, those of us in academia will need to figure out how to make this happen, and as Professor Nigam has pointed out, that with the help of working professionals.

There’s a great deal of detailing to be worked out here, and apprenticeships, mentorships and professionals in residence on campus will all have a role to play. Again: a hard problem to solve, but attempting to solve for this is a worthy mission as an academician.


I wish I could do a better job of writing more clearly, and the fault is mine over here. In my AIU, the onus isn’t on the student to attend. The onus is on the professor to make the class interesting enough to attend. The student is always free to not attend, but the professor should be good enough to make the student feel regret at not being present in class. Specifically:

  1. The professor should have the ability to not just explain a particular student’s doubt, but also in the process enrich everybody else’s understanding of that issue.
  2. The professor (or their assistant, perhaps) should allow the most non-intuitive doubts to filter up in class. That is, study groups, whether offline or on (say) Discord servers will allow the students themselves to resolve the relatively easier doubts. Those that prove resilient will be handled by the professor. Will it work perfectly right from the get-go? Of course not. Is it worth trying? I vote yes – but of course, as they say, your mileage may vary.
  3. So, no, not a diminishing role for physical classroom instruction at all. Au contraire, a role of paramount importance for the physical classroom, for synthesis will happen there. And perhaps can only happen there, but that takes us into deep waters for a blogpost. And on a related note, the more you agree with me over here, the more you should worry about inequities across the entire system. For obviously, physical classroom sessions can’t scale.

A rare area of disagreement for me in this Twitter thread, for I do have a lot of confidence in the motivational levels of undergraduates. Not all undergraduates, I should be clear. As with everything else in life, so also with motivational levels of undergrads: there will be a distribution. Some will be very motivated, and will remain so no matter how bad college is. At the other end of the distribution, some will remain very unmotivated, no matter what how good college is.

But that being said, it is true that I prefer to award the benefit of the doubt to the student. This is in good humor, Professor Nigam, and please do forgive me my impertinence, but innocent until proven guilty! Or in this case (and is it the same thing?) motivated until proven otherwise. 🙂

But quite honestly, and I’m no longer joking around, I very strongly believe that the enthusiasm to learn is systematically sucked out of a student with every passing year in academia. The more years you spend in the system, the more likely it is that you will want to not learn. This is not a universal law, but in my experience, it has been a fairly accurate heuristic.

Will there be students who will abuse the system I propose? Absolutely. That is the nature of a distribution.

Do more students suffer today for being made to mandatorily sit through classes that just aren’t good enough? Absolutely, and I would rather avoid this than the former.


Completely agreed!

I could get into one of my classes, as a hypothetical, a retired bureaucrat who has impeccable knowledge of how the Union Budget takes shape over the course of the financial year in India. This hypothetical bureaucrat has forgotten more about the budgetary process than any of us will ever know. Unfortunately, watching paint dry is more entertaining than listening to this person speak.

We’ve all met folks like these: really, really good experts, but really, really bad communicators. And that’s fine! Their job wasn’t to be good communicators. It then becomes my job as the teacher in that class to make it more interesting. Maybe I interview the bureaucrat, rather than have him speak? Maybe I record the interview and play snippets? Maybe I speak offline with him, and then conduct I class based on that conversation?

But yes, we absolutely need great teachers to make the subjects accessible and enjoyable.


It’s a great question, and I wish I had an answer, but I don’t. As I said in my first post on the AIU:

I’m a big believer in the fact that students should have skin in the game, and therefore I think that a price should be paid for acquiring an education. But I’m also all too aware of the fact that some students simply cannot pay, and therefore think that some amount of subsidization is inevitable.
It gets trickier still, because you will almost certainly have to spend more resources on those students who will need subsidization. They are, other things held constant, likelier to need more intensive training in getting the quality of their writing up to the same level as that of other students, simply because they are likelier to not have had the same exposure to quality education in school. And this will apply to other dimensions as well: quantitative skills, the luxury of having time to practice their skills and so on.

https://econforeverybody.com/2021/07/09/the-almost-ideal-university/

That is, the economist in me is saying that students from poor or underprivileged families will need more intensive training and help, educating them in the AIU will be more expensive. But that still doesn’t explain the how of it. Sure, it’ll cost more, but for doing what, exactly, and how?

There are some potential answers (bridge programs, extra assignments, more mentorships) but I’m hazy on the details right now.

Would I be correct in saying, however, that if we don’t solve this problem within the university itself, the student will face an ever tougher challenge out of it? That is, an underprivileged student who doesn’t get the kind of education we are speaking about right now will find it even more difficult to succeed out in the real world – is that a reasonable hypothesis? And if yes, then it becomes even more imperative to ensure that we work towards ensuring that these students get the kind of learning that we are speaking about?

Food for thought, for sure, and I’ll be feeding at this trough for a while. 🙂


Thank you, to Professor Nigam, for an excellent set of thought-provoking questions!

And a request to all of you – please help by letting me know what makes sense, and what doesn’t when it comes to the Almost Ideal University.

And What Will *They* Do?

NYT Cooking taught me how to make cake this past year. Ranveer Brar taught me how to make palak paneer. Sahil taught me how to make a bacon bomb. Kenji Alt-Lopez taught me how to make pizza. Smita Deo taught me how to make mutton. Krish Ashok opened up entire worlds of possibilities. I can go on and on.

The proof of the pudding is in the eating. I didn’t make all of the dishes up there, but I did make some, and I think they turned out fairly well. You should try my butter chicken sometime. But the point is, I upped my cooking game a fair bit during these pandemic times. Most of us did, I think.

And one of the major reasons we became better is because we all carry around some of the best instructors in our pocket, and that for free. Your culinary school is in your pocket, as is your theatre, your sound studio, your music room, your karaoke bar, your art museum and your sports arena.

So why not your classroom?

Watching Chapter 3 of the series on Linear Algebra from 3Blue1Brown was a life-changing experience for me (and I’m not exaggerating), because I finally understood the visual intuition behind linear transformations. Ditto with Bayes Theorem. As I often tell my students in classes on behavioral finance, it is one thing to read a paper written by Fama by attempting to check out a book from the college library. It is quite another to sit and listen to Fama talk with Thaler. Or listen to Dani Rodrik talk to Tyler Cowen. Or just stroll into a “room” where some of the most interesting folks in the world are chatting with each other, as Clubhouse and it’s clones have made possible.

YouTube (and just YouTube alone, forget everything else) has taught more, across all dimensions, to most students in the past eighteen months than most universities could have managed in twice the time. That’s rhetoric, not data, but I really do think we’ll be quibbling about the magnitude, not the direction if we argue about that estimate.

Learning has had its dynamo moment.


So whenever the pandemic recedes, those of us in academia need to address questions that will (and should) increasingly be asked by students. Why the classroom? Why mandatory attendance? Why only these notes and not those videos? Can I honestly do a better job than this when it comes to teaching the Solow model? Is SC Gupta really better than Seeing Theory?

Without the internet, the cheapest and the most efficient way to deliver learning to a student was via the classroom. If I am, say, to teach a course on the Indian economy post 1991, then I can put together a bunch of slides and deliver them in a classroom where students listen to what I have to say, debate and discuss the topics I bring up in class, and then go ahead and read more stuff on their own.

With the internet, the cheapest and most efficient way to conduct the same class is to come up with a reading/viewing/listening list, and spend the class discussing the doubts and questions that students may have. This can happen in a class or online. Those who don’t have any doubts, or don’t want their doubts resolved by me are free to not attend.

But can I go one better? Can I ask the author of Half Lion to came talk with our students? Can the folks who worked on Indiabefore91.in come and speak to us about why (and how) they developed the website? Can the author of the paper that highlighted how being rich and “good” was a trend that Bollywood started to become popular after Hum Aapke Hai Kaun be invited for a talk? James Crabtree to talk about inequality in India? Or maybe Stanley Pignal? Mihir Sharma, to talk about Restart? Bibek Debroy or Ashley Trellis, maybe, to talk about what else needs to be done now? Vijay Joshi? TN Ninan? Arvind Panagariya? Arvind Subramanian? Samanth Subramanian to talk about the tanker mafia in Bangalore (and indeed, elsewhere in the country)? Hansda Sowvendra Shekhar? Gilles Verniers? Cristophe Jaffrelot? Nitin Pai?

This might seem like name dropping, but it isn’t. I haven’t met, in real life, even one of the people I have mentioned above. Nor is that list anywhere close to being comprehensive. But imagine a world in which students in my class are tasked with reading the works of these people, and they then go and reach out to these experts, asking for a talk. It is quite likely that some, maybe all, of these people will say no. But the students will have that conversation, they’ll learn the art of making the ask, and they’ll learn the art of asking for alternatives. They’ll network with some of the best people in the business. And if either the person, or the suggested alternative says yes, the student (or that group of students) is responsible for moderating that discussion. They are responsible for taking notes, creating a summary, preparing a reading list and sending all of this to the guest speaker at the end of the session. That is their assignment, and it counts as being done if all of this happens. And the “semester end” examination is a reflective essay on what they learnt through all of these guest lectures: the organization of these lectures, and what they learnt from it.

I could finish the entire semester without having “taught” a class. But there would be a lot of mentoring, networking, discussion and planning in this entire semester. My role as a teacher for this course is to be the guy who decides on the broad contours of the course, facilitates introductions, figures out Plan B’s if the original choice of speakers doesn’t work out, and overall, act as a mentor for the course.

Without the internet, I had to substitute for all this. With the internet, I complement all this. I put this altogether, on the fly, during the semester, and make sure that all of it comes together by the end. The work will actually be more, much more, than regular old teaching – but this would be, in my eyes, a significant improvement.

You don’t provide a negative incentive to have students attend class. You reward them with incredible networks for having attended class. You don’t teach a class. You harness the power of the internet to conduct a class. You don’t check if students have learnt enough by having them write an exam. You make sure that students earn the right to learn from the best, by having them read and digest the works of the best in the business. Will you learn more by mugging up notes the night before the exam, or will you learn more when you know that you have to personally speak with the author of a book, and request them to come speak to your class about it?


Teachers in my Almost Ideal University will mentor students, and help them build out their networks by connecting them with the best in the business. The learning is the process, the network is the outcome. All talks to be recorded and put up for consumption by everybody in the world. Ditto for the documentation. And the challenge in the next semester is to improve upon the one that went by.


Who exactly are these professors, though, the ones who mentor the students in these courses? Full time employees? Well, sure, in some cases. But imagine a 36 year old manager in some analytics firm who is given six months off by her firm to come and teach Introductory Statistics at a university. Imagine the kind of folks she could invite for talks at her classes. Imagine the case studies she could build. Imagine the kind of problems she could speak to students about.

I could go and teach principle of economics at a law university for one semester. A former secretary of health and could come and teach a course on public health. Maybe a PhD student of, say, Professor Ashok Gulati could conduct a course in agri-business marketing. None of us need physically be on campus! This last year and a half has taught us that this work happens just as easily remotely. We just happen to be in charge, that’s all. And sure, if you can be present physically, even better!


It’s been three essays and counting in this series, but I think we need at least one more before we can call it a day. What are the societal incentives that we need to change or chip away at before my Almost Ideal University has even a chance at existing, let alone succeeding? That’s the topic of tomorrow’s essay.