Month: January 2018

The human freedom index — A Global Measurement of Personal, Civil and Economic Freedom — of 2017 is out. There’s India near the bottom of the list. Indians are not free — but that’s not news, is it? For a couple of centuries at least, Indians have not been free. This fact goes a long way in explaining why Indians are not prosperous.

Click on the image to get the details. Here’s a short video below the fold that’s of interest. Continue reading “The Human Freedom Index 2017”

In the list of historical figures I’d have loved to meet, Alexis de Tocqueville (1805 – 1859) figures near the top.

Together with a close friend, he visited the United States at the age of 25 for only nine months. He went back to France and wrote a book. His book Democracy in America (in two volumes, De La Démocratie en Amérique, published 1835 and 1840) is a political science classic and essential reading for understanding America.

Here’s a bit from the wiki entry on Democracy in America:

In 1831, Alexis de Tocqueville and Gustave de Beaumont were sent by the French government to study the American prison system. In his later letters Tocqueville indicates that he and Beaumont used their official business as a pretext to study American society instead. They arrived in New York City in May of that year and spent nine months traveling the United States, studying the prisons, and collecting information on American society, including its religious, political, and economic character.

Continue reading “Quote of the Day: Tocqueville on Self-interest”

There are things we can accomplish as individuals and there are things that we can more effectively and efficiently achieve collectively. For the latter, we create what are called institutions to serve as instruments for getting things done. The lunch club introduced previously is a simple example of an institution.

Institutions

The club, like all institutions, is an abstract entity. It does not have a physical existence other than the existence of the individual entities that constitute it. The members of the club exist physically but the club is only a set of rules that members of the club agree to abide by. The club exists in some Platonic realm though the benefits it provides to its members are tangible.

The benefits of the lunch club include companionship, the opportunity for discussions, etc. But there are costs too. For example, when the club chooses a particular cuisine on some occasion that is not to your liking, you incur a cost. When you join the lunch club, you weigh all the costs and benefits of joining. You join the club because you figure that the benefits exceed the costs.

The existence of any institution, thus, depends on whether the benefits exceed the costs as subjectively and objectively evaluated by the members. The lunch club continues to operate only as long as there are people who receive net benefits from membership. Being a member means abiding by the club rules. So now we come to the rules. Continue reading “The Wednesday Lunch Club”

I’d like to explore a few important concepts like government, constitutions, democracy, etc. They are embedded in the fabric of Indian society. Taking a clear-eyed view of their genesis, nature, function, modes of failure, and implementation can be intellectually rewarding but more importantly it can help in creating the good society. I’ll start with something seemingly unrelated — clubs.[1]

Consider an average workplace lunch club. We will call it the “Wednesday Lunch Club.” A bunch of coworkers[2] — five in our club — go out to lunch every Wednesday. Where? The restaurant is decided by a simple majority rule vote. If three out of the five members agree on Chinese food, then a Chinese restaurant it is that Wednesday. The two that wanted Indian food have to go along with the group decision. It’s not that they hate Chinese food but on that particular day they preferred Indian food. So they incurred a loss in terms of not being as satisfied with lunch as they would have been if the WLC had gone for Indian food.

Models

That’s a simple story. But if one examines it carefully, in detail and in very small steps, it can be instructive. It’s a very small elephant but it’s still significant. Slowly walking around the small elephant, examining its features carefully, making sure we are on firm ground each step of the process, and integrating different bits of what we learn gives us an understanding of the big elephants we encounter in real life. The small elephant is a model. Continue reading “Clubs and other Collectives (and the Welsh Incident)”

In response to my piece “Censorship on the Internet“, a friend from Mumbai emailed me two questions: “How should we look at issues like pornography. Is it okay to let people say/show what they want to and let children and other vulnerable groups see/listen to all that ?” and “How can India move in the direction of First amendment?”

Let’s take the issue of pornography. Different societies have different standards about what’s acceptable in all aspects of living — what to eat, how to dress, how to worship, sing, dance, make music, make art, etc. These evolve with time and technology. Whether we like it or not, the moral code too evolves.

What’s considered obscene also differs among societies, and the standards change with time in the same society. There was a time, for example, when the sentence “Frankly, my dear, I don’t give a damn” was considered too vulgar to be uttered in a movie. (Gone with the Wind, 1939.) Now you can say WTF to that and no one would bat an eyelid. Continue reading “Censorship on the Internet — Revisited”

To a previous piece , “The End of Poverty“, my friend Indradeep added a few thoughtful and thought-provoking comments. I take him seriously since he’s a fellow member of my tribe (namely, economists). In the following, I will do my best to address the points that he has raised. But first, here’s what I wrote in summary in my piece:

Technology is advancing at an exponential pace. Therefore the cost of energy will continue to drop. Therefore the cost of production of stuff will monotonically decrease, until a point that it will be practically close to zero. Therefore all the basics of life will be available for consumption at zero price. Therefore extreme poverty will be solved. This will happen in about 15 years.

I reproduce Indradeep’s comment here for reference:

Hard to argue with the idea that technology will reduce cost to near-zero levels. But the rest of it borders on wishful thinking. Especially, the expectation that some system of distribution will magically appear, sounds almost as sanguine as the familiar and now roundly discredited argument advanced by free-market fanatics that free trade is surely beneficial and the matter of how the winners compensate the losers is only a minor wrinkle that we do not need to worry about. Political economy, voice, agency – these things are nowhere in the picture. Does not a system of representation of voice have to precede the appearance of a system of distribution? If the rich have no intrinsic interest in alleviating poverty, how will that first system come into existence?

Let’s examine the “now roundly discredited argument advanced by free-market fanatics that free trade is surely beneficial”. Continue reading “The End of Poverty — Revisited”

In the context of exponential technological growth (a topic that I explored in the piece “The End of Poverty“), Akshar asked in his comment, “Don’t you think the gap between a poor person in India and a poor person in say USA would only increase ?”

Yes, I think that the gap will only increase with time. But that is just part of a broader trend of increasing inequality in numerous dimensions — within and between nations. In technical terms, the Gini coefficients (a measure of inequality, where 1 means perfect inequality and 0 means perfect equality) will continually increase.  Continue reading “The Growth of Inequality”

This is an optimistic piece — a rarity for sure around this blog. Here I claim that in 15 years or so, extreme poverty which afflicts around one billion people, mainly in the so-called third world, will be eradicated. That problem has plagued mankind since the beginning but the end is in sight.

Technology

Global extreme poverty will be eliminated as a side-effect of technological advances, primarily made by people who probably neither care about poverty nor do they intend to solve that problem. Which is good news for India. India has the largest number of people suffering extreme poverty in the world. Around half of the billion extremely poor people of the world live in India.

There are two kinds of problems. There are hard problems and there are impossible to solve problems. Given time, with advances in knowledge, all hard problems will be solved. Poverty is a hard problem but not an impossible problem since in many parts of the world it has been solved for all practical purposes. The critically important key to eradicating poverty is knowledge.

Knowledge

Knowledge is what economists call a “public good.” Once produced, knowledge can be repeatedly used without diminishing the available stock. It is “non-rival” in consumption. Technology increases monotonically because of the accumulation of knowledge. And technology (which is essentially knowledge of how to do something) developed somewhere gets adopted in the rest of the world with surprising rapidity. It is very cheap to use once developed.

Consider the cell phone, internet and computer technologies that were developed in the Western economies (they are called developed economies partly because they developed technology) but those advances spread to every part of the globe. Just like the computation and communications technologies, it will be people in rich countries who will develop the technology to eliminate poverty in poor countries, albeit not by design nor intent.

That means India’s dire poverty will be solved not by Indians — least of all by the insanely inept, criminally corrupt government of India which is arguably the fountainhead of India’s poverty — but by others. I note in passing that India’s telecommunications problem was created by the government but it was solved using foreign technology.

In the following I conjecture how the end of poverty will happen.  Continue reading “The End of Poverty”