Saturday, December 31, 2005

Final thoughts before a Naveen year!

It has been quite some time since I have started blogging and I feel obligated to make clear my background and experiences. And the last day of this year (in India) is a good occasion to indulge in this wish. My primary reason is to acquaint the readers with my biases, and hence a more critical analysis of my blog thoughts. The secondary ostensible reason is that I haven't said much about myself apart from the few hints in my previous blog notes.

I have been born in Hyderabad; raised in Kolkata and completed my engineering in Bangalore. After the odd job like a creative copywriter for an advertising agency, I worked as a Research Associate for a public policy think tank in Delhi. And am now pursuing my doctorate in Public Policy Analysis at RAND Corporation in California. Someday, hopefully, I will bring a richer focus on the thought and practice of public policy in India.

Much of our thoughts are based on what we experience, observe and read. Mine has been no different. In reflection, curiosity seems to be my indulgence.

The Indian Army in its final selection process asked me this question, "Imagine you are sitting at a railway station. A man comes from nowhere and suddenly starts hitting you. What is your first reaction?"

I answered, "I will ask why he hit me!" Needless to say I was rejected, they were looking for something else.

I love children because they have the gift of curiosity. As we become mature, we acquire a veneer of nonchalance and become inured to the fantastic things happening around us and possibilities. I believe that most knowledge starts with a simple question. And that answers to these questions beget disciplines.

Why are the poor so poor? Perhaps the questions should be framed differently. What makes the poor rich? It is only incidental that the answer to this question can be found (with due modesty) in the realms of economics, law, management, political science, philosophy, and sociology. The tool is mathematics. And hence it may be apparent that my thoughts will be based upon my experiences from these disciplines. However, there is so much to be learnt in this world! Hehehehe! Earlier I would balk at the sheer number of books that I would leave unread in my lifetime. Of late I am veering to the premise that guided thought is perhaps more important than reading a large number of books. Of course, our experiences form the goblet for the ferment of our thoughts.

And my most intense learning experience is unreservedly my stint in the public policy think tank. I have never had a favourite teacher till I found one in my boss here. Dr. Parth J Shah. Some of you may know him. Others will know him. With him I have shared that inimitable urge for that understanding of "how the world works", and its relevance to understanding why people are poor. Readers trying to know my biases will find loads of it here. My dabbling in Austrian economics, libertarianism, objectivism, anarcho-capitalism have undoubtedly influenced my thoughts, though I don't agree with quite a few of their premises. At heart, I am more of a researcher and less of an advocate. Nevertheless what has influenced me more than anything else has been my research into the functioning of governments in India, their departments and legislations, and their relevance to markets.

Markets! I don't know whether this is true or not but every family has a particular kid who is made to go the market every time the need for a grocery arises. And so has been the case with me. I still think that some of the best lessons in understanding the world come from visiting any busy market in India. A half-hour chat with a paanwaala about his business and its details will throw a lot more light on the relation between markets and poverty. And much of this relation is encapsulated in the research of my co-edited book Law, Liberty and Livelihood: Making a Living on the Street. A few reviews are over here. There is no doubt about my fascination with markets and bazaars. But it is only for their role with regard to the production and distribution of goods and services.

There are many other areas of human activity that do not have a central role of markets, for example, the making, maintenance and marring of marriages! I do have an abiding interest in questions concerning them as well.

So why do I blog? Consider it as me thinking aloud. Which readers may find my blog interesting? Well, people interested in policy issues with an analytical bent of mind. What is the best way for readers to interact with me? Three ways. One, if you find research dealing in what may be an interesting policy question, mail it to me. Two, any interesting academic idea dealing with realistic issues are also welcome. Three, do point out any egregious errors!

And with only a few hours for ushering the New Year in India, here is wishing all of you a fruitful intellectual journey through 2006.

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Thursday, December 29, 2005

Salt for the Soul!

On a quirk, I had been looking at the economics of salt markets (in fact, a $7 billion market), and an interesting question emerged for libertarians and those interested in the economics of micromarkets.

Deficiency of iodine leads to serious disorders. And common salt is identified as a very good vehicle for iodine. For customers it is difficult to distinguish between iodised and non-iodised salt. Most poor may not even have information about the benefits of iodised salt. Yes, production of iodised salt does make it costlier but the difference is say, maybe about Rs 4/kg. Should the state legislate a ban against the sale of common salt for human consumption? A qualifier: the ban is not simply against sale of common salt but only in the context of human consumption. Some states of India do have this ban like Tamil Nadu (as far as my limited memory serves me). But if one does legislate a ban, what is the guarantee that it will be implemented well? Does subsidised iodised salt, sold through PDS shops achieve the objective?

It is probably because of this that Chine still has a stranglehold on its salt market. Read here. India, in contrast has through amendments to the Central Excise and Salt Act, 1944 in 1996, and and salt Cess Rules, 1964 in 2001 apparently de-licensed the salt industry. It is now the third largest salt producing country in the world after the US and China.

The market for salt (the regulations and the business aspects) in India is again on my would-love-to-research list. It would be exhilarating following the path through its production, marketing and consumption. Now here is a micro-market waiting to be researched!

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Wednesday, December 28, 2005

Rice, Roads and Regulations

A key factor that can make markets work better is integration of various sub-markets. And it doesn't happen simply by constructing tarred roads (even that is needed) but by demolishing regulations. Roading is the technical part of integrating markets, the political and more onerous part is the regulatory part. But why integration? Because deregulated common markets will remove transaction costs and foster competition; provide better signals for optimal generation and consumption decisions; and improve security of supply.

So if I sell rice in UP and you sell rice in AP, the Berlin walls of regulations would not easily allow us to trade rice with each other. Consumers at both these places would have to pay higher prices, and a section of the traders are denied opportunity of profits. In fact, I bet there are hundreds of these micro-markets in India that are affected by a labyrinth of regulations. I would be glad to know more about them than the beaten-to-death GDP issue. Here are a few findings from the research paper Market Integration in Wholesale Rice Markets in India authored by Raghbendra Jha, KVB Murthy and Anurag Sharma.
Any given centre in any state is more likely to be integrated on a bilateral basis with other centres within the state than with those outside it. This indicates that there are barriers to market integration across states. ... internal trade is amongst the most repressed sectors of the economy, even today.
There are controls and restrictions exercised by multiple authorities, at various levels. This results in serious barriers to trade at the inter-state and inter-district levels. There are differences in taxes and standards across the country. As a result of these restrictions and differentials the all-India market is fragmented. Traders are obliged to obtain licenses for trading and there are different authorities for issuing licenses for different goods. The process is highly time consuming, cumbersome, costly, variable and invariably corrupt. After obtaining a license the trader is faced with over 400 laws that govern trading. This plethora of restrictions and inherent differentials across the country prevent rational and uniform pricing strategies. The price differentials, in turn, do not reflect inherent market conditions and allow local scarcities to remain. The restrictions on trade prevent arbitrage possibilities, which could possibly help remove short-term price differentials.

Some of the most important trade restrictive laws are:
1. The Essential Commodities Act, 1955.
2. Standard of Weights and Measures Act, 1976.
3. Agricultural Produce Marketing Acts.
4. Various Agricultural Commodity Control Orders.
5. Prevention of Food Adulteration Act, 1955.
6. State Levy Control Orders.

The first Act controls production, storage, transport, distribution, use or consumption of a wide range of commodities. It authorizes the Central Government to issue Orders for “increasing cultivation of foodgrains”, “controlling prices”, “regulating or prohibiting any commercial or financial transactions in food items” and “collecting any information”, amongst other things. The State Levy Orders make it compulsory for private rice mills to supply 7 to 75 percent of their production to the Food Corporation of India and the State Government, for the Public Distribution System. The important point with such Orders is that the price received by the millers is ‘pan-territorial and pan-seasonal’. It is based on the Minimum Support Price for paddy plus average milling cost. Thus, for a major part of their output mills are not free to fix their price in accordance with economic considerations.
There are three factors originating in government policy and impinging upon the market:
a. Quantitative interventions
b. Price distortions, at various levels — farm, wholesale and retail.
c. Heavy subsidies.
Their conclusion sums it all.
Much has been written about state discretion and autonomy in some matters of economic policy in India. This is not the place to debate this point but it should be pointed out that this latitude should not extend to placing restrictions on internal trade. Furthermore, this has nothing to do with decentralization of decision-making. An economy such as the US, which is considerably more decentralized than India’s, still bans most, if not all, impediments to inter-state trade.

Thus there is an urgent need to reform the rules governing interstate commerce in foodgrains and to overhaul the attendant state government tax policies and regulations. There is an urgent need to reform price policy at the levels of producer, wholesaler and consumer. In addition, it is crucial to privatize wholesale grain in free trade and thus improve the efficiency of market signals. These policy measures are long overdue.
Cross-posted on the Indian Economy blog

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Tuesday, December 27, 2005

What is the importance of the ceremony of marriage?

Last week I visited a temple. What I like about temples are the laddoos, lords and the ladies! Not in that particular order, however. Yours truly followed brother and sister and stood in the queue to step into the lord's chamber and seek his blessings. Once I was into the chamber and 10 ft from the idol, I decided it made no sense (for me) to stand in a queue to wait till I am in front of the idol and only then pray. Breaking the queue and stepping aside, I mentioned my prayers, and left. Even if I don't buy the argument that God is everywhere it would be hard to argue (to myself) that I should pray only in front of the idol and not 10 ft away from the idol. Religion is a personal issue but some aspects of it do raise interesting questions for me.

We may have an idol at home, yet we feel the need to go to a temple/mosque/church and pray. What makes us do this? Yet, I can't help feel it more significant if I pray in a temple compared to my home. In fact, there are three levels if you think of it. You pray to an idol at home; then you have the local temple that you frequent; and then the "special" temple that may be visited like, Tirupathi, Mt. Abu, Trikuta and many others. Does a step of effort make us more involved in the cause and feed into the whole cycle? Does the endeavor enable us to signal our commitment better than the "lazier" token worship done at home? Admittedly, there are a number of other factors.

Why is the question important? If we look at the ceremony of marriage, it is often fashionable to say "why do they make a big deal about it? I mean, if they love each other, why can't they just go and live with each other?" The ceremony of marriage is an event marked by endeavour from both ends. The endeavor sends a certain signal to both the parties, of committment and of bridges being burnt. How does bridges being burnt show committment (atleast in India, where one-marriage-in-a-lifetime still rules the roost)? And does it increase the cycle of committment? Again, the interesting question may be, to what extent has the availability of divorce increased the prevalence of divorces itself?

Consider the threat of a suicide bomber. How credible would you consider it? I would take such a threat very seriously. The fact that she has bombs tied to her self and is willing to give up her life sends a message that she is willing to burn her bridges for her objective. Note the irreversible nature of the result of her committment which makes for a very strong tactic, i.e. the loss of her (and others) life. Hence the fact that we are willing to do a particular effort provides a signal of committment to our cause and hopefully the gods smile upon us.

The question of credible committments becomes very important in negotiations in the context of warring nations, manager-labor relations, dating partners and many other situations. And work on this won the Nobel Prize for Thomas Schelling.

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Female offspring and left wing inclinations!

With the current spate of female infanticide in parts of India, the population there may soon turn liberal, heh! Why? Read and reason here.

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Sunday, December 25, 2005

Does schooling really matter for the poor?

There is a distinction between literacy, schooling and education that is often misunderstood. Partly, because the definition of these terms themselves involve ambiguity. Being literate is being 15 and over and the ability to read and write. It doesn't tell us much about what he can read or write. Education is more often a lifelong process of learning. You can be educated without going to school if you are self-taught. Schooling is the period of classes between kindergarten and through high school. Too often we are lazy to use the term education when we actually mean schooling.

So, can you be schooled (let us say, partly) and yet not be literate enough?

Yes, you can, as this well-opined article tells us.
Mere literacy can be achieved in months. The aim of completing six to eight years in primary school (as planned by Sarva Shiksha Abhiyan) is to gain skills that translate into higher wages and less poverty. But, according to Ernesto Schiefelbein, former education minister of Chile and a renowned educator, research shows that while literacy improves income significantly, additional years of schooling contribute little extra. Why? Because in many countries with near-universal education, students cannot read simple texts or do simple sums. They may have completed school, but they are functionally illiterate. Surveys in seven Latin American countries reveal functional illiteracy of 40 per cent in Chile and over 50 per cent in other countries. Dean Nielsen of the World Bank says that surveys in Peru and Romania show that more than half school graduates are functionally illiterate.
Maria Cristina Mejia, education minister of Bolivia, says her country has greatly increased school enrolment and ended the gender gap in education, yet incomes are not rising. ...

Most teachers lack the special skills (or time, or patience) needed for teaching poor children. Quality improvement schemes tend to focus on teacher training for higher levels of learning. In itself this is a good thing, but it tends to neglect the basic skill of teaching children with a very small vocabulary and little home support from illiterate parents. So, spending billions on supposed quality improvement might not improve learning outcomes: few poorer children will reap much benefit. Are things better in India than in Latin America? Alas, no. They are probably worse. Sarva Shiksa Abhiyan may, by spending thousands of crores, get most children into school. It may finance better text books, teaching materials and teacher training. But will it ensure that poor children can read within their first two or three years in school? If not, then little will be achieved by ensuring that all children complete school. Poorer children will emerge functionally illiterate after wasting eight years in school.

Read here for the rest of the article. The article is thanks to a tip-off from Amit Varma.

I can't help pointing out two morals of the story. One, we need to know so much more schooling and education and the present structure of education does't allow us to explore those possibilities. Two, just theorising that the government can do something does not impy that it will do it, atleast in the way you desire the outcome. This moral may also apply to certain advocacy of markets.

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Saturday, December 24, 2005

The market for driving licences!

Right now, we have the state agency providing driving licences. There are problems, as anyone would vouch. However, the question is how to create a market for the provision of automobile driving licences. The benchmarks may be any or more of the following: disallowing poor quality drivers (or even driving); easy compatibility between the domain of various agencies' boundaries...think of any number of suitable realistic conditions.

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How do you distinguish a true economist from a wannabe economist?

Two interpretations.

One, does he know a formal result of economics that is not known by the wannabe economist. The welfare theorems, for example. This implies a true learned economist with a knowledge of the theory in the field.

The second, has he internalised the principles of economics in understanding the behaviour of people and institutions. For example, the intuition of incentives and, can he perceive the "unseen" behind what he sees? This implies to a good economist.

Both are not mutually exclusive!

Perhaps, the question is not too important. What is more important is that which are the good ideas that have developed from the social sciences that one should be aware of? Read here a few of these. For economics, read here.

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Forty bucks for a measly coffee in Barista!

I have often said this. To those whom I questioned its logic, I never got a satisfactory query. But there are countless times that I have sat in there and observed the clientele. Hence let me reason it out.

For a courting couple, what are the choices they have? In comparision to the harsh weather, and the lack of privacy in cities, is forty bucks too much for an airconditioned place that offers a place to sit across each other, a reasonable privacy, and music on top of it. Have I forgot to mention coffee? Nope, coffee is incidental. They might as well have given you a bill for the time spent in the ambience and a complementary coffee. You are paying for the need to have that quality of ambience (and hence time) and a cup of coffee, in comparision to other choices that you have.

The same goes for women who can sit comfortably without being leered; men who want to enjoy a game of chess or play the guitar or indulge in quiet reading; couples who want to wait for each other; or well, those who want to enjoy the coffee and cakes! You can probably have the same kind of coffee at home after sweating it out to make it, and sit on your sofa and have it, but would it be worth it? Now, that is a personal question!

The other question is, why don't cafes serve soft drinks? OR "I haven't seen too many married couples frequenting these cafes! Does it point to anything? ;-)

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After a hiatus!

There are days when ink and thoughts don't connect and there are days when the cup brimmeth over. The next few hours belong to the latter!

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Wednesday, December 21, 2005

Q for Queen, W for Woman, E for Empress...

Okay, this is one more gnawing question that I need to get off my back! Is there a reason for the alphabets to be in the order A B C D E...?

Wouldn't it be easier on schoolkids to learn Q W E R T Y...?

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Sunday, December 18, 2005

Highway to educating India

Here is a colourful thought experiment. Colour blue every buck that leaves from the government’s pockets for the purposes of education. Yes, every single note, from the education departments; the social welfare departments; the public works departments and a plethora of others involved in education. After you track the flow of money, categorise where they end up. Amounts spent on teachers; schooling materials; mid-day meals and others.

Some of the results may be surprising. Read here.

However, this is not news. Mismanagement of government funding and low achievements of government schools are old hat.

Why spend so much money on a system that is not working well? Obviously because there does not seem to be a plausible system that can replace this entire education structure. Is that the case?

Let us turn to the purported success of the government in building the highway. There is a world of difference between the Indian government embarking single-handedly on building 15,000 miles of highway and educating 192 million children. There are issues of building and then of maintaining in either of them. And even if you are efficient in physical engineering, it doesn’t mean the same as being efficient in social engineering. However, the cinch is this. The government has employed private sector partnership in building the highway but still desists from it in educating its students. Can one learn from some of the successful principles employed in this highway building task? There were incentives for early completion and penalties for late execution. Apparently the interest shown by the private sector in the highway project was due to the three major factors of ensured revenue repayment, fair bidding and speedy execution.

What they did was to set up an environment of accountability and incentives and executed it well. Would it be possible to replicate a similar environment in education?

You could have one or more of the four kinds of accountability in education.

  1. Bureaucratic accountability (sarkar will take care through rules and regulations)
  2. Professional accountability (teachers and principals are educated and they will take care)
  3. Performance-based accountability (the sarkar will take care through measurements of performance in tests)
  4. Market accountability (if you don’t take care, I will take to somebody who cares)

These are the factors that determine the quality of your money, the bang for your buck. It is not a surprise when you read James Tooley’s report where he finds that there is a sector of “private budget schools” that is catering to the poor, and students in these “private schools achieved at or above the levels achieved by their counterparts in government schools in both English and mathematics.”

The education system for long has been under the strangle-hold of the first two factors which obviously haven’t worked in our country. This has hence led to a decline in quality and access. Isn’t it time to move on to the next ladders of accountability? This would involve thinking of the schooling sector as a market and not as a government sector. Which are the regulations that impinge from an explosion in the supply-side of schooling? Here is a hint, think licence!

Cross-posted on The Indian Economy Blog

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Saturday, December 17, 2005

Can you help Dawood?

After I have come to the US, one of my favourite pranks is to call up long-time-college-buddies- but-forgotten-after-they-left-for-US and say "Hey man! Where is the $1 million stash of drugs? If you don't tell me I will have my men waiting outside shoot your head off!" Usually there is a stunned silence! Other times they recognise me even before I complete my sentence and I feel like an idiot. But it is more fun than saying, "Hello! I am so-and-so and here yada yada yada!"

However that brings me into question the theme of this post. Take the example of the rich businessman Kantilal in Mumbai. He gets a phone call one fine day, "Oye Kanti! Apun Dawood ka bhai Rawood bol raha hai. Kal shaam tak Mandville gaon mein ek peti jama karne ka hai, nahi tho! (Loud laugh) HaHaHaHaHaHaHa! Nahi tho Kanti, teri ghanti baja dunga! Aur police ko bola tho tera pura family khallas!"

For the non-Hindi speaking, "Hon! This is big bad don, give me the mammon, else you will be shot down!"

Kanti is frightened but then also perplexed. Is this call for real? There are two possible assumptions and consequent actions.

Assumption 1: This is not a hoax call.
Assumption 2: This is a hoax call.

Action A> He assumes it is a false call and doesn't pay. But then it may turn out to be real and the cost is high, maybe even his life! This would be a Type I error. Assumption 1 jo socha ki nahi hai, phir baad mein pata chal voh actually hai!

Action B> He pays in accordance with the dhamki, but then he gets a call from the real Dawood bhai and finds that the earlier call was a hoax. His earlier payment would be useless. This is a Type II error. Assumption 2 jo socha ki hai, phir baad mein pata chal voh actually nahi hai!

I have seen snatches of The Film where a group pulls a few strings based on the same idea!

Now, flash to Dawood bhai!

Dawood to his Market Analyst: "Yeh main kya sun raha hai! Saala, koi chokra log mera naam use karke paisa le raha businessmen se. Mera brand counterfeit kar raha hai. Kya kare iska?"

I really wonder what they do? Obviously, they don't make I-cards or carry photos of Dawood around, or do they?

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Friday, December 16, 2005

My five experiences in US!

1> "Radioshack Madam, would you have a webcam?" "
Oh we have that online, not in store. Register it and u will get it in four days!"

Saala, dilli ke gali gali mein webcam milta hain, aur tu yeha pe online ka bhav dikha rahi hai!

2> "I need a cornflakes!"

Do you want Kellog's or Bulldog"s?

"I just need a cornflakes!"

Do you want with strawberry flavoured crispy or vanilla flavoured milksy?

"I just want a breakfast cornflakes!"

Ah! I see! You want breakfast cornflakes. You should have mentioned that earlier. Now see here we have...


3> "Buddy! I am off to my friend's place to study and may be late in the evening!"

Okay! Don't forget to take your travel kit of neighbourhood maps; bus route maps; bus schedule; cellphone; taxi phone numbers; quarter coins, I card...tum saala log India se kya aaye yeha apne aap ko Indiana Jones samajhta hain, b****c***d?

4> "Acha buddy! I am curious at these two women staying in the next door flat! Kaun hai yeh, bata, bata!"

Do saal se saath dekh raha hu! Mujhe bhi pehle vahi lage lekin hai nahi! When I heard them discussing and arguing about alimony mujhe divorced ma and behen lage; when I heard them arguing about clothes mujhe laga sisters, (maternal bhi ho sakta hai, fraternal bhi...); when they were arguing about channels mujhe laga mother in law and daughter in law...

"Aage bol!"

Arey, I did ask them finally. They are just room-mates and are working and don't know much about each other except their names and their boyfriends' names!

5> "Yaar! Yeha pe log kitna kaam karte hain! Working; cleaning; cooking; laundry; looking for love; making future plans; being happy! Agar main Bangladesh, Bihar, and Mexico se inke liye labour lau tho unki bhi aish and inki bhi, and meri bhi!"

Don't you find yourself being independent by doing all this work apne aap?


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Tuesday, December 13, 2005

I am not talking to me!

"The best thing that I like about my self is that I hate my self!"

"Which self are you talking about?"

"Obviously, the self that I know of!"

"How about the self that you don't know that you don't know? What if you had fifteen other selfs?"


Read Sybil!

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Saturday, December 10, 2005

Subsidies and Logic!

"Arey bhai, some of the richest people in India are politicans!" Hands stretching out and eyes winking, "itna saara paisa banate hain!"

"Really! So if you are in Indian politics, there are good chances of being rich OR is it that if you are rich in India there is a pretty good chance that you are a politican!"

"Kya fark padta hai?"

There is a difference.

Let us take the case of subsidies (electricity/water/PDS kuch bhi...)

Last year about 50 people got these subsidies (label S). The system can accommodate only 50 subsidy requests. 35 of them were deserving (labelled POOR) and the rest 15 were not deserving of it (labelled RICH).

At first sight, we find that 30% of the people getting the subsidies are not deserving of it, i.e. the RICH category.

However, the more interesting question might be this. Given that you are not deserving of the subsidy (i.e. RICH), what is the probability that you will get the subsidy? Now you have the data of people applying for the subsidies. About 20 RICH people and 80 POOR people.

Let me concise that data.

20 RICH people applied and 15 RICH ones are receiving the subsidy. A little grease here and there, you know!

80 POOR people applied and 35 RICH ones are receiving the subsidy. The system still works, you see!

There are two interesting questions.

1> What is the chance of getting subsidy given that you are rich?
2> What is the chance of being rich given that you get subsidy?

Take a moment to reflect.

The answer to one of them is 0.3 and the other is 0.75.

P(RICH /S) = 15/50= 0.3
P(S/RICH) = 15/20= 0.75
/ stands for given

In laymen terms, 30% of those receiving subsidies are rich but more importantly, there is a 75% chance of the rich receiving subsidy, if they apply. A little application of conditional probability gives us an idea of the distortion of incentives involved.

You can apply the same logic to backward communities applying for government employment. No wonder it is worth forging one's community status because of the increased probability of receving government benefits.

Data in above example is only indicative for purposes of displaying conditional probability and any errors in above logic will be appreciated.

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Wednesday, December 07, 2005

Groom shopping!

Everybody is excited about Bindu's marriage!

Prospective NRI grooms will be arriving in the city for the pre-marriage talks with Bindu. However, she has a dilemma. NRIs can stay only for a short time, because of short leave from their jobs. So if she says YES, then the marriage ceremony will be performed soon. But if she says NO, then the prospective NRI will go off and marry another lady. She cannot revisit her choice once she says no. Should she say yes to the first "A Suitable Boy" who she meets, or should she wait long enough to know her best possible choice. But then how long should she wait? Through how many people should she wait?

HR interviews may pretty much have the same decision-environment. You cannot revisit your choice once you say nay. You have to say yes to the candidate or he would leave and be taken up by another recruiter. You know the number of candidates out there. But you don't know the scores of those who have come to the interview but are waiting outside your chamber. And scores here mean, an overall assessment!

Turns out that intelligence has been applied to the "secretary problem" as it is famously known. In more technical terms, you are trying to maximise the probability of choosing the best item from the ones on offer. Rejection is once and final.

The solution is on these lines.

"The consensus among the many who have worked on this problem is that his best strategy is to let a certain fraction of the students pass and take the next one who has a score better than any of the ones seen thus far."

So if there are three students. It makes sense to let one pass and take the next candidate who has a score higher than this one candidate that has been passed. If there are lots of people, the odds are only 1/100 of the optimal choice being the first or last person. Then it makes sense to test the first 37 persons and choose the next person who is better than the previous 37.

"Finally, there is the “twelve bonk rule,” that says that if you simply want to ensure that your choice is better than 90% of the other choices available, simply ’sample’ the first 12 possibilities and pick the first person who is better after the first 12. This strategy gives you a 77% possibility of success."

Just a qualifier. Probability works in the long run, not in the short term!

And btw, Bindu eloped!

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Tuesday, December 06, 2005

Dribble Drills

It is examination time for me and my posts will be more light-hearted and short during this period.
There is something about a soccer ball, that is so "playable," for lack of better words. And if you have watched a good player dribbling a soccer ball, it is art in motion. One could speak about the technique but is best relished and watched, with good music in tow. Tip-off from a friend, Myles, thanks!

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Sunday, December 04, 2005

Save Our Schools?

One way to think about an idea is to time-travel to the past and place yourself in the period when the idea was emerging. So if you were around the time that the blackboard was devised (or invented) how would you feel about it? And you see that technology is not just computers, it is even present in the evolution of a plain blackboard. And it would have been considered an innovation in its time. Consider the idea of travelers cheques or the photocopy machines or the automobile replacing the horses. All these ideas changed their field to a great extent from the previous pattern. Read about innovation in tissue papers here.

A step further in understanding innovation comes from the fact whether a particular innovation helps implement a technology better (like gmail) or well, gives rise to a completely new technology (like email). In jargon, the former is called sustaining innovations and the latter is called disruptive innovations. Read more about it here and for the book, click here.

What relevance does it hold for public policy?

Consider schooling. Think about all the factors associated with it. A 50-100 years hence, would things still be the same way? Read the article here Save Our Schools, for it might as well apply to India!

Before you get "misled" by the author's policy prescription, here is my contention. It is convenient to think of government as the architect for any grand-scale scheme because our minds probably cannot take in the amorphousness of a market. How about thousands of entrepreneurs in a deregulated schooling market competing for price, access, quality and diversity?

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Saturday, December 03, 2005

Meet Bindu!

Bindu is 21 years old single, outspoken and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice and also participated in anti-nuclear demonstrations.

Please rank the following statements by their probability, using 1 for the most probable and 3 for the least probable.

a) Bindu is a working lady.
b) Bindu is a working lady and an active feminist.
c) Bindu is an active feminist.

Think about it. Don't scroll down!

Why do we close our eyes when we kiss? That is my upcoming blog entry.

Okay, now that you have hopefully stopped the urge to look to the next sentence for the answer, let us proceed to the explanation.

If you have given the highest probability to (b) you are not alone. About 85% of people chose it in a similar exercise. This is called a conjunction fallacy. The above problem is a rip-off of the Linda problem, which is explained below.
...experts violate a fundamental rule of probabilities by tending to find scenarios with more variables more likely. If a prediction needs two independent things to happen in order for it to be true, its probability is the product of the probability of each of the things it depends on. If there is a one-in-three chance of x and a one-in-four chance of y, the probability of both x and y occurring is one in twelve. But we often feel instinctively that if the two events “fit together” in some scenario the chance of both is greater, not less.

The classic “Linda problem” is an analogous case. In this experiment, subjects are told, “Linda is thirty-one years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice and also participated in antinuclear demonstrations.” They are then asked to rank the probability of several possible descriptions of Linda today. Two of them are “bank teller” and “bank teller and active in the feminist movement.” People rank the second description higher than the first, even though, logically, its likelihood is smaller, because it requires two things to be true—that Linda is a bank teller and that Linda is an active feminist—rather than one.
I found bank-teller too telling a bore, so the change in wording. The context of the problem and a review of the book Expert Political Judgment is here. The tip-off for the source is here.

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Thursday, December 01, 2005

Researching Reality

There has been news on two research ideas of late.

The first one is an economist's delight. Pay a student to increase his grades and you should find an increase in them. Read more about it here. Now, why didn't my dad think of it? It is one experiment that I am looking forward to for the results. Probably I should open a betting site for it! More importantly, will it work in India if students are not given the money directly but is deposited to the parents' account. Part of it will be redeemabale for present expenses and the rest will go into a Higher Education Savings Account.

The other is the radical finding of Steven Levitt. "Unwanted children, the story goes, are more likely to become criminals in later life. Abortion, legalised throughout the United States by the Supreme Court's Roe v Wade ruling in 1973, prevents unwanted pregnancies from becoming unwanted children. Higher abortion rates from the 1970s onwards thus help to explain why crime rates fell in America about two decades later." I must admit the finding is quite appealing. However the study apparently has an error because the authors thought that they had run a test, but the computer did not run the test due to a programming error. So Steven Levitt's funda that “abortion was one of the greatest crime-lowering factors in American history” will still be up for research for a lot more time. Read about it here.

If I go by Steven Levitt's funda, that would imply the following logic in India.
Since abortion is costly, one may simply dump or let the child die. So more infant deaths among unmarried or well, more criminals in orphanages.
Boys are anyway desirable in India, and usually not aborted. So there are more chances of guy-criminals out there! No wonder the average girl is so wary of the average Indian guy:-)

I don't believe either but would love to research it.

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