India: Links for 23rd December, 2019

  1. “When it comes to data centre storage though, India lags behind not just the developed world but even Asia-Pacific. With roughly 40 million less Internet users, Europe has more than 12 times its capacity to store data — 8,600 MW, compared to India’s 700 MW. And while India comprises 25% of Asia-Pacific’s Internet users, in 2017, it accounted for only 8.6% of its data centre growth, as per a 2018 research of the Data Center Advisory Group.”
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    A nice article from the Livemint about how this is set to change.
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  2. A short write-up from the Business Standard on reforms to the GST. The specifics do not matter (to me, that is) as the fact that this article needed to be written at all.
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  3. “The remedial measures have to be a combination of factors: capital infusion, capacity building on the supply side to resolve the unproductive assets, incentives for new entrants and tweaks in the regulatory framework. We need to wipe the slate clean and look ahead. The need of the hour is also to take some hard decisions impacting the current stakeholders. Remember, this situation is akin to the housing-led credit crisis in the US, where a turnaround was led by foreclosed properties and those under development.”
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    On revitalizing the real estate sector in our country. It is going to be a long, hard drive, but one that needs to be undertaken as soon as possible. This is necessary reading for anybody who would like to understand India’s economy today!
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  4. Niranjan Rajadhakshya, about nine months ago, on the need (“maybe?” he said then) for Operation Twist.
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    “One option right now is to borrow a trick from the US Federal Reserve—Operation Twist, named after the dancing style that was all the rage in the years after World War II. There have been two famous instances when the US central bank “twisted” a steep yield curve through clever money market operations, first in 1961 and then in 2011. In each case, the Fed changed the relative amounts of short-term and long-term securities in the market. How? It sold the short-term treasuries it had and used the proceeds to buy long-term securities. The result was that short-term interest rates went up while long-term interest rates came down. The yield curve flattened.”
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  5. And we went ahead and did it. However
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    “Yet it is far from clear that the RBI’s goal will be achieved. Certainly, there might be some flattening of the yield curve. But it is not clear that the amounts being discussed are sufficient. The response of the market for short-term bonds is also being questioned. The sale of the shorter-tenor bonds might well blow up yields in that segment, according to some market participants; on the other hand, liquidity at that end is so ample that there might be an effective cap on yields. The essential problem in the Indian bond market is that the country has, in spite of an apparently manageable debt-to-GDP ratio, entered a state of effective fiscal dominance. “

India: Links for 25th November, 2019

  1. A difficult article to excerpt, so go ahead and read it in its entirety: Andy Mukherjee on India’s telecom woes.
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  2. “The NFMW should be determined based on macroeconomic considerations, namely (1) whether the NFMW would increase aggregate demand for mass market consumption. (2) Whether there are supply bottlenecks in responding to such aggregate demand and, if so, calibrate the NFMW to not cause inflationary pressures by driving up demand that would not elicit a domestic supply response- mass market textiles is a good example. (3) The impact of the minimum wage on the factor distribution of income i.e. wage and profit shares should be a key consideration not from the point of view of equity, but from that of macroeconomic stability and growth optimisation. (4) Subnational minimum wages could be set above the floor as desired with other considerations in mind.”
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    Rathin Roy in an excellent article on the need for minimum wages in India.
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  3. Vivek Kaul is less than impressed with the real estate bailout package.
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    “According to real estate research firm Liases Foras, the number of unsold homes in the country is more than 1.3 million. The number of unsold homes in India has risen dramatically primarily because of high prices. Builders have cited higher development costs as a reason for their inability to reduce prices of properties. The bailout package of ₹25,000 crore will lead to a further increase in the supply of homes, but without adequate price cuts these homes are not going to get sold. Hence, the problem will only deepen.”
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  4. “So he mounted his horse and galloped over to a nearby hill. “From the top of the hill there was a magnificent view embracing old Delhi and all the principal monuments situated outside the town, with the river Jumna winding its way like a silver streak…”The hill, near the village of Raisina, would become the epicentre of the new capital. By October 1912 the government initiated the legal process to acquire land. The first plots, required for the construction of what would be called Rashtrapati Bhavan, amounted to 4,000 acres.”
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    Sidin Vadukut in a lovely article on how modern Delhi came to be, well, Delhi.
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  5. “The scorers refused to continue after the covering over their heads went up in flames. Fire brigades were called and a riot squad formed a line between the dressing rooms and the pitch.”
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    The Guardian on riots in a Test match in Bombay during the 1960’s.

EC101: Links for 10th October, 2019

  1. “Coase’s originality was not in his reasoning, but in recognizing that economic exchange is not the mere trading of physical goods but trading rights to property or rights to engage in certain types of conduct affecting property.”
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    Was Ronald Coase the first to come up with the Coase theorem?
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  2. “However, the joy of this book is less in the big picture than in the detail. And what a lot of it! The mind boggles at Smil’s extensive reading and absorption of information. We get the speed at which marathons are run – over the entire course of human history; the growth rates of piglets and weight of chicekns over time; sales of small non-industrial motors over time; the envelope for the maximum speed of travel; Kuznets cycles; Zipf’s law for city size…. The middle section of chapters offer a fantastic overview of technical progress over long periods in a wide range of technologies. I love all this detail.”
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    Diane Coyle thoroughly approves of Growth and Civilization.
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  3. “When a daughter is married, we do worry about her future. But why should I worry when the government of India is my son-in-law who married my daughter Syndicate Bank,” asked the late Tonse Madhav Ananth Pai in 1969, in the aftermath of the nationalization of the first-generation private-sector banks. Fondly known as “Brahma of Manipal”, Pai was the founding father of Syndicate Bank in 1925.”
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    A lovely read on bank mergers, bank nationalization and banks from a particular part of Karnataka.
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  4. “This is where the popcorn enters the picture. Pricey popcorn makes those lower ticket prices possible, And that is why you should buy popcorn at the movies.”
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    Expensive popcorn? Uh, no, cheap movie tickets. Yes, really. Cheap for whom, you ask? Welcome to microeconomics.
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  5. “This leads to the question: Why try these markets at all? This is quite similar to creation of super highways which help reach destinations much quicker but lead to accidents as well. Should we then not create highways?Policies always raise such trade-offs and hopefully, the regulator will take steps which minimise the negative aspect of creation of these markets.”
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    Amol Agarwal, in Moneycontrol, on securitization in real estate loans in India. Me, I think this is not such a great idea.

RoW: Links for 9th October, 2019

  1. On China’s reforestation programme. Also, if you haven’t already, read Seeing Like a State.
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    “After a half century of blistering economic growth, China is increasingly looking back at the environmental havoc it wreaked and searching for a greener path forward. It has boosted renewable energy, declared a “war on pollution,” and vowed to lower carbon emissions. But if Grain-for-Green is an indication, preserving biodiversity may represent a new challenge in China’s push to go green: protecting and restoring natural spaces with an eye to not just quantity, but quality.”
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  2. A review of No Friend But The Mountains, by JM Coetzee. I have not read the book, and am not sure I want to. Not, I hasten to add, because of the quality of the book or the lack of it, but because of the utter heartlessness the review manages to convey of a nation I am conflicted about.
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    “The UNHCR has been extremely critical of Australia’s offshore policies. In 2017 it concluded that PNG and Nauru were intrinsically unsuitable as resettlement homes, given “the impossibility of local integration.” In other words, Papuans and Nauruans do not want refugees living among them, and refugees do not want to live in PNG or Nauru. New Zealand has offered to take 150 of the inmates, but Australia has vetoed this offer on the grounds that former detainees might make their way from New Zealand to Australia, thereby weakening the deterrent power of Australian policy.”
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  3. A thought-provoking write-up by Danny Quah:
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    “In the new world order Asia’s leadership does not mean Asia has to become alternative architect. Instead, Asia only needs to be articulate and empowered consumer, and allow demand and supply to work in the marketplace. With care, thought, and unity, ASEAN (and indeed all of Asia) can continue to make a success of this new marketplace for world order.”
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  4. “A course at Yale-NUS College on dissent and resistance in Singapore was canceled two weeks before it was scheduled to start, the Singapore-based The Straits Times reported. Yale-NUS president Tan Tai Yong said some of the planned course activities and speakers would “infringe our commitment not to advance partisan political interests in our campus” and potentially expose students to the risk of breaking the law.”
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    Via (where else) MR, dissent on dissent in Singapore.
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  5. “Lok, 31, lives with her parents in North Point, in Hong Kong Island’s Eastern District. It is more than an hour away from the island of Tsing Yi, where 35-year-old Chau lives with his parents. Their three-year-old daughter, Yu, spends Monday to Thursday with Lok and the weekend at Chau’s. They can’t move in together in one of their family homes, Lok says, because the bedroom space is simply too small for two adults and a child.”
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    Not me being lazy, I promise, but this too, from MR… on the space crunch in Hong Kong, but oh so much more.

Links for 9th May, 2019

  1. “Matters came to a head in the summer of 1745. Nanasaheb Peshwa was in Satara and his grandmother, Radhabai, lived in Pune. Seeing the water crisis, she ordered that no water be drawn from the river for the gardens. However, her order was challenged and a letter of complaint was written to the Peshwa in Satara.”
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    A very nice article in the Pune Mirror about the cities water supply, and how it originated and was developed over time. Also, if you haven’t heard it already, you might want to listen to this short introduction to Visvesvarya.
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  2. “This isn’t to say we don’t learn from these exercises. We do. In both India and Tanzania, we learn that citizens value public services. In Tanzania, the researchers then led deliberative discussions about cash transfers, and some respondents highlighted that “social services encourage a collective voice that helps increase accountability, while cash transfers would focus people on private interests and leave room for corruption.”Listen to the voices of citizens. But before throwing the cash transfer baby out with the bathwater, let’s make sure those citizens have clear information about their trade-offs.”
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    Beware well-intentioned surveys – read this article to find out why. Questions in surveys – and the framing of these questions – should give you a headache. If they don’t, you haven’t thought enough about ’em!
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  3. “Someone reading a book is a sign of order in the world,” wrote the poet Mary Ruefle. Four centuries earlier, while ushering in a new world order, Galileo contemplated how books give us superhuman powers — a sentiment his twentieth-century counterpart, Carl Sagan (November 9, 1934–December 20, 1996), echoed in his shimmering assertion that “a book is proof that humans are capable of working magic.”
    Do you subscribe to BrainPickings? You really should – and clicking through to this link is a good enough reason to start. Amit Varma had a column in the Times of India about much the same thing the other day, which is also worth reading for a rather more, um, practical example of the benefits of reading.
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  4. The lungi is more than just a South Indian sartorial choice. But what are the origins of this popular garment? It is difficult to state this with certainty. The lungi’s well regarded cousin, the dhoti, seems to have, on the whole, cornered much of the attention, in terms of research into its history on account of its elevated social standing.”
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    The Madras Courier on the lungi – its origins, how to wear it, and its apparent near universality.
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  5. “The new regulations have been harder on some of the smaller developers who lack the wherewithal to navigate the labyrinth that is getting construction permits on time causing many to exit the market. The Authority has no jurisdiction to hold different government departments to account for withholding or delaying approvals without a valid cause. Without accompanying reforms that ease the complex permissions process and bring about transparency and predictability in rule implementation, the objective of easing housing supply bottlenecks to lower house prices and benefit homebuyers is going to meet with limited success. ”
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    A short take on what ails the real estate sector in India. And the answer that this paper gives is that there may be too much regulation of the sector, not too little. A classic example of unintended consequences. This paper, from that article, is also worth reading.

Links for 5th March, 2019

  1. “Using a neural network trained on widely available weather forecasts and historical turbine data, we configured the DeepMind system to predict wind power output 36 hours ahead of actual generation. Based on these predictions, our model recommends how to make optimal hourly delivery commitments to the power grid a full day in advance. This is important, because energy sources that can be scheduled (i.e. can deliver a set amount of electricity at a set time) are often more valuable to the grid.”
    The big problem with renewable energy is its utter unpredictability – which is why we will always struggle to move to a world that uses renewable energy as a primary source. Unless, of course, we figure out how to make great batteries. But in the meantime, anything that helps us predict the pattern of availability of wind and solar power is great news.
  2. “Still, people do break Google’s protection. CAPTCHAs are an ongoing arms race that neither side will ever win. The AI technology which makes Google’s approach so hard to fool is the same technology that is adapted to fool it.Just wait until that AI is convincing enough to fool you.
    Sweet dreams, human.”
    Ever clicked on the “I’m a human” button and wondered why it seemed like such a stupid idea. Well, uh, not stupid. Not stupid at all.
  3. “This further tells us that people are buying and selling homes. It’s just that the builders are not a part of this transaction.”
    This is a very short excerpt, but especially for Indians, this article is well worth reading (and Vivek Kaul is well worth following!). Home loans are going up every year, but unsold inventory is also going up every year? What gives?
  4. “All of economics is meant to be about people’s behavior. So, what is behavioral economics, and how does it differ from the rest of economics?”
    An essay about behavioral economics and its many applications, written by two people who are more familiar with the field than almost anybody else. There isn’t much here for people who are already familiar with the field – but if you are new to behavioral economics, this is an excellent introduction.
  5. “Two landmark events helped pushed along the proliferation of Sichuan cuisine in New York. In 2005, the peppercorn ban was lifted, though imported peppercorns still had to be heat treated and were thus less potent than they might have been. (This restriction was finally lifted in 2018.) ”
    I was in New York in 2007, and knew nothing of how to try new food, and it is a major source of regret. Especially when I read articles like these.

Links for 27th February, 2019

  1. “The time for masking such equity-type investments as loans has passed. Real estate in India is facing a glut, with $110 billion worth of unsold homes across the top eight markets, including Mumbai. That’s almost four years of sales, according to property analytics firm Liases Foras. Back in 2009, when apartment inventory was equal to about one year of sales, only 25 percent of construction funding came from shadow financiers. Banks controlled 75 percent.The tables have now turned: Housing-finance firms and other nonbank lenders, more adventurous than conventional banks, account for 55 percent of advances to builders. Lenders pocketing 2 percent to 3 percent of the loan value as upfront fees in exchange for not collecting on the principal for years has allowed a buildup of poor-quality debt. Moratoriums have delayed builder bankruptcies, and prevented timely detection of the problem.”
    This is a problem just waiting to become a full blown crisis in India – not the real estate sector per se, but the financing of the real estate sector in India. Read this article to find out how and why it has become as big a problem as it has.
  2. “Like all great work, it was the foundation for other huge contributions – work by other great economists such as Oliver Hart, Bengt Holmstrom, Paul Milgrom and many others can easily be traced to this paper. The paper’s starting point – that coordination within firms is not accomplished ‘by fiat’ (Demsetz famously remarks “This is delusion”), and that one should instead examine how incentive structures within firms create efficiencies relative to other forms of organisation – became the starting point for nearly the entire field of the economics of organisation ever since.”
    I have linked to this piece earlier, I think in January. But since I am currently teaching a course in Industrial Organization at Gokhale Institute, I found myself reading this piece all over again. Demsetz really was a giant in this field – and his analysis of why firms exist, and how they coordinate and incentivize activity within the firm is truly illuminating.
  3. “So, the UN forecasting model inputs three things: fertility rates, migration rates, and death rates. It doesn’t take into account the expansion of education for females or the speed of urbanization (which are in some ways linked). The UN says they’re already baked into the numbers. But when I went and interviewed [the demographer] Wolfgang Lutz in Vienna, which was one of the first things we did, he walked me through his projections, and I walked out of the room gobsmacked. All he was doing was adding one new variable to the forecast: the level of improvement in female education. And he comes up with a much lower number for global population in 2100, somewhere between 8 billion and 9 billion.”
    Population “crises” are over-rated in any case (people are a resource!) – but even the forecasts for how many people there will be on the planet in the next thirty to eighty years are likely to be wrong. The world is changing right in front of our eyes. The problem of the (near) future isn’t one of too many people – it’s one of too few.
  4. “Instead, the signatories objected to the election of a student union president of Tibetan descent, who “was found to hold the political belief that Tibet should be free”.”
    Based on what you have read above, which country are we talking about? Not only might the answer surprise you, but it will also help you think about geopolitics, international finance and the benefits of diversification.
  5. “Most developed countries of today addressed many of their basic plumbing challenges largely through public production. China is clearly an example of the latter. It appears to have perfected the use of industrial policy to co-ordinate private enterprise even into some of the most difficult areas for private engagement. This is the case of industrial policy to both address a critical plumbing issue as well as catalysing a market. And this is what makes its achievement exceptional.”
    Law, innovation, state led industrial policy and judicial pendency, all in one lovely article by Gulzar Natarajan. Gokhale Institute recently released a report on judicial pendency in India – China has an interesting way of tackling this problem.

Links for 20th February, 2019

  1. “There is no amount of growth that can’t be destroyed by an investor’s temptation to grab too much of it. And there is no opportunity so appealing that it will catch the eye of someone who refuses to look.But greed and fear aren’t always character flaws. People with the best intentions and ethics fall for their temptation. The two traits evolve from something innocent: the amount of confidence we have that our actions influence our outcomes.”
    I am currently teaching, at the Gokhale Institute, a course on Behavioral Finance. This blog post will be a part of the required reading when I teach the section on overconfidence (and it’s mirror image)
  2. “A Facebook press officer said, in a prepared statement: “This is one study of many on this topic, and it should be considered that way.” The statement quoted from the study itself, which noted that “Facebook produces large benefits for its users,” and that “any discussion of social media’s downsides should not obscure the fact that it fulfills deep and widespread needs.”
    What happens if you go cold turkey on Facebook? I haven’t read the paper itself, but this article from the NYT is a useful read – but not for the usual Facebook bashing reasons. There are benefits to using Facebook, for all of us. I myself no longer have the Facebook app on my phone, but freely admit to checking Facebook every now and then on the browser on my phone.
  3. “Mere hours into the first day of the Google block, my devices have tried to reach Google’s servers more often than the 15,000 times they tried to ping Facebook’s the entire week before. By the end of the week, my devices have tried to communicate with Google’s servers over 100,000 times, comparable to Amazon, at 293,000 times during its block. Most of Google’s pings seem to be in the form of trackers, ads, and resources built into websites. ”
    Speaking of which, what might life look like if you decided to go cold turkey on Google? Much worse, it turns out – your productivity takes a direct hit, as the article above makes clear.
  4. “We’ve made the case for the divergence among equipment manufacturers before: Ultimately robots and excavators aren’t dependent on the same business cycles. This is now playing out.”
    Partially because my own research during the PhD was on this topic, but also because it is a useful way to start thinking about which sectors in the economy tend to move together, and which don’t. More – does this relationship hold over time?
  5. “But the rental market is largely fragmented and unorganized. The build-to-rent model that has worked well globally in many countries hasn’t even scratched the surface here. It is a space ripe for disruption.And in the past 3-4 years, a slew of startups have begun to do just that, particularly targeting young adults and millennials (those in their 20s and early 30s) who need a place to stay when they move out of their parents’ nest or are moving to a new city.”
    This had to happen sooner or later in India – it was simply a function of the way the real estate market is, and has been in India for some time. Watch this space – I’d argue that future growth in India’s real estate sector will happen in this fashion.