Patriots and economics

Most of us here are already tired hearing about Demonetization and people complaining how inconvenient it was to them. A lot of my peers studying economics complained how it was a very inhuman move and brought in all non-existent Martian logic. Most arguments were pertaining to how that move did not help the nation bring back black money. So the minute we say black money, why do our eyes roll towards The Swiss accounts and we forget everything else domestic?

Business Today talks about a report which states, “2 Lakh non-filers filed Income Tax of 6,416 crore in FY18″. This happened as I-T Department issued notices to 3.04 lakh persons who had deposited cash of more than Rs 10 lakh post demonetization but had not filed their return of income till the due date. 37 cases have been registered under Provisions of Money Laundering Act, 2002 in connection with the irregularities relating to demonetization, investigation of which resulted in attachment of properties worth 114.71 crore and seizure of gold weighing 7.538 Kg. Now although theses volumes look very small, the direction of the impact can’t be undermined. Also another report says that digital transactions have increased 400-1000% post demonetization. Not to forget an old report which said that Bank account deposits saw a huge rise within December 2016. And these are still at the surface of deeper implications.

So what’s my point?

I’m definitely not getting paid for writing pro saffron and neither is any of this about a person or party. It’s just about understanding the economics behind a move and my attempt in showing how the cash is now being streamlined in a way it can be further monitored and looked into. From the banking sector to the I-T sector, a huge volume of cash in the economy is being channelized and being accounted for. That’s as good as a baby step for a cashless economy but still a start.  There are still challenges pertaining to Unorganized sector and parallel economy which are being addressed through these implications without a mention of them as the primary agenda. Penetration of a policy takes time and other structural changes. Of course, easier said than done and easier criticized than analyzed.

For those of you who are still sad you had to stand in queue for long hours to get your own money, I’m sure your patriotism display is only when the National Anthem plays before your movie.

All this just made me think about how hate-policy makes us biased and the standard approach to our opinion formation is based on personal likes and dislikes framed out of politicization of issues.

Guess it’s time to step up beyond. Don’t you think?

 

 

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Holy COW Paradox. There’s a cow, how do you cross?

While I was reading Freakonomics the other day, the authors were talking about incentives and policies. A day-care centre has a policy where parents are supposed to pick up their children by 4 PM and on an average there were 8 parents delaying and getting apologetic and guilty about being late. To address this issue they imposed a fine of $3 for being 10 minutes late on every incident. The number of parents now picking up late had gone up to 20 from a mere average of 8. They all had successfully bought their guilt. The policy backfired, as mentioned by in the book.

Interesting enough, in a conversation about all the cow menace going on in the country, a Prof. of mine mentioned how he read in a recent article which mentioned about the rearing of Cow : Buffalo ratio in UP after Cow slaughter ban. He said pre-ban it was around 93:7 respectively and there was a great significant decline in cows reared after ban and buffaloes got greater welcome now. Where did all the cows go?

When the policy was implemented, farmers realized it was economically not viable to rear a cow anymore as by the end of it’s milching it can’t be slaughtered, which was a possibility otherwise. So although the whole idea was to protect cows, the implementation of this policy saw a steep decline in rearing of cows.

While lot of you here have already framed your opinion of whether I am right winged or left winged just by reading this, hold on there’s more. While watching Kanan Gill’s stand up comedy show titled “Keep it real”, there’s a hilarious subtle mention about all this cow politics. Those of you who’ve watched it would have understood the title of my write up by now.

So coming back to our holy cow (pun intended),  Article 48 of Indian Constitution which is part of DPSP talks about organization of agriculture, animal husbandry and it prohibits slaughter of cows, calves and other milch and draught cattle. So, folks, a cow which is potentially going to earn a farmer income is not allowed to be slaughtered. The policy as a whole is about economic implications and not in the minute bit a majoritarian remark. Beef ban, although, is a different story altogether.

All these stories summed up to show that sometimes consequence of a thing turns out to something that one can’t anticipate, but for an economist. Just like how you say that you’ll award the teacher, in comparison with rest of the teachers,  whose students get the highest scores in aggregate, would be willing to cheat and make most or all of his/ her students score way more than what they could have. Policy backfire again.

Just like how the book says, if the stakes are right, almost anybody would cheat. What would you cheat for?

 

Holding the heaviest chair.

You know it’s the end of an era when things just look so distant and unbelievable when you look back and you know you’ve set foot elsewhere. Especially  a transition from childhood/teenage to adulthood, you never precisely know when or how it happens. Being 20 and believing you’re an adult ready to handle situations around you, is the biggest notion that was falsified. The balloon burst right up there at cloud 9.

I’m sure you have experienced a level of happiness which can’t be expressed or explained and just felt deep inside and you just thank your lucky stars for it. I’m also sure that life left you stranded in places where you didn’t even know how to go back home or who to call. If we’re talking about the same intensity of emotions, I’m sure your eyes moistened in both these scenarios.

This really got me thinking on how we perceive childhood and adulthood. Is it really about age or is it how our minds function? Is it just biology or psychology and spirituality stirring their wands on us?

How would you like to have a hat that can step you up to adulthood in a situation of crisis? A hat that lets you enjoy candy like a 2 year old even when you’re 72? Would you go around looking for that hat if you were told it existed? If yes, where would you look?

When I was 13, I came across an interesting theory on Parent- Adult- Child model. My cousin who was trying to talk me out of what I perceived as “Houston, we have a problem” , told me about this. This gave me my hat and all the hats I’d ever need (Although the only sad part is that I can’t have it in pink). I realized how much my relationship with other people depend on what hat I’m wearing that day. If I walk out of the house wearing the right hat and enough spares to switch between situations, I’ve either earned myself a day or saved one.

Now, about dreams, the literal ones, a lot people think they don’t get dreams but they just don’t remember cause of how the REM cycle functions. Why did I randomly bring up dreams here? Having experienced dreams ranging from awesome, good to bad and OMG I just had a nightmare, they helped me learn about my deepest desires and fears. It was like the inner me speaking projecting my world around me, telling me what it liked and what it didn’t.  I learned how exactly to determine what made my body feel happy, light, sad, unbearable, dreadful, exciting, vulnerable and lot more emotions while walking through situations. I asked myself if I would feel any different about those situations if I’d switched hats.

It’s just like how T T Rangarajan puts it. Consider your anger to be a chair. You’ve been holding that chair up in the air for about a minute now. Well, it’s okay, it’s a light chair. You’ve been carrying it for an hour now. It started feeling heavy and it only feels heavier with time. Laws of physics can guarantee you that the weight of the chair did not change.

Knowingly or unknowingly, we all have been carrying those chairs up in the air long enough for us to feel heavy. Red chairs (anger), green chairs (harmony), blue chairs (melancholy) and a lot of them we’ve been holding up. It’s time you and I let go. Truly understand, accept, acknowledge and move on. Switch between hats and make peace with all those things you didn’t even know you were bothered about.

Just smile looking at yourself in the mirror and admire the view!

 

For the love of writing!!!

“Gaze into the white space of paper to embellish it with the flow of ink .The pen striking my forehead for every word that spurs me to a thought. While every word being devoid from the pen, It seeks a sense from within integrating my thoughts.And there I sit back gazing at the words smudging in my eye balls..”

A writer’s workshop is beyond a reasonable pen , ink and paper. It’s more like the ideas that you drown in ,that keep you floating. To be a writer is like you look at yourself; no, not in the mirror but you have an insight of slightest gesture of thoughts that run over your brain trying to tickle you even when you’re asleep. It’s the constant consciousness awakened to grasp what you could write next. You write from anything or even from nothing, making it sound like an international event impacting America and the rest of the world. That’s the power behind a striking pen.

Guess what I learnt today – Basic Principles of Economics

Hey again,

Welcome back

Going back to our awesome Prof. N. Gregory Mankiw, we can start by learning about the 10 most fundamental principles of Economics like he’s mentioned in his book.

Ummm okay but what do I do with these principles?

Well, for starters, you can look around and try to see if theses principles fit in or if they’re outdated or if we’re bluffing.

Principle 1: People face trade-offs

So how many times have we been in a situation that to get something we’d have to give upon another? We are faced with Alternate Choices.

Consider how right now rather than reading my blog, you could just be there watching The Sherlock Series. So how is any of this Economics?

A classic Trade-off is having to choose between “Guns and Butter”. So if you were governing a country and let’s say you had a 1000 bucks, how much of it would you spend on securing your country, strengthening border forces and make sure the soldiers are fed enough and on the other hand spend on ensuring your citizens have enough to satisfy their needs? Its a toughie, I know.

So here we also get to learn the term Consumer Goods which mean,’ Goods bought and used by consumers, rather than by manufacturers for producing other goods, also called final goods’.  In the above example, guns refer to Defense expenditure and butter refers to consumer goods.

Principle 2: The cost of something is what you give up to get it

You know when you go to the mall and pick up fancy sunglasses and pay how much is written on the tag, that’s not the cost I’m talking about.

Think of it this way. You own 20 books and here’s what you can do with it:

  1. Either rent them out to your friends and make some money
  2. Or read them all, acquire knowledge and maintain the books in your personal library.

Both of them have their own merits and demerits. So that’s where we learn Opportunity Cost : The loss of other alternatives when one alternative is chosen. So now that I’m talking about cost, there’s gotto be a math to arrive at it. Watch this Video to learn the math.

Principle 3: Rational people think at the margin

Now, of course we’ve heard of the usage of ‘Rational Human Behavior’ in my previous post. So you will notice that most people and firms and Governments make rational decisions. So what do I mean by thinking at the margin? Well the decisions you take often are not between two extremes but a decision of whether or not to something a little more or a little less. Like an extra hour of watching series or complete a chapter of the novel in the same allotted time. Like how during exams you would either want to use your time revising or use the time relaxing. So what you do is compare the benefits and cost of this margin. So here we arrive at Marginal Cost and Marginal Benefit.

Marginal Cost: The cost added by producing one additional unit of a product or service. Or in your case, the cost of watching an extra hour of series if that’s what you choose.

Marginal Benefit: The additional benefit arising from a unit increase in a particular activity. So, the benefit you got by spending that extra money on something.

So let me give you a classic example that my professors gave me that their professors gave them and even theirs :

Why is water so cheap while diamonds so expensive?

Because how much a person is willing to pay is based on how much satisfaction one derives by that extra unit of good.

 So, how much satisfaction I’d derive by an additional unit of water is way less than an
additional unit of diamond. I mean, come on, another diamond ring? I’m on cloud 9
already! So feel free to gift me one !
So what’s my point?
You and I and all of these rational people only take action if the marginal benefit over-
weighs the marginal cost. 
Principle 4:  People respond to incentives
It’s an incentive if it’s inducing you to act.  Simplest example, you’re still looking out for
that flash sale on Amazon or wanting to watch a movie on a weekday so that you get
tickets at lower price. Also when you notice that the fuel prices are going up, you try to
cut down on your travel ( or at least that’s how you’re supposed to think) .
Incentives are extremely important for policy makers. That’s how they determine taxes
and subsidies so that they can have some sort of  control over what the masses of people
are going to demand and buy.
If you’re really curious to read more on this and specifically a case study that will help
you understand more, Click here.

Principle 5: Trade can make everyone better off

You remember the times when in India a page on the internet would take minutes to load and you’d just sit there waiting forever? But now it’s there before you even completely type in your search.!? It’s not just advancement of technology that’s lead to this but also a lot of growing companies in the market who provide these services. So one company is competing with the other to acquire you as their customer and also that’d mean they’d have to be the best to get your attention and sell to you.

So all this rivalry and competition isn’t that bad after all huh. Didn’t you study more when you thought someone would and could score more than you? Didn’t you feel good when you got that top for 600 while she got it for 800?

It’s all the same logic.

Principle 6: Markets are mostly a good way to organize economic activities

Okay hold on, Markets , economic activities, give us a little background, right? Okay… Is it the same market as where I buy my stuff? NO.

Here the economists refer to Market Economy which is an economic system in which production and prices are determined by unrestricted competition between privately owned businesses.

So now you already know there’s a lot of competition out there and that’s between business owners and manufacturers which puts in a system as to know how much to produce and how much to sell them for. Let’s look at this in a very simpler way.

So you have this pen you bought for 200 bucks and you wanna sell it off at 220. Imagine all these scenarios and think on what’d be the outcome for it

  1. You are lucky! you got a buyer and is okay paying you 220.

Done deal right?

  1. You got so lucky that now two of your buddies want it

Now that obviously you can’t break the pen into two and give it to them, you’re gonna have to increase the price  so  much that only one of them can and is willing to pay.  Thereby you also learnt that 2 people are demanding for your pen.

3.  Your buddy does wanna buy it but thinks 220 is too much and it doesn’t look like anyone else in interested

You might want to reduce the price so that he does buy or wait until someone pops up in your life willing to pay 220 bucks. Also, it gave you the vibes that selling a pen isn’t that great after all.

This is also how the market functions, based on demand and supply and their differences lead to change in prices and production. We can talk in detail a little later.

It’s finally time to meet the big guy, Father of Economics, Prof. Adam Smith who was one of the early thinkers of this subject. In his book An inquiry into the nature and causes of the Wealth of Nations, he presents this concept in a different way. He talks about something called Invisible Hand. So this is simple; when you’re out watching a movie you don’t say, “Lemme do this guy a favor and buy pop corns from him”. You’d rather wanna buy it cause it serves your need and you see him selling and grab yours. In the same way, if everyone satisfy their needs, it will be a mechanism that will make sure the economy runs and it’s more like a natural course.

Principle 7: Governments can sometimes improve market outcomes:

Without much drag, lemme tell you what it is. The way our big fella said that everything will be taken care of, on its own, was proved wrong after The Great American Depression in 1930s and they realized the importance of Governments interfering in economic activities. So the governments show interest through their policies and laws and keep an eye on things. Oh yeah, it’s got eyes on you too!

Say there’s a situation where the market fails to function the way it’s supposed to, which we call Market Failure, you’d notice the government taking rectification actions.

Let’s now widen to the whole economy

Principle 8: A country’s standard of living depends on its ability to produce goods and services

May be you can survive in Mumbai with 20,000 INR a month but do you think that’d be enough in New York or Chicago or Switzerland? Your common sense just said NO.  That’s because we have the basic understanding that goods and services, although similar or same, cost different in different parts of the world and how much you’ll be paid for the same job is also different in different parts of the world.  So this is what I mean by, Standard of Living.

Economists have established that there’s a relationship between a country’s productivity and standard of living.  Productivity is the quantity of goods and services produced from each unit of labor input.  So basically, higher your and my ability to produce goods and services, better standard of living we enjoy. So buckle up you all.

Principal 9: Prices rise when government prints too much money

When I was little I always wondered why you couldn’t print like 1000 notes for everyone and end poverty. If only it were that simple. (When I was really very little)

So this is simple to understand, higher the money in the economy, more prices you’ll have to pay. This brings us to the most commonly heard term Inflation which means an increase in the overall level of prices in the economy. No rocket science, that’s all it means. So you pay 10 bucks for chocolate today and buy the same chocolate for 12.50 after 6 months, it’s inflation in play. And of course no one likes to pay more.

This is because the value of money decreases due to addition of quantity of money. So when would you value your Ipad more? When you have 1 of it or  5 of it on your table?

Principal 10: Society faces a short-run trade off between inflation and unemployment

Okay how does this stuff work now?

More money in the economy – people are gonna spend more on goods and services  – firms would wanna produce more thereby employ more people – Tada, reduced unemployment.

So you could say that its more like policy tool where the government decides what is required at the moment and acts upon it.

 

So that’s about the Ten Principles Of Economics and come back tomorrow while we’re gonna Think like an economist.

Source: Our awesome Prof. N Gregory Mankiw

 

 

 

 

 

Economized.

Hey guys,

When I first meet someone and introduce myself as a student of economics, I get two extreme responses :

  1. “That damn subject doesn’t make sense to me .”
  2. They start talking like an economist who’s a step away to take over Urjit Patel’s role.

There’s no middle.

So, to all those in the first category, It’s no big deal guys. Economics is just applied common sense. Look around yourself and you’ll realize it’s everywhere. It’s not mere graphs and numbers but a social science that just showcases Human life through its lenses.

So here’s what I’ve decided to do. As I’m brushing up my fundamentals and getting into deeper dimensions of the same, I decided to put it out here.

A concept a day keeps the boredom away.

Just planning to read on and share one concept a day starting right from the fundamentals. If you’re curious or interested to join me on this journey, stay tuned for blog post series on “Guess what I learnt today!” .

PS: I’m also crazy about various other subjects and you might see a post or two on others once in a while.

Stay updated for more…!

Taxiing onto Runway

Let's_take_off

It’s official, I’m gonna be a pilot soon.

Goals,
It’s never an over-night thing, there will be many hurdles and set backs, and how you tackle them shows how determined you are in achieving your goal.
Everyone has their own goals in life, some achieve with ease while others strive to achieve.

Well in my case, it wasn’t easy.
It wasn’t easy to drop out from college.
It wasn’t easy to arrange the money for the training.
But no, my parents made it look so simple and easy.

They never discouraged me for one second, it’s always been positive from their end and I’m lucky to have such supporting parents.

Well my goal is to be a successful pilot, make my parents proud and see them smile all the time.
For one hell of a goal, cheers

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The abandoned road

 It’s the  41st Indian Social Science Congress. Bharadwaj, Omer and I had our papers selected to present in the Congress which is a 5 day conference here at Salem.

 

We decided to start early in the morning from Mysuru, to reach Salem by evening en route Bengaluru. Starting our journey from bus terminal 1, we were headed toward something more than what he’d anticipated. A pleasant morning, alternate posters of Kumarswamy’s smile and the dimple of the youth leader, we reached Bengaluru with an hour to spare, which we utilised for the dipped idli in sambar, as second breakfast for the morning.

With Bharadwaj’s anxiety disorder, we boarded the bus 15 minutes early and then started our rugged bus engine to take us to this city we had no clue about. We couldn’t have asked for a better weather, all pleasant and nice across state borders. Inspired by ZNMD, our dear Omer tried some poetry which is compiled as Terrible Poetry Fails in our memories. The never ending discussions on politics, religion and spirituality and no road hump could break this intimate conversation between Omer and Bharadwaj. Not to forget Bharadwaj’s frequent phone calls updating every fort we saw and every grain of rice we ate.

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For those who know Omer, he’s an amazing story teller. Of all prophets and children of God that graced earth, they graced his memory too. He soon started with a story narration while that was my bed-time story and I fell asleep on the bright noon. Omer’s survival kit i.e his brown classic briefcase was perfection. Icing on the cake was the mosquito coil in it. I mean, what if we get lost in a forest and we’ll have to battle against an army of mosquitos, thoughtful he was.

Getting off on the highway, we had some majestic welcome at Periyar University. It’s a huge campus with warm people to greet us. We were overwhelmed with their campus and I particularly, as it’s all pink and white. Settling down at university hostels, I came back to the campus to explore it over a walk…my excitement demanded me to call these two over to explore the campus with me. These two princess, took their own sweet time and came back all dressed formal just to walk the roads of a university campus.

About my first roommates, 2 girls from Delhi university, who were already sick of the stares they got from Coimbatore airport. My acquaintance with her started the minute I saw her in a Hogwarts t-shirt. She just couldn’t stop talking about how much people pre-suppose about Delhi girls and how they’re as normal as any of us.

Wrapping the day with dinner, we had to set our minds for cold water shower, for the next 6 days of our lives. We were technically living with XXL sized mosquito that showered their love to us throughout.

A bright Monday morning, academicians all over from Kolkata, JNU and Delhi University. For evenings, we had found ourselves a stone to sit on, gaze at the countless stars above our head and talk about Bharadwaj’s Marx and other heroes. Irrespective of how much we differed in ideologies, we relished getting 3 slices of a small bhajji.

After ranting about education quality in my previous post, I was of clear expectation to rejoice these 5 days among intellectuals and academicians. All parallel sessions going on and we tried hard not to notice how not-so-intellectual few were. Bharadwaj and I escaped from one while Omer had to fake a call to come out of it… Poor guy was so guilty at first, he cut his very own fake call and stayed back in the conference hall with 4 other people so that the speaker doesn’t feel heartbroken. After all the escaping scenes, we decided to attend a symposium on Philosophy. Only after reaching the directed venue, we realized that the venue never existed there. We  gave up, literally, we gave up.

 

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If your bus broke down in the middle of a village and all you can do is just sit on few rocks waiting for the next one, well that’s how we felt too; like we were on an abandoned road.  But what happened to us after this, was ama(u)zing…

 

We spoke for an hour or so on social sciences and decided to pick up our stuff and explore the road ahead of us. After a brief walk, we got to some sort of a park with swings and prisms and stuff made for children. We were the happiest. Just a few buildings apart while the congress was going on, I was here sitting on a prism, with a playlist on my phone. These two sitting on the bench with their endless discussions. It was just then that Omer pointed out that we were surrounded by a lot of hillocks and mountains and we got excited. We got up the children’s swing to get a better view and all in excitement and broken Tamil I asked an old lady which mountain it was. Well she told me with a frown it had no name and they were all some gigantic structures. Not bothering much about it, Bharadwaj and I continued to sit on the prism and talk about heights, fears, falls, Sherlock and Moriarty. It was peaceful, a bliss away from the world.

 

Omer in front of us, out of nowhere started to shout. Bharadwaj and I clearly blank not understanding why. We had faced our backs to the guest house and who came out of it was the President and General Secretary. Shit, they can’t notice us sitting on a prism swinging our heads to music. Thanks to Omer’s scream, we both ran to save our respect and dignity we’d earned. Got out of there and silently sat down with cups of coffee in the food court like none of this ever happened.

Oh and about me, I’m locked out of my very own room and nothing else to do, just accounting these memories of laughter, joy and bliss.  4 more days to go and we know there’s more of that to come.