Supply, Demand, Productivity (and, of course, 70 hours!)

Via Navin Kabra

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 🙂

On Sludges

I had (and have) sympathy for Navin, but I have to confess that I did enjoy reading this tweet, because it is very much a teachable moment:

Why is this a teachable moment?

Because firms have an incentive to make it as difficult for you to “leave”. They make it as easy, painless and frictionless as possible for you to “join”, and they make it as difficult, painful and, well, friction-full as possible for you to leave.

Here’s Richard Thaler and Cass Sunstein on this phenomena:

Perhaps the most basic principle of good choice architecture is our mantra: make it easy. If you want to encourage some behaviour, figure out why people aren’t doing it already, and eliminate the barriers at a standing in their way. If you want people to obtain a driver’s licence or get vaccinated, make it simple for them, above all by increasing convenience.
Of course this principle has an obvious corollary: if you want to discourage some behaviour, make it harder by creating barriers. If you want to make it harder for people to vote, forbid voting by mail and early voting, and reduce the number of polling stations (and place them far away from public transportation stops). While you’re at it, try to make people spend hours in line before they can vote. If you don’t want people to immigrate to your country, make them fill out a lot of forms and wait for months for good news in the mail (not by email), and punish them for answering even a single question incorrectly. If you want to discourage poor people from getting economic benefits, require them to navigate a baffling website and to answer a large number of questions (including some that few people can easily understand).

Nudge, by Richard Thaler and Cass Sunstein, Chapter 8, pp 151, Kindle Edition

And they have a term for it too – sludge:

Any aspect of choice architecture consisting of friction that makes it harder for people to obtain an outcome that will make them better off (by their own lights).

Does not getting spam mails in his inbox make Navin better off, by his own lights?

Yes, of course!

Does the design of the unsubscribe (I’m being generous here) form add friction to the process of Navin obtaining this outcome?

Yes, of course!

That’s sludge in action.

And once you “see” it, you begin to spot it everywhere. Newspapers and magazines make it difficult for you to cancel your online subscriptions and banks make it difficult for you to file a complaint with the banking ombudsman, to give you just two examples. I’m sure you can think of many more from your own life, and Chapter 8 of the book Nudge has many, many other examples. Please read the whole chapter (and if you’re willing to humor me, the whole book).

And finally, this might resonate with people of a certain age (or maybe, even now, all ages?):

If you have the Monday blues, and now have an irresistible urge to drop everything else and watch the whole episode instead, it’s S04E04.

You’re welcome.

On The Optimal Amount of Fraud

Sounds weird, right?

What is the optimal amount of a problem – any problem – in your life? Surely the answer to this question must be zero! No?

Let’s get more specific. What is the optimal amount of poison in your body? Surely the answer to this question must be zero! No?

Well, that would mean no vaccinations, for starters. And no sugar in your body, but that’s a whole other story.

But it certainly would mean no vaccines in your body. Here’s the definition of a vaccine:

“A substance used to stimulate immunity to a particular infectious disease or pathogen, typically prepared from an inactivated or weakened form of the causative agent or from its constituents or products.”

So if you want your body to develop the ability to fight a particular virus, you first need to inject your body with a (much) milder form of that virus. The optimal level of “poison” in your body? Non-zero!

But why should the optimal level of fraud be non-zero?

The answer, as it turns out, is related to opportunity costs:

All fraud is a) an abuse of trust causing b) monetary losses for the defrauded and c) monetary gain for the fraudster. You could zero fraud by never trusting anyone in any circumstance.

Is it possible to have a system set up where there is no fraud whatsoever? Sure. You’re just likely to have a bunch of extremely angry customers, because you’ll have to set up systems where they have to verify that they are who they say they are every few seconds.

Logged in from the same device? I don’t care, you must sign in again. Transacting for a slightly larger amount than usual? I don’t care, you must verify yourself three different ways. Reset your password every three days, and if you don’t comply, we won’t let you in.

Turns out you can live in a zero-fraud world within your organization. It’s just that nobody will want to buy anything from you:

Clearly, e-commerce would cease if, prior to buying a pair of sneakers online, you required someone to go to that degree of effort. You’d almost never lose a pair of sneakers to a fraudster again, but you’d also sell very few sneakers.

And so, much like vaccines and the human body, organizations often voluntarily accept some fraud. Why? Because of what we spoke about above – eliminating all fraud risks throwing the baby out with the bathwater. That is, yes, you could eliminate all fraud, but you would also, in the process, end up turning away all of your genuine customers as well. Or, if you prefer it to be put in our language, the opportunity cost of zero fraud is zero customers.

Which then begs the question – how much fraud is acceptable? Well, that would depend on the volume of transactions, and on your margins. High margin, high volume business? Fraud isn’t your first problem. Low margin, low volume business? Fraud probably makes it into your top three list of problems.

Between these two there exists a spectrum of fraud regimes, and this is broadly a good thing. Society gets to make choices, and here it is choosing through the activities of private agents. It is optimizing for how many resources to let leak to bad actors and much societal effort to burn on policing them versus how much low-friction commerce to enable by good actors. This is often missed in discussions of fraud; one reason it has increased over the past few decades is that legitimate commerce has exploded, as the world becomes richer and as barriers to commerce have come down.

It also depends on the level of trust in the society in which you operate – but that, also, is a whole other story.

My thanks to Navin Kabra for sharing Patrick McKenzie’s article, on which this post is based. Please, do read the whole thing.

Why is it bad to be rich? Final take (for now)

Third blog post and counting in response to one simple question!

But as the title suggests, this will be the last one, I promise. Mostly.

But this last one, it is my favorite of the three, Here we go:

Have you heard of the European Super League?

The European Super League (ESL), officially The Super League, was a proposed seasonal club football competition that initially would have been contested by twenty European football clubs, twelve of them being the competition’s founding members. It was organised by the European Super League Company, S.L., a commercial enterprise created to rival the UEFA Champions League, Europe’s premier club football tournament organised by UEFA.
The announcement of the European Super League in April 2021 received wide opposition from fans, players, managers, politicians, and other clubs in England, which with six teams was the most represented country in the project. It also received opposition from UEFA, FIFA, and some national governments. Much of the criticism against the ESL was due to concerns about elitism and the lack of competitiveness within the competition, as it would have consisted of only high-ranking teams from a few European countries

There were many reasons to oppose the ESL, and I should at the outset make my own opinion clear – I abhor the idea. But the main reason to oppose it? The structure, or the format of the competition:

Inspired by European basketball’s EuroLeague, the proposed competition was to feature twenty clubs who would take part in matches against each other; fifteen of these would be permanent members, dubbed “founding clubs”, who would govern the competition’s operation, while five places would be given to clubs through a qualifying mechanism focused on the teams who performed best in their country’s most recent domestic season. Each year, the competition would see the teams split into two groups of ten, playing home-and-away in a double round-robin format for 18 group matches per team, with fixtures set to take place midweek to avoid disrupting the clubs’ involvement in their domestic leagues. At the end of these group matches, the top three of each group would qualify for the quarter-finals, while the teams finishing fourth and fifth from each group would compete in two-legged play-offs to decide the last two quarter-finalists. The remainder of the competition would take place in a four-week span at the end of the season, with the quarter-finals and semi-finals featuring two-legged ties, while the final would be contested as a single fixture at a neutral venue.Each season of the competition would feature 197 matches (180 in the group stage and 17 in the knockout stage) (emphasis added)

A while ago, Tyler Cowen spoke with Luigi Zingales for a Conversations with Tyler episode. A truly wonderful episode, full of enjoyable insight, but this in particular really stuck with me:

I don’t understand why in the United States the only thing that is really noncompetitive is sports. In Europe, the only thing that is really competitive is sports. In Italy, soccer you are the first division, second division, you are promoted or demoted, according to performance. You don’t buy your way into the NFL or the Major League, et cetera.
Here, you buy the franchise, and once you’re in, no matter how incompetent you are, you stay there, which is completely un‑American.

The next three words in the transcript are, and I quote “laughter and applause”, but this is no laughing matter. Luigi Zingales is completely right, and is speaking about a ridiculously powerful idea: skin in the game.

The reason every single football fan I know, without exception, was completely set against the ESL is because it took away skin in the game. The top fifteen clubs would never be demoted from the league.

There was no fear of failure, and without fear of failure – without skin in the game – you can’t make the jump.

The way to make society more equal is by forcing (through skin in the game) the rich to be subjected to the risk of exiting from the one percent

You really should read the whole post on Medium (and then the entire book, and both at least twice, preferably once more, just to be sure), but think about what Nassim Nicholas Taleb is saying in that quote. Inequality, he says elsewhere in the post, is a zero-sum game. In countries such as the US, he says, the act of wealth creation is also an act of destruction (he means it in a Schumpeterian sense).

And that’s what Zingales is getting at when he says that sports in America is, well, un-American. The leagues there have no skin in the game, because no matter how incompetent you are, you never get demoted from the league. There is no creative destruction in American sports leagues.

And that was the problem with the ESL. There would have been no skin in the game, and that doesn’t sit well with us. The best team in the leagues as they are structured today begins with a clean slate next year, and while the probability that it will be demoted the next year is very low, it isn’t zero. Every team in, say, the English Premier League has skin in the game in this sense. And it really and truly matters.

And so my final answer to Navin’s question isn’t really my own, it is a quote from Taleb:

What people resent –or should resent –is the person at the top who has no skin in the game, that is, because he doesn’t bear his allotted risk, is immune to the possibility of falling from his pedestal, exiting the income or wealth bracket, and getting to the soup kitchen.

Inequality itself isn’t bad. Inequality in a rigged game, where there is no skin in the game? In that case, it is really and truly bad to be rich.

Please, do read Skin in the Game.

ChatGPT on Why It Is Bad to be Rich

What if we asked Navin’s question to ChatGPT?

This post is as much an attempt to think more about Navin’s question as it is an attempt to show you, concretely, how you might want to use ChatGPT.

Complements over substitutes, always remember. By which I mean that you should use ChatGPT as a tool (complement) to make your thinking better. You should not use it as a replacement (substitute) for your own thinking.

Say you’re at a dinner party, and somebody brings up this question: why is it bad to be rich?

How should you go about thinking about this question? Me, I would want to ask two extremely basic questions first:

  1. Bad for whom?
  2. Relative to what?

The first question is about asking whose perspective one is going to try and answer the question from. Is it bad to be rich if you are the person getting rich? Or is it bad to be rich from the perspective of somebody else? That somebody else – if that’s the answer – is who, exactly? Somebody who didn’t get rich as a consequence of you getting rich? Somebody who will also get rich as a consequence of you getting rich? A bit of both, maybe (by which we mean we are analyzing the question from the point of view of society)?

So rather than ask the question directly to ChatGPT (“Why is it bad to be rich?”), it might help if you thought about the question yourself, and then asked a better question to ChatGPT (“If a person were to be rich, is that good or bad for that person?”):

You and I might have a difference of opinion about which answer is better, and that’s fine. The point is that phrasing the question differently evokes different responses, and that phrasing the question the right way matters as much when you’re chatting with AI as it does when you’re chatting with human beings. If, at the first attempt, the answer isn’t along “expected” lines, don’t fall prey to confirmation bias, but rather ask yourself if ChatGPT has understood you well enough to be able to answer. Consider this version, for example:

All right, enough gyaan, you might say. Let’s see what the econ literature has to say about this last question:

I ran the first sentence of ChatGPT’s answer through, and this is what turned up:

Not only does phrasing matter, but don’t end up depending on just one AI assistant – that’s the lesson from this exercise. Broaden your search (and this should go without saying, but please do also check if the papers cited by ChatGPT also exist!) If you’re as lazy as I am, you might want to meta-outsource – but even if you, do still verify the whole thing independently!

And now on to the second question (relative to what?). Is it bad being rich relative to other people/regions/countries being poor? We’re talking about inequality now, and the relationship between inequality and economic growth has a long and rich history.

This rabbit-hole can keep you occupied for hours. You can dig further by asking ChatGPT what it means when it says “structure of the economy”, for example. You could ask it to elaborate on ways in which the labor market might not function to full efficiency, and how that impacts the evolution of both poverty reduction and inequality. You could ask it what it means by “full efficiency”, if you want to go hyper-meta.

Depending on your research interests, you could ask for a literature review for any one of those questions, and drill further down still.

This, so far, has been a sojourn into the world of economic literature. But we would be remiss to stop there! What does the field of philosophy have to say about this question? What about sociology? What about psychology? Here’s the first of these:

Again, note that you will have to verify that each of these exist! The more you play around with ChatGPT, the more you should try and build a model in your own head about questions for which it is likely to ‘hallucinate’. It’s a little like conducting a viva voce for a student. Play the game often enough, and you develop a sense for when a student is winging it, and when a student isn’t. It is a much more difficult game – detecting bullshit on part of ChatGPT – but you can get better at it, and it is a useful skill to possess, no matter how rudimentary.

There is now, in all probability, nobody else left at the dinner table, and you’re not about to be invited back anytime soon. But on the other hand, you’re much richer in your knowledge about how to think about this issue and about how to work better with ChatGPT. Those who left that hypothetical dinner party are, along this dimension, poorer.

Is it bad to be rich?

Why is it bad to be rich?

Navin asked this question on Twitter recently:

(My thanks to Mihir Mahajan for pointing the tweet out to me, and for requesting for a post on this topic)

My current plan is to answer this question over three posts. In today’s post, I’ll try and answer this question using a first principles approach. That is, without using Google, or ChatGPT3, or my notes and references, I’ll answer this question using nothing more than what I think are the basic, foundational principles of economics.

In tomorrow’s post, I’ll trawl through the internet (and make use of ChatGPT3), and throw in articles/blog posts I’ve bookmarked over the years that speak to this point. And finally, in the post the day after tomorrow, I’ll speak about books you might want to read about this topic.

But even before having written down a single word re: my first principles argument, here is my answer in short: it is wonderful to be rich.

Six principles, if you ask me, that you absolutely must learn if you are a student of economics (and note that whether you like it or not, everybody is a student of economics):

  1. Incentives Matter
  3. Trade Matters
  4. Costs Matter
  5. Prices Matter
  6. Externalities Matter

As I was telling somebody the other day, most – if not all – problems in economics can be thought of using these six principles. If you truly understand these six principles and all of what they imply, you will be able to reduce every economic problem you meet down to the application of these six principles. The applications may be nuanced, there may be more than one principle applicable, and you may have to supply a lot of caveats. But you’ll go a very long way towards tackling your problem of choice by starting with these six principles.

And I’ll fire my first salvo at Navin’s question by deploying the third principle in the list: trade matters.

People get rich by trading with other people. Sure, people have gotten rich in the past (and in some cases, even today) by expropriating property, through loot and through dacoity. But I hope you don’t think I’m ducking the issue by saying that’s not the focus of today’s post. My focus in today’s post is about people who get rich through peaceful, voluntary trade. This particular process of getting rich focuses on offering you, through entirely peaceful, non-coercive means, a trade.

You are free to evaluate the terms of this trade, and if they seem agreeable to you, you enter into this trade. Note that the only reason you do is because you think that doing so is to your advantage. You are better off for having done this trade, relative to the option of not doing so. And the person who offered this trade to you is presumably better off for you taking the other end of it, for why else would she have offered you this trade instead?

That’s a non zero sum game, and the more we play such games with each other, the better off we are. That’s what the principle of “Trade Matters” means, and that is what it entails: peaceful, voluntary trade leaves both parties better off, and the world is therefore better off for this trade having gone through. If, as a consequence, both parties get richer, that’s A Very Good Thing, and it is therefore good to be rich.

But remember that for some problems, the applications of these principles may be nuanced, and that there may be more than one principle applicable.

First, opportunity costs. TINSTAAFL stands for There Is No Such Thing As A Free Lunch, and even to a non-zero sum game, opportunity costs are very much applicable. In the context of international trade, your level of analysis matters. Trade might make sense at the level of the parties involved in the trade, but that doesn’t necessarily mean that everybody else is better off as a consequence:

Because in the case of trade between countries, as opposed to trade between individuals, there are people who will lose out. If a university in the United States of America hires me to teach online classes to the students over there, there isn’t a hypothetical amateur cook who is losing out. There is an actual person in that country who could have taught this course, but is no longer able to because of me.
The university that hired me is better off, because it is able to hire the services of a teacher for less money. To the extent that I do about as good a job as the person I replaced, the students are (at least) indifferent. And given how strong the dollar is, I am certainly better off!
But it is not enough to say that both parties in this trade are better off (I and the university). A complete economic analysis should also include the person in the USA who is out of a job, and I would argue that one should also include what I find myself unable to do here in India as a consequence of teaching that course abroad. Both of these are the opportunity costs of this trade, and a complete economic analysis should include these aspects as well


Trade might then, at the margin, cause an increase in inequality. You’d be surprised at how old (but still somewhat underrated) an idea this is, but the opportunity cost of more trade might well imply an increase in inequality. So you might well say that it is bad to be rich because the opportunity cost of you being rich is that somebody else is (comparatively) poor.

But be careful with how you proceed with this! It cuts both ways, this analysis. Is the opportunity cost of reducing inequality a reduction in the creation of wealth? When you attempt to reduce inequality by taxing the rich, you reduce their incentive to trade. And remember, they get rich by voluntarily trading with you, and if that trade leaves you better off, you’ve made yourself poorer in the bargain.

If you tax Amazon so much that Amazon decides it is better for them to shutter up altogether, have you made the world better off or worse off? I’d urge you to ignore your first, visceral take, and take a look at your Amazon app to find out how often you’ve ordered from Amazon in the past month before answering this question.

So I’d argue that it still is good to be rich – but it ain’t for free. But in my opinion, the price is worth it. One can, and one should, argue about what the appropriate level of taxation should be. One can, and one should, worry about tactics used by Amazon to make sure that they remain a monopoly provider of certain goods and services. One can, and one should, worry about whether Amazon pushes its employees a little bit too much. I’m not defending Amazon as a perfect company without flaws. But I very much am saying that the world is a better place because Amazon exists. There are costs that we bear for having Amazon in our midst, but those costs are worth it.

And I picked Amazon as a stereotypical example here, but the argument is about the underlying idea, not about the specific organization. Trade matters, even after acknowledging that there are opportunity costs involved with trade.

We’re trading right now, you and I. You’re paying me with that most precious of all commodities in the year 2023: attention. And I can’t begin to thank you enough for having given me your attention so far, because I know that reading this ain’t easy. Pleasurable, hopefully, and worth your while – but not easy. And you’ve chosen to continue to pay me with your attention because what you’re getting in return – the pleasure you feel in tackling my arguments – is worth your while.

But how do you know that it is worth your while? You could have been doing something else with this time. You could have been learning how to code. You could have finished at least part of some project or an assignment. You could have picked strawberries. You could have milked a cow.

The point is that you could have been doing something that actually earns you cold hard cash, instead of reading this article. And it is your assessment of your own opportunity costs that allow you to continue reading this article. You know that you can ‘afford’ to spare the time required to read this article.

But how do you know this? You know it because you are part of a national (and global) economic system that depends upon the principle that ‘prices matter’.You have at least an implicit valuation of how much a minute of your time is worth, and you have made the rational decision to ‘spend’ this time reading this blog.

What is my point? My point is that we know how much it costs to enter into a trade only if we know how much that trade is worth to us, and we only know how much a trade is worth to us by having a sense of what we’re worth to society. Trade matters is a principle that works only if we know the price of a good or a service, and we know the price of a good or a service best in a free market economy. Deciding how much to produce something, and deciding at what price to sell it is a truly difficult problem to solve in an economy that is not based on markets.

So yes, trade matters, but so do prices.

But speaking of prices, it gets trickier still.

  1. What if you set prices to not just lure the buyer into buying your product, but at a price which is so attractive to buyers that your competitors cannot afford to match it? What if they go out of business as a consequence, leaving you as the only game in town? What if you then raise prices?
  2. What if you use patents to make sure that others cannot sell the same goods that you are selling? What if you abuse the patenting process to stymie the competition? What if you then become the only game in town, and raise prices to eye-watering levels?
  3. What if the price at which you sell the product you are selling does not take into account the damage done to the environment?
  4. What if the buyer isn’t aware of further purchases she might need to make for having bought your goods? What if she realizes later that the true price of the good in question is much higher?
  5. What if the buyer is tempted into buying the product because of shady marketing techniques?
  6. What if you lobby with the government to make sure that nobody else but you can sell the product that you’re selling? Will you then be able to charge a higher price?

Each of these questions merits a much deeper exploration than is possible in this blogpost (for those who are interested, or wondering, here are the topics you want to think about in the case of those six questions: monopoly | propoerty rights and patents | externalities | asymmetry of information | microeconomics/ behavioral economics | public economics). These topics would just be the start, there are many nuances to consider in each of the six questions. But for having raised these six questions, and the two separate arguments I’ve made in the last two sections above, here is my answer to Navin’s question about why it is bad to be rich:

It is bad to be rich if you live in a world without a fully operative price system, and/or a world in which non-voluntary trades can take place.

Interpret that sentence however you like, but begin to worry if you are convinced that there is only one interpretation, or if you are convinced that your interpretation is the only correct one!

I write on this blog for many reasons, but chief among them is a very personal reason. I would like my thinking, and my writing, to be become clearer and better over time. I’ll be the first to put my hand up and say that there are days on which I think I succeed in this endeavor, and there are days on which I don’t. But taken as a whole, I am convinced that I am a better thinker and writer than I was in 2016, which is when I started this blog.

Far from perfect, in case it needs to be said, but the benchmark isn’t perfection, the benchmark is Ashish of 2016. And on any given day, it is the Ashish of the previous day. One day at a time, as it were.

And one thing that has happened over these past six years is that I have become better at distilling in my own head what economics ultimately comes down to. Six microeconomic principles, and three big picture questions. I have outlined the six principles above, and I have written about the three big picture questions before, but here they are once again:

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

Students who have learnt from me these past six years will be familiar with this list. But there is a crucial component that is missing in this list of six principles and three big picture questions: time. On my blog, I have attempted to get around this problem by speaking of an alternative framework, which I have shortened in my head to the CHIC acronym: Choices, Horizons, Incentives and Costs:

The trouble is, our brain isn’t always the best at interpreting incentives correctly, which brings us to the third key concept in economics: horizons. Or, if you have had enough nerd talk for one day, we could also call it the instant gratification monkey problem. Call it what you will, the problem is that we tend to prioritize choices that payoff in the short run, but create problems in the long run. If you’ve ever had that last “one for the road” drink, or ended up actually eating that second dessert (and who hasn’t?), you don’t really need an explanation for this. We tend to choose those options that payoff over the short horizon, and ignore the long term consequences.

I have also written about time, and how it is ever-so-confusing to think about it in the context of economics. In my classes, I show students the circular flow of income diagram, and once they’ve understood it, I ask them to think of it as a video, rather than a still picture. That is to say, time matters.

Time matters.

Go and read the responses that Navin got on his original question on Twitter. I sent this essay that you are reading right not to some people, and they highlighted this same problem – they thought of intergenerational problems about being rich. Inheritance and the perpetuation of inequality across time, for example. Almost the entirety of my blogpost tomorrow, where I will share many articles that answer Navin’s question, focusses on this issue.

So here’s a question I have been grappling with for a while: should I update my list of six principles (Incentives matter | TINSTAAFL | Trade Matters | Costs Matter | Prices Matter | Externalities Matter) to also include Time Matters? And if yes, how do I expound upon this principle?

Here’s another way of thinking about this issue – one of my objectives on this blog is to teach economics to anybody and everybody. So ask yourself this question – what do we need to do to simplify economics down to its absolute bare minimum? Will somebody who has learnt about economics by attending my classes, or reading my blog, be able to answer Navin’s question? And the short answer to this question is yes, they will. But in an incomplete fashion, because in the context of this question (and many others besides), time matters.

Time, as it turns out, really and truly matters. And for me to teach this principles, I need to try and understand it better myself.


It is the process that matters

Regarding yesterday’s post, which you might want to read before tackling this one, a follow-up point that should have struck me much earlier – the answer lies as much in that ChatGPT query that I ended with as much as it does in a post written a while ago by Navin Kabra:

One of the most influential modern theories espoused by many successful people is known as “Process-Oriented Thinking” or “Systems-Mindset.” The main point is that focusing on your process, or your system, instead of focusing on the goals, or the outcomes is the key to success.

I have linked to this post before, and I doubtless will again. But please, if you have not read this post yet, do so in its entirety. It is well worth your time. And please note the title of Navin’s post!

Whether it is a NAAC visit or a G20 visit, why should that act as the catalyst to Get Things Done? Why should, in other words, Senapati Bapat Road look awesome only when foreign dignitaries come a-visitin’? Why should a campus look fantastic only when the NAAC committee comes a-visitin’?

Because we’re focussing on the outcomes, but ignoring the process (note that targeting outcomes is important, but without having a process-mindset, the targeting is next to useless). The PMC is not following the karmanyevaadhikaraste philosophy if the Senapati Bapat Road relapses to its old state once the summit is over. A college is not following the karmanyevaadhikaraste philosophy if the bathrooms are back to being dirty the week after the NAAC committee has vacated the building. By the way, in the defense of both the PMC and the college/university, it is hard to follow the karmanyevaadhikaraste philosophy. I rarely succeed in it myself across all of the things I try to do (this blog included) – and so while I have enjoyed trolling both the PMC and colleges, I do have some sympathy for ’em.

But regardless of whether it is hard or not, if you are looking for an answer to the question of how do we get Senepati Bapat Road to always be spic-and-span, the answer lies as much in ChatGPT’s answers as it does in ancient wisdom. And it is, as Navin says, worth following this advice in one’s own life, to the maximum extent possible.

On a related note, one my of my resolutions for the year was to listen to more podcasts, and I’m happy to recommend to you a conversation about what we’ve been talking about between Tim Ferriss and James Clear. Lots of excellent takeaways, including the quote that they’ve chosen to lead with:

Every action you take is a vote for the kind of person you wish to become

And if you’re wondering, yes, that is a very large chunk of the reasons behind I trying to write everyday. It really is all about the process!

How To Fall In Love With Twitter

There’s a very small list of people I know of who use Twitter well.

There are probably millions of people who use Twitter well, of course. It is just that I haven’t found them yet.

But when you do use Twitter well, it is a magical thing. It entertains you, educates you and on rare but delightful occasions, even enlightens you.

Learning how to use Twitter well is a skill. I am still learning it, but I get a little better everyday. And isn’t that the point?

And if you’re looking for advice on how to use Twitter well, follow Navin Kabra on Twitter. Learn from what he says, but much more importantly, learn from what he does on Twitter.

For example, consider his pinned tweet:

Navin, thank you for being awesome at Twitter!

Two Paths

Scenario A:

You are a student. You are currently an undergraduate student, majoring in field of study X. Having spent near enough three years studying courses in field of study X, you have now realized that this is not your calling in life.

You now wish to study abroad, but in a different field of study, say Y.

In order to get into a “good” university in field of study Y, you need to show that you have acquired some sort of expertise in that field of study. How does one show this? Can we show that you have worked in an organization that specializes in the applications of that field of study? Can we show that you have attended conferences related to that subject? Can we show that you have published papers, written blogs about that subject? Can we show that you have interned with a professor whose specialization is that field of study?

How do we build a resume that shows you to be passionate about that particular field of study?

Scenario B:

You are a student. You are currently an undergraduate student, majoring in field of study X. Having spent near enough three years studying courses in field of study X, you have now realized that this is not your calling in life.

You now wish learn more about something else – a different field of study, say Y.

You read some articles about that field of study online. While reading about these articles, you start to communicate with some of the leading practitioners in this field of study. Maybe you reach out to them via LinkedIn, maybe you meet them at a conference that you learnt about because of your research online. Maybe you write a series of blogs as you read these articles, and the magic of the internet means that some people reach out to you to talk about what you’ve written. Maybe you create Instagram Reels about your learning. Maybe you help somebody create a podcast about it. Maybe you start a YouTube channel about it. You spend three months, maybe six months, maybe a year learning more about field of study Y. You have some projects, some work experience, some collaborators, some followers associated with this new passion of yours.

Given all this, which university should you pick to learn more about this field?

Which approach is better?

Which approach are you more likely to advocate?

Which approach are you likely to pursue yourself?

What does karmanyevaadhikaraste mean?