Hauled from the archives, here is a bit on the distinction between information and knowledge. This is important because I think we are in an age of superfluous information (followup to that here.) Making distinctions aids comprehension and consequently the ability to efficiently effect change. I like to distinguish between economic growth and development because economic development is the goal and in many cases economic growth is the instrument for development.
Category: Economics
Art of Living: Another Letter
Not having the gift of foresight, one rarely knows how far one will stray having embarked on an ill-advised direction. So it is with me and my simple assessment of Sri Sri Ravi Shankar many years ago. I began with concluding that SSRS is very skilled in marketing a good and ancient Indian technique generally known as yoga. Many others from India have done so and I approve of all of them because I approve of good ideas being shared. Some made huge fortunes (self-styled “Bhagwan” Rajneesh AKA Osho, for instance) and some labored out of sheer love and devotion for the ideas.
However, my conclusion that SSRS is a “useful” person, just like you and I, did not go down too well with those who are persuaded that SSRS is God Almighty incarnate (whatever “God” is.) So I get nastygrams from these fairly regularly. But once in a while I also get letters from dissatisfied AoL customers. The curious thing is that the nastygrams from SSRS worshippers are pretty incoherent rants; and the dissastisfied customers are generally pissed off but coherent. Because I have published one recent incoherent rant from an SSRS worshipper, I am publishing one from someone who has an opposing point of view. Here it is, for the record.
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A Bit on Mobile Advertising
Advertisement as Signaling
Advertising is the communication of a signal (information) with the express purpose of gaining advantage over one’s rivals in a competitive environment. That’s my definition of advertising in the broadest terms. In those terms, advertising is not limited just to the world that is human made. All sorts of life forms over evolutionary time scales have been in the business of advertising. In the natural world, advertising serves a very useful function, the end result of which is the astonishing appearance of beauty and diversity. A beautiful human face is not just an advertisement but also the result of successful advertising. Little wonder that beautiful people appear in advertising pictures.
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A Trivial Economics Question
Here is the story. I have an object X that I wish to assign (gift or give away) to one of three: A, B, or C. How do I determine whom to give it to if I am concerned about allocative efficiency? Assume that A, B, and C have different preferences and abilities to pay.
To put a nice twist to the story, what if I am also concerned about equity? That is, although I have only one object X, I don’t want to be unfair to the other two who will not get the object X. What is the best way—the mechanism—to resolve this issue?
Of course, the answer changes if I don’t wish to give more than just the object X, as opposed to the case where I am willing to give more than X just for the sake of being fair to all three.
Finally, a real world situation. My siblings and I have inherited our parents’ property. The eldest occupies it, but the other three (including me), are waiting for our share. What is the most economically efficient way to distribute the value of the property if the property itself is indivisible?
Your views are solicited. Let’s see if we can find answers to the questions that we find satisfactory. And if we do, perhaps we will understand a little more about the question of how economies work. That is the beauty of economics. From seemingly trivial—though interesting—questions, one can gain insight into larger questions.
POST SCRIPT: I made the mistake of putting two entirely different scenarios on the same post. So there is much confusion. I wish to clarify that the “efficient allocation of an object X” is a seperate matter from the “fair and efficient distribution of an indivisible inherited property.” Conflating the two was not my intention.
Milton Friedman: A Joke and Some Serious Stuff
One day an economist looked up and saw a little girl being attacked by a vicious dog, just down the street. He rushed over and saved the girl by strangling the dog.
A reporter interviews him and says, “Sir, this is a wonderful thing you have done. Did you say you are an economist?”
“Yes, I am,” says the economist.
“Very good, sir,” says the reporter, “this will be our lead story tomorrow, and the headline will be ‘Radical libertarian economist saves little girl from vicious dog.‘ ”
“Well, I’m not that radical,” says the economist. “I’m really more of a classical liberal.”
The reporter scratches his head and says, “Well, we’ll come up with something. Whose views would you say you are closest to?”
“Oh, I suppose it would be Milton Friedman,” says the economist.
Next day, the economist buys the paper. Across the front page is splashed: “CHICAGOITE KILLS FAMILY PET!”
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Advantages of Being a Village Idiot
My favorite village idiot joke goes – please stop me if you have heard this one – this way. Once upon a time, in a particular village, when offered a choice between a dime and a nickel, the village idiot would invariably grin and pick up the nickel and everyone would have a hearty laugh at the stupidity of the village idiot.
One day, a kind-hearted guy says to the village idiot, “You know, although a nickel is larger than a dime, it is only worth half a dime. You should pick up the dime.” The idiot says, “I know that. But if I pick up the dime, people would stop offering me the choice between taking a nickel or a dime, wouldn’t they? Who would be that stupid?”
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The High Cost of Living
Burundi comes before Canada lexicographically but Canada leads in all measures of human welfare one could care to compare the two on. I am endlessly fascinated by the contrast between different parts of the world. How on earth did humans end up occupying such widely separated ends of the spectrum of economic development?
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Reasoning Economically
Or What Economists Do
What the heck do economists do is a question that does not baffle many people because they “know” what economists do. I know it did not baffle me. I was not taught economics in high school, and had an entirely forgettable few lectures ostensibly on economics sometime during my undergraduate in engineering. Given this ignorance, I had a vague notion that economics had something to do with money. I think I conflated economists with finance people and accountants. But I was not baffled because I was too ignorant. Continue reading “Reasoning Economically”
How to study economics
A friend recently asked me for some advice on how to improve his understanding of economics. I asked my favorite advisor CJ to take a shot at it. Here is what he wrote, for the record:
Each of us has a unique learning style, of course. Here is mine.
Learning economics better requires reading. But here is the rub: one could read disjointed stuff on the web all day long and still not understand what it is all about. In fact, reading too much on the subject which is more in the “news” category is detrimental to understanding. Even reading the Economist will not help one understand economics any more than reading a lot of hospital news will teach one much about medicine. Continue reading “How to study economics”
The REGS Guarantees Poverty
The Rural Employment Guarantee Scheme (REGS) has the word guarantee in it and whatever else it may or may not guarantee, it certainly guarantees greater overall poverty than would be the case without the REGS.
In brief, REGS does not increase the aggregate production of the economy, nor does it increase productive capacity; it merely redistributes incomes by giving money to those in the rural areas. The first order effect of this diversion of resources is that other projects which have the potential to increase production and increase productive capacity do not get done; that is, the opportunity cost of the REGS is very high. The second order effects are increased public corruption, making the population much more dependent, increasing population, etc. This means in the future, the economy will produce much less than it would have otherwise produced and thus more people would face poverty as a result of the REGS .The rest of this essay is an elaboration of this argument. Continue reading “The REGS Guarantees Poverty”
Atanu Dey : Life is a Random Draw 