Tag: navin kabra

About Ergodicity

Anything that Zeynep Tufekci writes is worth reading, and people like Navin Kabra make Twitter a place of learning and knowledge. Therefore this tweet is worth the price of admission twice over.

But it gets better!

Because the replies took me to this excellent essay on ergodicity:

In an ergodic scenario, the average outcome of the group is the same as the average outcome of the individual over time. An example of an ergodic systems would be the outcomes of a coin toss (heads/tails). If 100 people flip a coin once or 1 person flips a coin 100 times, you get the same outcome. (Though the consequences of those outcomes (e.g. win/lose money) are typically not ergodic)!
In a non-ergodic system, the individual, over time, does not get the average outcome of the group.

https://taylorpearson.me/ergodicity/

… And therefore this set of essays and this newsletter.

As the kids say these days: sorted.

Learn Macro by Reading the Paper

Macro, and I’ve said this before, is hard.

But a useful way to start understanding it, at least in an Indian context, is by:

  • carefully reading a well written article
  • understanding and noting for oneself key concepts within that article
  • recreating the charts from that article
    • That includes figuring out the source of the data…
    • … as well as acquiring the ability to build out these charts
  • And most important of all, creating a piece of your own (could be a YouTube video/short, a blog, an Instagram story, a Twitter thread) that helps simplify the article you’ve read.((Skipping this last point is missing the point altogether, rascalla!))

Now, Arvind Subramanian and Josh Felman have generously obliged us by writing a well written article. I’ll oblige you by carefully reading it and annotating it, including pointing out key concepts, sources for data and recommendations for building out the charts.

That just leaves the last point for you, dear reader. We’ll call that homework.

Now, the well written article:

For more than a decade, India’s fiscal problem has been on the back-burner, acknowledged as a concern, but excluded from the ranks of pressing issues. Now, however, the problem is back with a vengeance. COVID has upended the fiscal position, and fixing it will require considerable time and effort, even if the economy recovers. This worrisome prospect has prompted calls for the Fiscal Responsibility and Budget Management Act (FRBM) to be dusted off, reintroduced, and implemented — this time, strictly and faithfully. But before we heed them, we need to understand why the previous FRBM strategy failed and how to prevent a repeat. We argue below that the new strategy will look nothing like the current FRBM.

https://indianexpress.com/article/opinion/columns/coronanvirus-india-economy-gdp-growth-post-covid-7261915/

First things first, what is FRBM?

The Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) is an Act of the Parliament of India to institutionalize financial discipline, reduce India’s fiscal deficit, improve macroeconomic management and the overall management of the public funds by moving towards a balanced budget and strengthen fiscal prudence. The main purpose was to eliminate revenue deficit of the country (building revenue surplus thereafter) and bring down the fiscal deficit to a manageable 3% of the GDP by March 2008.

https://en.wikipedia.org/wiki/Fiscal_Responsibility_and_Budget_Management_Act,_2003

Think of it as a one-person Alcoholic’s Anonymous club. It is of the government, for the government and by the government, and the idea is to wean the government off a dangerous addiction that it is hopelessly affixed to: debt.

By the way, there are many reasons this is a good essay, not the least of which is how well structured it is. The first three sentences in the very first paragraph, excerpted above, point out the problem that is going to be addressed, without using any difficult words or jargon. Then they point out the tool that will be used to address the problem. Then they point out the tool itself has problems. Finally, the explain that the essay is about fixing those problems. And then the essay follows. You might want to keep this in mind when writing your own essays (or indeed creating your own podcasts/videos etc.)

Now, back to the essay:

  1. What is general government debt? Where can I access the data?
    Note the second hyperlink above: I’ve linked to the Fred St Louis page about India’s debt, which itself gets the data from the IMF. Here is the page from the Ministry of Finance’s own website titled Public Finance Statistics. It has not been updated since September 2015. Here is a Motilal Oswal report on the subject that pegs general government debt at INR 157,227 billion. (Exhibit 1 in the report). If you read footnote 3 of that exhibit, two things happen. The first thing that happens is that you realize that tracking down general government debt might take a while. The second thing that happens is you feel a rather large twinge of sympathy for the folks who have tried to do this exercise.
    Figure 1 in the well-written article that we are analyzing in today’s post doesn’t mention a source, unfortunately. So recreating that chart will involve a rather large part of our day – but I would strongly recommend that you do the exercise. If you want to analyze Indian macroeconomic data for a living, this will be a good initiation. And indeed, a write-up about this exercise alone is a worthy addition to your CV!
  2. Second r-g: what is r, and what is g?
    1. “r” is the policy rate, which in our case will be the repo rate. This is available on the homepage of the RBI, top-left, under current rates.
    2. Time series data? Available on the DBIE page, under key rates.
    3. “g” is the nominal growth rate of the economy, and can be found at MOSPI.
    4. A useful thing to do as a student is to try and recreate the chart in the well-written article.
    5. Pts 1 and 2 here will help you get most of the data, and try and use either Microsoft Excel or Datawrapper to recreate the chart.((Document your learnings as you go along.))
  3. Next, what is primary balance?((Read the whole article, please. It’s a good way to clear your understanding of this topic, and it is free)) Where does one get that data in India?((The Excel link under Deficit Statistics was down when I tried to access the data. Your mileage may vary.))
  4. Next, this sentence from the article: “Simple fiscal arithmetic shows that debt does not explode when the former (primary balance) is greater than the latter (interest-growth differential)”. What is this “simple fiscal arithmetic”? They’ve explained it in equations 1 and 2 in this paper.((Page 3))
  5. The next three paragraphs after Figure 1 in the article point out how precarious India’s situation is when it comes to government debt, and why. It is one thing to read about the equation in a textbook, it is quite another to “run” the numbers in practice. Give it a shot, please, and see if it makes sense.
  6. Next, this paragraph from the article:
    “First, India should abandon multiple fiscal criteria for guiding fiscal policy. The current FRBM sets targets for the overall deficit, the revenue deficit and debt. This proliferation of targets impedes the objective of ensuring sustainability, since the targets can conflict with each other, creating confusion about which one to follow and thereby obfuscating accountability.”
    This paragraph is a good way to understand the importance of reading In The Service of the Republic, by Kelkar and Shah (and also to read up about the Tinbergen Rule).
  7. The next three paragraphs after that are a good way to understand what Goodhart’s Law means in practice.
  8. And finally, see if you can explain to yourself why targeting the primary balance is better than other options. Personally, I agree that it is a better target, and I agree that rather than setting down a concrete number to reach, averaging out half a percentage point worth of reduction is better. In essence, what they’re saying is that you shouldn’t try to reach x kilos of weight on a diet, but lose x% body weight every month. As our ex-captain might have put it, process over results. One of our gods advocates this too, as Navin Kabra points out.
    My reservation comes from the fact that sticking to a diet is hard, and that is true whether you’re targeting a process or a target. In other words, it is the ongoing implementation of the plan that is the challenge, not it’s design!
  9. One last point: without creating something that you are willing to put up for public consumption, and highlighting on your CV as an exercise you have done – you haven’t really learnt. Reading either that article or this blog is the easy part – explaining it somebody else is the much more difficult (and causally speaking, therefore meaningful) bit.
  10. Please, do it!

Pre and Post Nuclear Bomb Steel

I had referred to Patrick Collison’s “Yes, and” rather than “No, But” approach to Twitter earlier this week.

In a world in which there was a “Yes, and” Society, and a Pune chapter for this hypothetical (but much needed) society, I’d have voted for Navin Kabra as Lifetime President. Today’s twitter thread of choice is one of many reasons why:

Recommended pairing: The Life and Times of the Thunderbolt Kid, by Bill Bryson. The whole book is a delightful read, but I have the pages where he speaks about America’s fascination with the atomic bomb in mind.

A Simpsons based podcast this Sunday

Not a video today, but a podcast. Are the Simpsons still middle class today?

What a lovely, lovely idea, and how brilliantly executed! And you might want to pair it with this excellent newsletter from Navin Kabra.

CV’s are overrated

… as are examinations, marks, submissions, assignments and NAAC reports. I speak only of my current area of work, but this is true in all walks of life, of course.

There are two aspects to work: doing it, and showing that you have done it. A CV isn’t work, it is showing that you have done the work. So also the list above: none of it is work, it is showing that you have done the work. Meta-work, if you will.

Anybody who has conducted an interview has read the line “Proficient in MS-Office”. And each and every person who belongs to this tribe has rolled their eyes when asked about how many of the people who have written this line actually are proficient in MS-Office.

(My personal favorite among the variants of this line is “Intermediate level knowledge of MS Excel.” It signals to me that the writer is honest enough to acknowledge that they don’t know enough about Excel, but also can’t bring themselves to say that they don’t know enough.)

But ask yourself: what is a CV? It is a document that is supposed to showcase the work that you have done.

It is, as all of us know (but none among us would like to acknowledge) actually a document that showcases work that we hope will land us a job, no matter how tangentially true the content of the CV, and our association with said content.

This argument holds true for examinations as well! Examinations – and the marks you score in an examinations – are supposed to be a reflection of how well you know the subject.

It is, as all of us know (but none among us would like to acknowledge) a process in which we minimize our efforts to maximize our output. It’s even more problematic because the output isn’t learning, it’s marks.

NAAC reports that are submitted by colleges are in essence a manifestation of the many voodoo dolls that students have pricked at over the years, hoping to gain revenge for all the meaningless assignments/submissions/vivas that they have been subjected to while earning a degree. For colleges submit the NAAC reports using the same philosophy that students do while submitting their assignments:

“It doesn’t matter if it is a reflection of what reality is. It must be shown as a real thing on paper.”

We have created, as a society, a culture in which we measure the work that we do through these proxies, and collectively pretend that these proxies are a reflection of reality. Worse, we now spend a vast majority of our time on creating the proxies, rather than actually doing the work.

But to come back to my point (and yes, I do have one), the internet holds out the possibility to change this. At least where CV’s are concerned.

  • Don’t say that you are proficient in MS-Excel. Create, instead, a YouTube channel, or a blog, or an Instagram post, or a Facebook page, or a podcast where you show that you are proficient in MS-Excel. That is your CV, or at least a part of it.
  • Don’t say that you worked on project xyz with company abc. Write it up, and put it up on a blog. Writing’s not your thing? No worries, speak about it, and put it up as a podcast. Prefer video? YouTube!
  • The fact that you are reading this on an electronic device, by the way, means you do not have an excuse to not do it.
  • Worried about “how it will come out”? Do it ten times, and keep all ten up on the internet for people to see. Those ten variants of you describing your internship project is a much more powerful argument than a line that says “willing to work hard to improve myself”. And hey, if you do it ten times, it can only get better, not worse.

Showing that you have done the work tends to make you focus more on the showing, and less on the doing. Measuring work by analyzing what has been shown rather than what has been done is even more problematic, and that’s why firms tend to underrate grades (and increasingly, even CV’s).

Or, if you want to put it in economist-y terms, recruiters these days are like citizens of the Weimar republic. They know that the currency that is being issued is not worth the paper it is printed upon.

Any economist will tell you what happens next: a flight from currency, and into other assets.

That other asset in the context of the CV, is doing the work. Put it up for public consumption, and let the internet work its magic.

As a former India captain was very fond of saying, it’s all about the process. The results will take care of themselves. God, as Navin Kabra reminds us, says much the same thing!

Twitter Stories

Back in the day, when I had structure, regularity and a schedule here on EFE, Saturday used to be about five tweets that I enjoyed reading that week.

Which, on reflection (and some gentle prodding from Navin Kabra) wasn’t the brightest idea, because that’s what likes and RT’s are for on Twitter. So how about maybe a brief write-up based on a tweet that I read recently?

This week’s tweet that turns into a post is based on a variety of things. First, Nassim Nicholas Taleb.

The Black Swan is kind of like Thinking Fast and Slow, in the sense that everybody claims to have read it, and very few people actually have. If you haven’t read all of his books, please get started. The order doesn’t really matter, but if you’re asking, my favorite is Anti-Fragile.

There’s a lot to like about his books, his tweets and his outlook towards life, and this tweet is one example (note that I am talking about the pics in the reply, not the original tweet):

https://twitter.com/filipkob/status/1352028989381095424

Now, the original tweet, reposted as a stand-alone:

So what is the company about?

Nasser Jaber is cofounder of the Migrant Kitchen, a catering company and social impact organization that hires immigrants, migrants, and undocumented workers to both train them in commercial cooking as well as help gain their cuisines more exposure in the marketplace.

https://stories.zagat.com/posts/nasser-jaber-on-creating-jobs-through-immigrant-cuisine

Read the whole article! I got to learn about quipe (kibbeh, apparently), and esfiha (the spelling differs based on context, so my apologies if I got it “wrong”), among other things.

Twitter is a wonderful, wonderful way to learn more about the world, but it is like a garden, in the sense that constant weeding is required. But when you tend to it just so, it is completely worth the effort!

If you have had moments of serendipity on Twitter that you’d like to share, please, send them along. @ashish2727 on Twitter.

Thanks, and enjoy the weekend 🙂

Agriculture in England and India, Immigration, Water and Healthcare

Five articles I enjoyed reading this week – and hopefully you will as well

The change that is coming over farming can be summarised in simple economic terms. Intensive agriculture prioritises a bumper harvest – the annual dividend – while the new approach emphasises the preservation of the initial capital – the land itself. For a glimpse of how this new investment priority will affect British farming, it suffices to visit those progressives who have already, to varying degrees, made it their own.

The Guardian Long Read on agriculture (in England). Horizons (one out of choices, horizons, incentives and costs) remain underrated in economics classes, as this article points out. But there is much more to read here: recommended!

It developed an app-based platform that registers orders directly from buyers, analyses category-wise demand, fixes dynamic prices depending on daily demand, and transfers the orders to its network of 1,000+ farmers. Farmpal’s price comparison feature ensures that farmers can sell their produce at rates higher by 20 to 30 percent than what they would normally get in the mandis.
“This is one of our main promises to the farming community. We are able to offer them premium prices because technology eliminates at least four to seven middlemen from farm to fork,” the founder explains.

While on the topic of agriculture, this from Maharashtra, India: Farmpal.

Caplan’s case isn’t entirely about economics: he also makes a moral appeal. Consider the case of “Starving Marvin,” who needs food and is prepared to purchase it legally. On his way to the market, he is turned away by an armed guard. If Marvin subsequently dies of starvation, Caplan asks, is the guard guilty of murder? The philosopher Michael Huemer, who first introduced this hypothetical, in 2012, concluded that the answer was yes. He writes, “If a person is starving, and you refuse to give him food, then you allow him to starve, but if you take the extra step of coercively interfering with his obtaining food from someone else, then you do not merely allow him to starve; you starve him.” Caplan doesn’t go that far, but he does argue that the guard is wrong to prevent Marvin from feeding himself.

Read the paper, read the book, read this profile of Bryan Caplan, and his quixotic quest to get all of us to accept a world without borders.

Geologists and hydrologists, who worked on implementing the project, shared similar views and hailed Jalyukta Shivar. This was mainly due to the interventions undertaken in the existing water reserves, planned de-silting activities, among many others. However, experts agreed that the scheme was not appropriately implemented. Now with Jalyukta Shivar no longer in existence, focused efforts of the past five years, in most likelihood, will go down the drain unless a similar scheme is introduced. With rainfall variations getting more pronounced, in addition to depleting groundwater reserves, the state will need concrete interventions to tackle future water requirements, experts recommended.

As Tyler Cowen is fond of saying, solve for the equilibrium. On the politics of water conservation in Maharashtra.

America’s mediocre health outcomes can be explained by rapidly diminishing returns to spending and behavioral (lifestyle) risk factors, especially obesity, car accidents, homicide, and (most recently) drug overdose deaths. [Please read this post for the full explanation]

The diminishing returns are evident in cross-sectional analysis. Higher-income countries like Norway and Luxembourg spend twice as much as the likes of Spain and Italy and probably experience worse average outcomes.

Via the excellent Navin Kabra, a very, very long article on healthcare in America. Excellent if you are a student of America, healthcare or microeconomics. At the intersection of the three, it becomes mandatory reading. Pair up with Baumol’s Cost Disease (although the name is misleading, it is the most popular way to this phenomenon is referenced)

 

Etc: Links for 10th January, 2019

Links that I read during the week that I found interesting.

 

  1. Russia plans to have the ability to cut itself off from “the” internet, but keep “its” internet running.
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  2. One of my students might be embarking on a PhD in neuroeconomics, and reading up about the topic got me here. Interesting videos, and a neat set of publications.
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  3. Spinach is, is not, no is, no is not, never was, always was, is, isn’t a good source of iron. Via the excellent Navin Kabra.
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  4. A profile of Qassem Suleimani in the New Yorker, from almost seven years ago.
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  5. Learn SQL by solving a murder mystery.
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  6. The last link this Monday was about NIP. Rathin Roy is doubtful about the Indian government’s ability to execute on the plan.

Etc: Links for 8th November, 2019

  1. “Munch would have probably seen any marks from this period of the painting’s life as part of its artistic development. He wanted people to see how his works evolved and changed over their lifetime, and saw any damage they incurred along the way as a natural process, even leaving artworks unprotected outdoors and in his studio, stating ‘it does them good to fend for themselves’.”
    ..
    ..
    I cannot for the life of me remember how I chanced upon this link – all that I remember is that it came out of an interesting Twitter thread. 10 factoids about The Scream.
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  2. “It’s called the “dinner party problem”: A table of four or fewer people may happily converse as one, but a party of five or more will splinter fairly quickly into separate conversations of two or three four people each. What is it about the number four?”
    ..
    ..
    It really should be called the panel discussion problem. The conclusion to the short article deserves to be highlighted!
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    ..
    “It’s possible our brains evolved to manage only the conversations in which we have a chance of swaying the group to our side. Otherwise, what’s the point of talking?”
    ..
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  3. I’ll happily admit to the fact that the math is way beyond my capabilities – but it made for enjoyable viewing, if nothing else. The Mandelbulb, or the 3D version of the Mandelbrot set. This is via Navin Kabra, who should immediately be followed on Twitter.
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  4. “Are Indigenous and Western systems of knowledge categorically antithetical? Or do they offer multiple points of entry into knowledge of the world, past and present?”
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    A very interesting article in the Smithsonian on what is knowledge, and how is to be gleaned, understood and used.
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  5. A rather old, but nonetheless interesting article from Scroll on the Salim-Javed partnership breaking up.

Navin Kabra on Game Theory and Blockchain: Notes

Navin Kabra was on campus yesterday, to talk about blockchain. More specifically, game theoretic aspects of blockchain. The talk was excellent throughout, and lasted well beyond the scheduled 90 minutes (and I mean that as a compliment!)

What follows are my key takeaways of the talk (although I have cheated just a little bit):

Introduction

  • Navin began the talk with a brief summary of the prisoner’s dilemma, the Nash equilibrium, repeated games and iterative games
  • He briefly touched upon the surprising success of the tit-for-tat algorithm
  • He mentioned the Schelling point

The Use Case

  • He then got into the need for a technology such as blockchain. He used land records and trust issues from this area as a use case.
  • When I buy land, or an apartment, from somebody, the following issues emerge:
    • How do I know that the land is yours to sell?
    • How do I know that you are you?
  • Of these, we focused more on the first one: how do I know that the land is yours to sell?
  • Without blockchain, the idea is to go to a centralized repository, and check who owns the land. If it is indeed the person who wants to sell you the land, great. If not, ask the prospective seller to buzz off.
  • But how do I make sure that the prospective seller is who she says she is?
  • One way to prevent this from happening is by using modern cryptography to digitally sign these land records. Navin didn’t mention this in his talk yesterday, but here’s one recommendation to learn more about this topic: The Code Book.
  • But what if the prospective seller has sold the land to somebody else, and gotten that transaction struck off the official record?
  • Enter blockchain

The Basic Idea

  • Take a block of transactions, and apply a seal to them. A digital seal, although the idea is the same as a mohar.
  • But that’s not enough: what we then do is also use an identifier for this block of transactions, that is generated in a unique, but random way, from the previous block of transactions (this is called a hash).
  • If somebody were to hack into this block of transactions and change something, it would therefore change the hash for the next block, rendering the next block untrustworthy.
  • This dependency works across the entire chain of blocks, hence “blockchain”.
  • Better still, this entire chain of blocks is not stored on one central server, but across many different servers – this is the distributed ledger concept.

The Distributed Ledger

  • So why would these different servers (or rather, their owners) want to be a part of this?
  • So here’s the incentive mechanism: servers solve an algorithm that isn’t difficult, but is time consuming. Whoever solves the next chunk of this algorithm gets to seal the next block, and alerts all other servers about having done so.
  • Once all servers get this alert, they all update the chain of blocks so that everybody has the same version of events. This, of course, happens automatically.
  • The server that sealed the latest block gets as reward: bitcoins.

Bitcoins

  • These bitcoins are, in essence, a reward mechanism for making blockchain work.
  • Once folks start trading these bitcoins, especially in exchange for stuff from the real world, the value of bitcoins goes up.
  • We didn’t explicitly speak about this yesterday, but here’s my understanding: It becomes, as with any other currency, a medium of exchange, and also a store of value. (The unit of account bit is more troublesome, and I won’t get into it right now)
  • That reward mechanism is randomized, in the sense that any computer/server is equally likely to crack the next chunk of the algorithm. The more computing power you have, over time, the more you will get a higher share of bitcoins.
  • The number of bitcoins that can be mined is limited, and the number that is released per chunk of algorithm solved may change as a function of the number of computers trying to compete. In other words, the incentive mechanism is built in (I was rather impressed with this)
  • There are ridiculously large buildings in China stocked to the roof with servers whose sole objective is to mine bitcoins.

Game Theoretic Aspects of Blockchain

  • This is as pure an experiment in game theory as one could hope for.
  • You have people, necessarily anonymized, who can’t communicate with each other, who are trying to mine bitcoins
  • Also, you have folks who are, again necessarily anonymized, trying to transact using bitcoins.
  • Should they cooperate with each other or not? What are the implications? Since I’m already at around 750 words right now, I’ll outsource this part. Do read it, it is a very good summary of both game theory as well as its application to blockchain.

Also…

  • I enjoyed the fact that the numbers 42 (check the last bullet point, especially. But also, see this), 1729 were used in the presentation. This had nothing to do with anything, but Easter Eggs are always fun.
  • Also, yesterday I learnt (is YIL a thing? It should be)
  • I (and I think I speak for all the students who were present yesterday) would love to learn more about applications of Bitcoin. If there are folks in Pune who would like to come talk about this at Gokhale Institute, please get in touch! ashish at econforeverybody dot com

 

Finally, a huge thank you to Navin! The talk was hugely informative, thought provoking and easy to understand – and that’s a very rare combination indeed.