Links for 22nd February, 2019

  1. “We seem somehow bored with thinking. We want to instantly know. There’s this epidemic of listicles. Why think about what constitutes a great work of art when you can skim “The 20 Most Expensive Paintings in History?”I’m very guided by this desire to counter that in myself because I am, like everybody else, a product of my time and my culture. I remember, there’s a really beautiful commencement address that Adrienne Rich gave in 1977 in which she said that an education is not something that you get but something that you claim.

    I think that’s very much true of knowledge itself. The reason we’re so increasingly intolerant of long articles and why we skim them, why we skip forward even in a short video that reduces a 300-page book into a three-minute animation — even in that we skip forward — is that we’ve been infected with this kind of pathological impatience that makes us want to have the knowledge but not do the work of claiming it.”
    Have you heard of Maria Popova? This interview helps you understand who she is, and her importance in combating what I linked to a couple of days ago – David Perell’s article about the Never Ending Now.

  2. “Thanks to government backing, the state-owned company building the bridge is unlikely to default or go bankrupt. But bridges like Chishi leave local governments and developers struggling with debt, and those who live below nonplused.“If you don’t build roads, there can’t be prosperity,” said Huang Sanliang, a 56-year-old farmer who lives under the bridge. “But this is an expressway, not a second- or third-grade road. One of those might be better for us here.””
    The New York Times on bridges in China – and how there might be one too many of them. Economists have worried for many years now about how China’s economy will slowdown in the years to come, and also about how China’s economy has masked it’s imminent slowdown by building bridges, roads and entire cities when the immediate need is not apparent.
  3. “Turns out the reason was likely the same as the one behind every one of my life choices: it involved the least effort. As Frankie Huang, a writer and strategist based in Shanghai, told me over email, numbers are far easier to type for purposes like websites’ names, as compared to pinyin, the Romanised system for Chinese characters.”
    …speaking of China, Mithila Phadka explains why the Chinese prefer using numbers evreywhere possible – even preferring to use numbers rather than text for URL’s. 12306.cn is preferred to ChinaRail.com, for example.
  4. “In Study the Great Nation, you can catch up on the latest state media reports on Mr. Xi’s decisions, savor a quote of the day from Mr. Xi or brush up on “Xi Jinping Thought.” You can quiz yourself on Mr. Xi’s policies and pronouncements, or take in a television show called “Xi Time,” which is … well, you get the picture.Doing each of these activities can reward users with “study points,” which can be redeemed for gifts in future versions of the app.”
    I worry that China won’t be the only country doing this for very long – far too many leaders in far too many countries are likely to be tempted to be, um, inspired.
  5. “This conclusion, if it withstands open-minded analysis in India, does not mean that India lacks ways to punish Pakistan and motivate it to demobilize groups that threaten to perpetrate terrorism in India. Rather, it suggests that more symmetrical and covert operations would yield a better ratio of risk to effectiveness for India. There are many ways to make Pakistani military leaders conclude that the cohesion, security, and progress of their own country will be further jeopardized if they fail to act vigorously to prevent terrorism against India. Limited, precision air strikes are not India’s best option now or for the foreseeable future.”
    This is from 2015 – but as of that point, this rather well researched article points out that India may not be able to carry out precision air strikes against Pakistan – because of the threat of escalation, because of the technology available with Pakistan today, and because other ground based options may be more operationally feasible.
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Links for 18th February, 2019

  1. “That’s a tenet of progressivism: that progress is inevitable. So if you get something designated as progress, then your party, which was responsible for it, will get the credit for it, will always get to attack the other party for opposing it, and will find a continual source of votes in future elections by defending it. And that assumes that people will passively accept this narrowing of the range of political controversy and enjoy the individual relationship that each person has with this huge government that sends checks in the mail.”
    A rather old interview (from 2012), but the article I linked to yesterday about dole outs in India induced some additional research that helped me land up on this article – and it makes some interesting points, none of which is more interesting than the one quoted above.
  2. “The case of these surviving princes in our socialist republic is, in some ways, reflective of the countless ironies that make up Indian democracy. India remains, in many ways, a marriage of awkward histories and feudal legacies with the idealism of liberal thought and constitutional values. They do not sit easily with each other always, and sometimes jostle with force to make their presence felt. And yet the enterprise moves forward, one way or another: which perhaps explains why, even as we celebrate a Dalit president, newspapers descend into a frenzy at the advent of babies to freshly adopted maharajas; how even as a “chaiwallah” rises against the odds to become prime minister, there are princes and rajas to whom his government still owes a royal pension.”
    Manu S. Pillai on the wonder that is India today – its many contradictions and confusions. This one happens to be about how we still pay out pensions to princes and zamorins.
  3. “In short, what happened since September 2018 was the trifecta of trade tariffs, inadequate fiscal firepower from the Ministry of Finance (MoF), and a consistently hawkish PBOC. The 10% tariff on $250 billion of Chinese exports weakened domestic demand more than fiscal support was able to offset, which was reflected in both slower growth and lower inflation. And as inflation fell, the PBOC chose not to adjust the nominal interest rate, so the real interest rate effectively rose as a result. This confluence of factors put significant downward pressure on economic growth.”
    The article contains some forecasts as well – make what you will of them. But the analysis of why China did not use either fiscal or monetary tools is worth reading.
  4. “One story I’ve found myself revisiting over and over again is Asimov’s ‘Franchise,’ published as a short story in the August 1955 edition of If magazine. In it, a future America (2008), decides to reduce voting to a statistical model that extrapolates the outcomes of all elections based on a set of questions answered by one, extremely representative person.”
    The Verge has put together a list of books you might want to read to understand AI better. I am delighted to say that I haven’t read a single one of these, and therefore have a lot of reading to do.
  5. “The supporters are known as ‘Umans’ and control the team using the free United Managers’ app – a start-up which began working with the club in 2017.Before the game Umans can decide on the starting line-up, substitutes, the formation, set-pieces and communicate with staff and players.They vote using coins that they receive by using the app, or they can purchase a premium subscription. The more a Uman plays the game, the more weight their vote is worth.”
    What a fascinating experiment. A football club that is run, on the fly, by the fans. With the advent of technology, what else might be run this way in the future? With what consequences?

Links for 7th February, 2019

  1. “Using a series of network theory algorithms, Jen and Freire found that China’s influence on the world is now as sizable as the combined influence of the US and EU. The shift occurred following the financial crisis in 2008, which saw the US’s impact on average global GDP shrink from just over 40 per cent between 1989-98 to half that between 2009-18”
    FT Alphaville reports on analysis that shows just how big, and therefore important, China is in the global economy. Even more importantly, not all parts of the world will be equally affected by the Chinese slowdown/recession. Europe, it turns out, will likely be the worst hit.
  2. ““It would be kind of boring if everything was the same,” she said through a thicket of pink and green strobe lights at the bar, which sits in an upper-level parking lot. “That’s why this place is so valuable to people like us.””
    My apologies for the double-double quotes, but that excerpt encapsulates for me the dilemma underlying Singapore’s very existence. I loved the ten days or so I spent there, but maybe, just maybe, Singapore is too perfect? On the other hand, what a nice problem to have.
  3. “We became free of colonial rule in August 1947; and adopted a republican Constitution in January 1950. Seven decades later, we may be more democratic than when the British left these shores. But we are certainly less democratic than what the framers of our Constitution hoped us to be. Indeed, the faultlines I have identified here have persisted regardless of who is in power, at the Centre or in the states. They need to be addressed, and remedied, if we are to be more worthy of the ideals bequeathed us by the founders of our Republic.”
    Religious division, social inequality, environmental degradation and the degradation of public institutions are the faultlines that Ramchandra Guha speaks of – an article worth pondering upon.
  4. “All of this used to be obvious enough, but in the age of Alexandria Ocasio-Cortez it has to be explained all over again. Why does socialism never work? Because, as Margaret Thatcher explained, “eventually you run out of other people’s money.””
    Bret Stephens from the NYT lays out the reasons why socialism tends to not work – ever.
  5. “It seems clear that more people are receiving income and tax from activities that are outside traditional jobs. But other than ride-sharing jobs, just how to characterize these jobs remains murky, and the question of what rules and regulations might apply to such income-earning activities remains murky, too.”
    Care to guess which country we’re talking about before you click on this link?

Links for 5th February, 2019

  1. “If there is one number that can make the edifice of budgetary arithmetic collapse and impair the growth prospects, it is the movement of crude oil prices. If for nothing else, but simply reduce the vulnerability of the fisc, this should be done. For, it is the “resource deficit” of the country which is the single biggest threat to sustained growth of 9%”
    How might a new age budget look like? Haseeb Drabu takes a look at the ways – five of them. You’ll be reading this by the time the budget has come out, of course, but it still makes sense to read this in order to think about how the budget needs to be structured.
  2. “The 0.9 per cent year-on-year (YoY) growth in the adjusted net profit of 385 companies, which have released their results for the third quarter (Q3) of the current financial year so far, does not inspire much confidence. If financials and energy companies are removed from the sample, net profit has grown 6.4 per cent in Q3 — the worst performance in five quarters.”
    I’d recommend that you read this article to either get a sense of how to judge the macroeconomic environment (partially!) on the basis of stock market performance, or even better, if you are new to finance, read this with an Investopedia tab open alongside.
  3. “Passenger vehicle sales in China fell for the first time last year since the early 1990s due to a cut to government tax breaks and wider economic sluggishness. Hyundai, which was once the third-largest automaker in China together with Kia, is now sorting out overcapacity as its sales in China have not picked up much since being hit by the anti-Korean consumer backlash in 2017.”
    The FT provides additional information on the slowdown in China – and the link on the anti-Korean backlash is also worth reading.
  4. “From the start of 2012 to the end of 2016, China produced nearly three times as much cement as the US did in the entire 20th century.Much of that investment has gone to waste. A recent study by China’s Southwestern University of Finance and Economics estimates that more than one in five Chinese homes in urban areas, or about 65m apartments, are empty. And if demography is destiny, China’s prospects are bleak. Between 1980 and 2012, China added about 380m people to its working-age population. But that number has been shrinking for the past five years and is expected to fall by a third, or about 220m people, in the next three decades.”
    More grist to the China recession mill, from the FT. The numbers are truly breathtaking – especially that quote about cement!
  5. “China’s fertility rate has officially fallen to 1.6 children per woman, but even that number is disputed. Yi Fuxian, a professor at the University of Wisconsin-Madison, has written that China’s government has obscured the actual fertility rate to disguise the disastrous ramifications of the “one child” policy. According to his calculations, the fertility rate averaged 1.18 between 2010 and 2018.”
    The NYT picks up from where the FT left off, and tells us about the impending population crisis in China – that there may soon be too few  people in China, not too many.

Links for 4th February, 2019

  1. “The classic example in language is that a doctor is male and a nurse is female. If these biases exist in a language then a translation model will learn it and amplify it. If an occupation is [referred to as male] 60 to 70 percent of the time, for example, then a translation system might learn that and then present it as 100 percent male. We need to combat that.”The Verge interviews Macduff Hughes, the head of Google Translate. Worth reading for understanding applications of AI, the amount of bias that exists in our culture (along various dimensions), and the garbage in, garbage out problem.
  2. “This was a great year for iPhone customers, but perhaps not for Apple itself… Technology is outpacing customer need and phone lifespans are ever-longer, which we saw hurt Apple’s bottom line.”Keeping a tab on Apple makes sense, and this is a good place to start. Apple has had a difficult year for many reasons, but the most important reason has been a multi-year phenomenon – Apple has gotten too good for its own good.
  3. Ben Thompson tells it like it is:
    “While I know a lot of journalists disagree, I don’t think Facebook or Google did anything untoward: what happened to publishers was that the Internet made their business models — both print advertising and digital advertising — fundamentally unviable. That Facebook and Google picked up the resultant revenue was effect, not cause. To that end, to the extent there is concern about how dominant these companies are, even the most extreme remedies (like breakups) would not change the fact that publishers face infinite competition and have uncompetitive advertising offerings.”
    Worth reading for an excellent discussion of the law of conservation of profits, the Buzzfeed firings that took place recently, and the future of media.
  4. As Tyler Cowen never tires of saying, “solve for the equilibrium“:
    “The content industry spent years trying to battle piracy via all manner of heavy handed-tactics and lawsuits, only to realize that offering users inexpensive, quality, legitimate services was the best solution. Many users flocked to these services because they provided a less-expensive, more flexible alternative to traditional cable.Now, if the industry isn’t careful, it could lose a sizeable chunk of this newfound audience back to piracy by making it overly expensive and cumbersome to access the content subscribers are looking for.”
    Worth reading for why piracy may yet re-emerge, a good understanding of market entry and exit, and competition and its implications.
  5. “The market valuation of Baidu, Alibaba, and Tencent (BAT) is more than a quarter of India’s GDP.”
    What a stunning statistic. The rest of the blog post is a good way to acquaint yourself with how China has seen it’s internet ecosystem grow, and where India could improve.

A Tale of Three Movies

We took a look at statistics in the previous posts, and learnt how India has gotten richer over time. Rather slowly, since independence until the mid-1980’s, and then increasingly rapidly since then. Which is all well and good, but every Indian knows that statistics are like skirts.

So let’s try and take a non-data oriented look at India since Independence, shall we? And what better way of taking a look at India than by taking a look at Bollywood?

In the year 1954, Bimal Roy directed a movie called “Naukari”. Starring Kishore Kumar (in a very un-Kishore Kumarian avatar), the movie is about the difficulty that the youth of India face in terms of finding employment in India’s cities. To call it a tear-jerker is an understatement – one calamity after another befalls our protagonist.

My point is not the plot, though, but the theme. If you accept the argument that mainstream Bollywood movies are all about giving the janta what they want, then this movie was a reflection of stuff that people identified with back then. A movie about an idealistic youth who leaves his village to go work in the city is what the 1950’s were about.

Fast forward to 1975, and to one of my all-time favorite movies: Deewar. I love it for the acting, the dialogues and the plot, as does everybody else, but my inner economist is also a big fan of the movie. You see, Kishore Kumar in Naukari was about finding a job. Amitabh, by 1975, had given up on finding one. One way of viewing the movie is to say that fate conspired against him. The other way would be to say that the system failed him – and I’d argue that this is something that quite a few people back then could at least partly empathize with.

Deewar succeeded for multiple reasons, but at least one of those reasons was the fact that it struck a chord with the youth of that time: anger about jobs being hard to come by is a palpable sentiment in most movies of that time.

And then move on to the movie that best represents the zeitgeist of the India that I grew up in: Dil Chahta Hai. DCH wasn’t about aspiring to get a job, it wasn’t about being angry at the prospect of not landing one – it was about not caring a damn about the whole thing. This point is repeatedly driven home in the movie: Aamir Khan’s dialogue just before “Koi Kahe”, or the scene with his parents in which he’s packed off to Sydney come immediately to mind.

And we lapped it up! Couldn’t get enough of it. And it is quite true: the middle-class urban youth of our time wasn’t big on worrying about landing a job. It wanted to drive to Goa in a Merc.

Each movie was appropriate to its time. Audiences in the 1950’s didn’t want to see Dil Chahta Hai, and theatre going audiences in the 2000’s didn’t want to see movies about jobs.

Well, ok, maybe they did.

Understanding the Importance of GDP Growth

What is GDP all about? Why is it so very important, and why do economists spend so much time in tracking it? As we discussed in an earlier post, the GDP growth rate is one way of understanding how much more we produced in a given period compared to the last one.

So more is always good, right?

Well… not quite.

It’s a question I struggle to answer in the context of GDP growth, because yes, growth is good, but with qualifiers. It’s a little bit like saying that speed is good where a car is concerned, but too much of it can be quite disastrous.

And in a book that I have started reading recently, I came across a way of thinking about GDP growth in India that I quite liked:

In this book, I define the objective of India’s economic development as rapid, inclusive, stable and sustainable growth of national income, within a political framework of liberal democracy

(emphasis in original)

The book in question is “India’s Long Road” by Vijay Joshi, with the subtitle being “The Search for Prosperity”. Vijay Joshi has done all kinds of awesome sauce things over a long and distinguished career, and a 500 word limit will not begin to do justice to his many accomplishments. Suffice it to say that reading this book is well worth your time if you are interested in India’s growth story.

But to go back to the quote above: the author is saying, as is everybody else, that growth is important, indeed crucial, from an Indian context. That’s the rapid part. However, we also need to make sure that the growth is inclusive. Which means it’s not just important to bake a larger cake, but it is also important to make sure that every gets a slice (and preferably, as equal a slice as possible). There are many ways to accomplish this, and we don’t always do a perfect job in this regard but here’s the most important bit: we have to bake a larger cake first! Distributing a very small cake equally isn’t the point.

Stable implies growth that happens in steady fashion, not haphazardly, not in fits and starts. Put another way, steady growth over a decade is better than rapid growth for the first five years and no growth for the other five. Listen closely, and you can hear the sound of every RBI governor alive nodding his head ever so vigorously.

Sustainable would mean environmentally friendly. That’s a separate book in and of itself, but what we want is a rapidly growing country that has breathable air, drinkable water and arable land 100 years from now. Some might say that’s a contradiction in terms, but we won’t wake that particular beast just yet.

And the last bit? …within the framework of liberal democracy is treated as being almost axiomatic by Vijay Joshi, and in my opinion, rightly so. Sure, we grow slower as a consequence of our choice of a liberal democracy, but if that’s the price for political freedom, it is certainly worth it.

But I’d much rather that we work towards achieving rapid, stable, sustainable and inclusive economic growth within the framework of a liberal democracy, than achieving rapid GDP growth.

It’s a longer definition, but a better target.