Agriculture and Development

Rajesh Jain writes on Indian outsourcing:

Outsourcing is good for India – but it will only provide a few million jobs at best. What’s also needed is for Indians to come up with innovations to raise the incomes of the rest of India – the 700 million in rural India. Only then will India will start to make the transition from an agricultural economy.

I agree that outsourcing is of limited value to the vast majority of Indians who cannot participate in it for obvious reasons. I also agree with Rajesh about the need for the transition from an agricultural economy. One reader, Nitin, commented on Rajesh’s blog and said: Continue reading “Agriculture and Development”

Why don’t they feel the pain?

Ever wonder why poor nations are poor and rich nations are rich? I don’t. I believe I know why the poor stay poor and the rich get rich. Consider this from The Wall Street Journal of Jan 19th. The report is titled India and US to Improve Ties. Here is an excerpt:

Washington also sees India becoming a big buyer of U.S.-made arms. In the past two years, India has purchased roughly $200 million of American arms and is in negotiations to purchase P3 Orion maritime-patrol aircraft from the U.S. The deal, valued at about $1 billion, could be the biggest arms deal ever between the two nations.

There you have it. The rich sell arms to the poor and the poor pay for it through the blood, sweat, and tears of its starving millions. To be sure, it is not the starving millions who are interested in fighting the poor of the neighboring countries. These millions of poor unfortunates are merely the slave labor that supply through their toil goods that the rich buy in exchange for the arms they ship to the armies of the poor nations.
Continue reading “Why don’t they feel the pain?”

Interesting Games

Here are two interesting items. The first is from Burkhard Schipper, an economist at the University of Bonn. He created a game where you play as a firm against other firms and find out how you did against the computer and how you stand relative to other players. It takes about 5 minutes.

Talking of internet games, I came across something that is really spooky. I cannot figure this one out. I am pretty clever but that one has me totally puzzled.

Knowledge and Information

One of my basic convictions is that symbol manipulation ability is what distinguishes intelligent entities from non-intelligent ones. For manipulating increasingly larger chunks of symbols, we create higher level symbols which encode a number of lower level symbols. Vocabulary is then that set of symbols. I would define an extensive vocabulary as one with a large number of symbols, that is, the width of the vocabulary. Vocabulary can also be more or less intensive, depending upon the complexity – or depth – of the symbols. Higher intelligences have the need and the capacity to handle more extensive and intensive vocabularies.

Vocabulary matters. It allows us to reason about the real world more effectively. It allows us to avoid illogical constructs arrived at through ill-defined and vague ideas poorly understood and consequently improperly communicated.

One of my pet peeves (which stimulated this comment) is the conflating of ‘information’ and ‘knowledge’. They are cats of two distinct breeds and are not interchangeable. The first does not require a brain whereas the latter cannot exist outside a brain. A telephone directory does not have knowledge of my phone number; it merely represents that data as information. When you look up and internalize that information, you have knowledge of my phone number.

Information is what economists call a public good (non-rival, mainly) while knowledge is a private good because it is associated with a brain. The same amount of information can lead to a lesser or greater amount of knowledge depending upon how many brains internalize that information.

The revolutions in ICT has lead to a decrease in the cost of replicating and disseminating information. It has not reduced the effort required for information to be incorporate in a brain into knowledge. It is an information revolution; it is arguably not a knowledge revolution. There is an explosion in information (some would argue that it is merely a data explosion) maybe but certainly not a knowledge explosion. Indeed, too much information – information overload – can lead to a decrease in knowledge acquired because humans have limited CPU power and if too much is used up in input of information, less CPU capacity is available for processing the information into useful knowledge.

From the introduction that Rajesh Jain quotes in one of his tech talks, it is not clear to me that Mokyr distinguishes between knowledge and information. With the distinction in mind, it is interesting to re-read the quoted text and find evidence of much muddled thinking.

In my own field of development economics, I have noted a similar muddling of two very distinct concepts: growth and development. Not being able to distinguish between the two often leads policy makers to mistake growth for development: the former is neither necessary nor sufficient for the latter. So also, more information is neither necessary nor sufficient for greater knowledge.

Finally, let’s keep in mind the following: Data is not information, information is not knowledge, knowledge is not understanding, understanding is not wisdom, and finally wisdom is not enlightenment.

Numbers – 5

The Business Standard of 12th Jan 2004 carries an item on page 3 with the heading 33 million more Indians in poor list in 2001-02. The percentage of people below the poverty line is estimated to be around 25. That is, India has about 250 million people who are so unimaginably poor that they can’t cross the poverty line that is set way below what can be considered necessary for a human existence. For all the progress India is supposedly making, we have increased the absolute numbers of the abjectly poor by 33,000,000 in that one year alone.

Let’s put the number of the abjectly poor in perspective. Consider the number of people below the poverty line at the time of India’s independence. We had about 350 million people then. Assuming that 50 percent of them were below the poverty line then, there were 175 million abjectly poor people then. Now, about 55 years later, we have 250 abjectly poor people. There has been an increase of 75 million in the ranks of the abjectly poor.

Whatever else one can say about India’s progress, there is no way anyone can claim that India has made any progress in reducing poverty. Hundreds of billions of rupees have been spent in poverty reduction and yet we have not able to not just reduce poverty, we have actually seen an increase in the number of the poor.

How on earth could we have achieved this: spending huge amounts and still not being able to reduce the absolute headcount of the abjectly poor? The answer is not hard to find. The analogy I use is this: imagine trying to fill a leaky bucket. There is no way of ever filling it if the rate at which the bucket leaks is greater than the rate at which water flows into it. India’s misfortune is that the rate at which the population of the abjectly poor increases overwhelmes the resources available to lift people out of poverty.

Consider this report from the BBC simply titled 24 Children:

In the small town of Dadri in Uttar Pradesh, down an alleyway off the main street and behind some shops, is the home of Mohammed Omar and his wife, Aasiyah Begum… They have 24 children… Aasiyah Begum has given birth to 29 children she thinks, but five have died.

Of the hundreds of millions of Indians who are abjectly poor, one thing we can be sure of: to a first approximation, they are poor because their parents were abjectly poor. Poverty, like riches and skin color, is inherited.

Amartya Sen, an economist who has spent some time thinking about the matter of poverty, had once remarked that if poverty were a contagious disease, the rich would eradicate it pretty rapidly. I see his point, that in the short run, poverty is not contagious. But I feel that in the long run, poverty is highly contagious. The deadweight of the poor can produce sufficient friction in the workings of the economy that even the non-poor find it difficult to survive.

Poverty is the outcome or consequence of a large number of factors. Oppression and exploitation are certainly very potent factors that keep the poor in poverty. But the most important factor for the poverty of the poor is, in my considered opinion, the real uncontrolled fecundity of the poor. I realize that in this age of political correctness and global social forums, this is not going to make me popular.

The question of economic development of the country cannot be answered without reference to the poor. We need to ask hard questions and if the answer turns out to be less than palatable for some people, so be it. But we cannot pretend that we can solve problems without understanding fully what are the causal factors that create them.

Numbers — 4

No one reading this is likely to be suffering from malnutrition, illiteracy, lack of health care, lack of drinking water, and any of the marvels of modern technology such as digital gizmos and jet travel. That is so because we are sitting on top of a very large pyramid at the bottom of which are the toiling thousands of millions. The top of the pyramid is mostly populated by the white people of affluent western advanced industrialized countries but they are not alone. The economic elite in poor underdeveloped countries around the world also rest content on the top of the pyramid.

We – you and I – belong to that elite 20 percent of the world’s population, whether you are in Mumbai or Manhattan.

The gap between us and them at the bottom is wide and becoming wider still. A number of questions need to asked and then answered. How wide is the gap? Is that gap good or bad? Can the gap be eliminated? Should it be eliminated? Will it be eliminated? Whose job is it to eliminate the gap? Which side of the gap does the fault lie? Should the gap be filled by leveling things downwards or should things be leveled upwards? Is it possible to level it upwards?

Before we get to the normative questions, we should have knowledge of what is. We have all come across the usual list of standard laments such as the following from a Cornell University report:

  • One reason for the increase in malnutrition is that production of grains per capita has been declining since 1983. Grains provide 80 percent to 90 percent of the world’s food. Each additional human further reduces available food per capita.
  • The reasons for this per capita decrease in food production are a 20 percent decline in cropland per capita, a 15 percent decrease in water for irrigation and a 23 percent drop in the use of fertilizers.
  • Biotechnology and other technologies apparently have not been implemented fast enough to prevent declines in per capita food production during the past 17 years.
  • Considering the resources likely to be available in A.D. 2100, the optimal world population would be about 2 billion, with a standard of living about half that of the United States in the 1990s, or at the standard experienced by the average European.

I don’t trust projections that talk about the standard of living of people a hundred years hence. Could anyone living in the year 1900 have imagined any of the things lying around your desktop today? They could not have imagined any of the things we take for granted. They could not have imagined that 2 billion people – that is more people than entire population of the earth in 1900 – would be living lives of such unimaginable luxury that their greatest troubles would be due to the excesses of affluence. We too are clearly quite not up to the task of imagining a world 100 years hence because the rate of technological change itself has accelerated.

I don’t trust any projection that talk about the distant future. What concerns me is the present and the near term: of the order of 10 or 20 years. In the long term, as Keynes famously remarked, we are all dead, anyway.

As Joel Cohen noted, “Though the future is hazy, much that is very clear can be known about the present. First, the size and speed of growth of the human population today have no precedent in all the Earth’s history before the last half of the twentieth century.”

Take a look at the figure below from The International Institute for Applied Systems Analysis (IIASA):

In the 45 years since 1950, India added five times as many people as did the US. India added 571 million people, while the US added 109 million. Compare that to the growth in per capita GDP. India’s GDP grew from $180 in 1960 to $463 in 2000 — an increase of $283 in 40 years (figures in constant 1995 dollars). Compare that to the US: from $12,837 in 1960 to $31,806 during the same period — an increase of nearly $19,000, or 67 times the increase relative to India. (Data from the World Bank.)

In the 100 years from 1950 to 2050, India will add 1.2 billion people to reach a total of 1.5 billion. Let’s read that number again: it will be one thousand five hundred thousand thousand. During the same period, the increase in the US population would be about one-sixth that of India. I am not going to go into the projected difference in the per capita GDPs; it is too depressing even for me.

The important thing to note is that no country with large increases in populations has ever been, or is likely to be, a developed country. We have to do a little arithmetic to convince ourselves that there is no way on earth can India move out of the poverty trap without changing its population growth rate, no matter how pretty a song you sing about IT superpower or how nimble a dance you dance about BPO. All this song and dance about India being a superpower in 2020 is merely arranging the deck chairs on the Titanic while the Titanic band is paying ragtime.

We need to understand what is at stake and wake up to the fact that we are short on lifeboats, that the hull is breached, the captain has ignored the warnings, the builders have messed up the design, and the binoculars were missing.