Author: Atanu Dey

In a comment, Akshar asked, “As a lay person one of the question I have always had in my mind about economics is that how exactly should I separate good opinion from bullshit vending. …  If as a layman I can’t tell the difference between informed opinion on economics v/s Bullshit why should I take Mr. Atanu Dey more seriously or why should I waste my time supporting Milton Friedman’s ideas.”

It is an unalterable fact of life that since time is a scarce resource we have to rely on others for most of what we value, whether physical or non-physical. We don’t have the time to discover for ourselves all the truths of mathematics, the laws of physics, the facts of nature; or invent technology (i.e., how to do things), grow food, build houses, engineer machines, make clothes, and so on. Given the limitations of time and cognitive abilities, we depend on trade and the division of labor that it entails. Each of us specializes to some degree. What I earn by writing code I exchange for everything else I need.

So how do I choose from among what’s on offer? As it happens, there are institutions in society that help in this regard. For most goods and services, we reply on the markets for signaling quality. If something continues to appeal to a large number of consumers for extended periods of time, it is probably OK for me. And of course my own taste guides me to choose among the many alternatives. Continue reading “DIY BS Detection Meter”

Economic development of nations is a vast topic that people are unlikely to reach a consensus on ever. It lies beyond what’s even theoretically feasible. It’s a big enough elephant that defies easy characterization, and the best we can hope for is that the necessarily partial views are not obviously wrong.

Economists have debated the topic since the very beginnings of the discipline of economics. Indeed, the enterprise of economics was motivated by the very question of what economic development is. Adam Smith’s book, “An Inquiry into the Nature and Causes of the Wealth of Nations”, published in 1776 represents the first comprehensive attempt at systematizing the subject.

It’s the nature of the beast that makes it so intractable. An economy is an organic, living, breathing, dynamic, evolving thing. Unlike the inanimate objects that the natural sciences (physics being the foundational science) study, economists have at the core of their subject something that thinks, has volition, acts and reacts — the individual human. Economics is not, and cannot be, a science in the sense that physics is. Continue reading “Prospects for Indian Development Models – Part 1”

Prelude

The title of this post is borrowed from a YouTube video. Shri Rajiv Malhotra interviewed Shri S. Gurumurthy recently and the first two of a three-part series have been published on YouTube here and here. I confess to great trepidation in addressing myself to the matters that the two discussed, not because I am not confident of my own position but rather because of who they are.

I have deep respect for Shri Malhotra whom I have had the distinct privilege of spending time with. He is inspired and inspiring. He is one of those rare successful American NRIs who employ their fame, fortune, talents and energy in the service of not just the mother country but all humanity. The members of that tribe you can count on the fingers of one hand. Continue reading “Prospects for Indian Development Models – Prelude”

OK, here’s something interesting. Who said the following:

It’s a rare person who can achieve a major goal in life and not almost immediately start feeling sad, empty, and a little lost. If you look at the record – which in this case means newspapers, magazines, and TV news — you’ll see that an awful lot of people who achieve success, from Elvis Presley to Ivan Boesky, lose their direction or their ethics.

Actually, I don’t have to look at anyone else’s life to know that’s true. I’m as susceptible to that pitfall as anyone else . . .  Continue reading “Guess who said this”

There’s little doubt that the US health care system is not good. The US health care costs are around 20 percent of GDP, or $10,000 per capita per year. That’s unreasonably high compared to other developed nations. There are many reasons for this but the primary reason, as I see it, is the tacit collusion between the health insurance business, the hospital business, the pharmaceutical business, medical professional bodies, and governmental regulatory agencies.

Insurance has an important role to play in any large, modern society. Random events can be insured against in a population. Insurance distributes losses arising from random events across the insured population. Suppose in a population of 100 people, it is statistically certain that within a year one person at random would incur a loss of $200, then to cover that loss, if everyone paid an insurance premium of $2, then the loss can be spread over the entire population instead of just that unlucky person bearing the entire loss. In effect, everyone in the insured population bears a small definite loss so that no one bears a huge loss. When we buy insurance, we trade a guaranteed small loss against an uncertain big loss. Continue reading “What’s a good health-care system?”

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)”