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My Friend Sancho

My first novel, My Friend Sancho, is now on the stands across India. It is a contemporary love story set in Mumbai, and was longlisted for the Man Asian Literary Prize 2008. To learn more about the book, click here.


To buy it online from the US, click here.


I am currently on a book tour to promote the book. Please check out our schedule of city launches. India Uncut readers are invited to all of them, no pass required, so do drop in and say hello.


If you're interested, do join the Facebook group for My Friend Sancho


Click here for more about my publisher, Hachette India.


And ah, my posts on India Uncut about My Friend Sancho can be found here.


Bastiat Prize 2007 Winner

Category Archives: Economics

First Lessons

The quote of the day comes from Thomas Sowell:

The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

I got the quote from an excellent piece by David Boaz on the fallacies in many arguments for a bigger role for the state: The Empty Case for Big Government. Read the full thing.

Posted by Amit Varma on 16 October, 2012 in Economics | Freedom | Politics


The Two Roads to Happiness

In an interview with Abheek Bhattacharya, the Chinese economist Zhang Weiying says:

We human beings always seek happiness. Now there are two ways. You make yourself happy by making other people unhappy—I call that the logic of robbery. The other way, you make yourself happy by making other people happy—that’s the logic of the market. Which way do you prefer?

Or what John Stossel once called ‘The Double “Thank You” Moment’. It’s a ridiculously simple insight, which makes it all the more amazing that so many people just don’t get it.

Posted by Amit Varma on 14 October, 2012 in Economics


Dead Rats and Incense Sticks

So here’s the story: 15 dead rats land up in the drains of St George’s Hospital in Mumbai. A massive stink ensues (literally), and the hospital staff can’t figure out where the smell is coming from. So:

The hospital’s staff tried different methods - burning incense sticks, spraying room refreshers - to ‘clear the air’, but to little avail.

And this is exactly the way in which the Indian government deals with our country’s poverty. Every single government measure to tackle poverty is equivalent to incense sticks and room fresheners—it smells good for a while, and then the stink is back. The rats remain.

And yeah, if you read this blog regularly, you know what I think the root cause is: the lack of economic freedom. If only Rajaji, Patel and Prasad had their way 60 years ago instead of Nehru...

Posted by Amit Varma on 04 August, 2011 in Economics | India | News | Politics | Small thoughts


What Summers Has To Say

Via Felix Salmon, here’s an excellent interview of Larry Summers.

Key quotes you may find interesting:

We don’t really have a problem that there aren’t enough television sets in our society.  We really don’t.  I mean we did once.  I mean it used to be that some people had television sets and some people don’t.  We don’t have that problem anymore in America.

and

When somebody writes the human history of Americans, the fact that 25 years from now we will have done most of the following:  cure Alzheimer’s, apply stem cells to prevent diabetes, develop approaches that enable most of us to be the weight we want to be, rather than the weight we are, and find a solution for dementia, the fact that 25 years from now we will have done not all of those things, but we will have done most of those things, I think that looms enormously large.

and

If you look at the price earnings ratio for technology companies relative to the price earnings ratios for all industrial companies, you take that ratio, PE technology divided by PE industrial, you can plot that ratio over the last 40 years, and it is at the lowest point that it’s ever been.

So if you look at the large tech sector, it’s very, very hard to see a bubble. [...] What is true is that the Internet, the last time there was an Internet bubble, was 120 million people dialing up.

The Internet today is two billion people and two billion mobile devices, with wireless connectivity at a far more rapid pace.  Today, the businesses have cash flow, which they didn’t ten years ago.  So I think it’s a little facile to assume that just because the numbers are big, that it’s obviously a bubble.

There’s a section in which Summers talks about the different styles of the two presidents he’s worked for, Bill Clinton and Barack Obama. Most interesting.

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And yeah, I’m encouraged by his prediction that 25 years from now, I’ll be the weight I want to be. An exercise regime, in these circumstances, seems short-sighted.

Posted by Amit Varma on 22 July, 2011 in Economics | Miscellaneous | Politics | Science and Technology


India’s Second Freedom Struggle

This is the 37th installment of Viewfinder, my weekly column for Yahoo! India. It was published on June 23.

It was both ironic and poignant when, a few days ago, Anna Hazare remarked that his crusade for the Lokpal Bill was akin to a second freedom struggle for India. Hazare is fighting against the right things in the wrong way: as I wrote a few weeks ago, corruption arises from an excess of government power; creating an alternate center of power, as the Lokpal Bill attempts to do, which is neither accountable nor democratically elected, solves nothing. That said, Hazare’s rhetoric, borrowed from the likes of C Rajagopalachari from decades past, was correct: India does need a second freedom struggle.

Every nation is a work in progress, but India is more so because our independence was a job half finished. In 1947, we gained freedom from the British—but not from oppression. As the country heaved a long sigh of relief at gaining political independence, a new set of brown sahibs took over from the white ones. The great hope of this new democracy was that it would lead to a government that would serve us—but we found ourselves with one that continued to rule us, with laws either directly retained from the British, or even more oppressive than those that existed before. We were colonized by our own people, and eventually enslaved by ways of thinking that saw a mai-baap government as the solution to all our problems—even when it was often the source of them.

There is no Mahatma Gandhi to lead this second freedom struggle, and most Indians, complacent with how things are, would not even think it is required. But if it was to take place, what would its aims be? What would it fight to change? The goal of that first freedom struggle was to free ourselves of a colonial power; the aim of this notional second freedom struggle should be to drastically reform the system that denies us freedom in so many areas of our lives. From the classical liberal/libertarian perspective, here are a few things I’d love a second freedom struggle to strive to achieve.

One: Limit the power of government

As things stand, we are ruled by a government as oppressive as the British were. Ideally, the function of governments should be to protect our rights and provide basic services. But our government is a bloated behemoth whose tentacles, like a modern-day Cthulhu, extend into every area of our lives. This is hardly surprising: those in power are always looking for ways to extend their power, and government, if adequate safeguards are not in place, just grows and grows and grows. This is exactly what has happened in India—our government functions like an officially sanctioned mafia, controlling our lives and curtailing our freedom. It’s all a bit of a scam.

Two: Unleash Private Enterprise. Remove the License and Permit Raj

The liberalisation India carried out in 1991 was a half-hearted one, forced upon us by a balance of payments crisis and not out a genuine desire for change. The reforms halted once the crisis eased, and the License and Permit Raj largely remains in place. It has stopped us, in the past, from being the manufacturing superpower we should naturally have been, given the abundance of cheap labour in this country. It continues to act as a huge shackle on private industry: I’ve pointed out earlier the abominable fact that you need 165 licenses to open a hotel in India, including ““a special licence for the vegetable weighing scale in the kitchen and one for each of the bathroom scales put in guest rooms.” Every businessman in India has to go through surreal hurdles to go about his work, and given that businesses exists to fulfil the needs of the people, for how else can they make profits, it is doubly criminal of an inept government to stand in the way of private enterprise. In the areas where it has been allowed to operate, look at the impact private enterprise has had: consider how many years it took to get a telephone from the state-owned MTNL in the 1980s, and how quickly you can get one today. We are a resourceful people, and every problem of India can be solved by private citizens—if they’re allowed that freedom.

Three: Reform the Indian Penal Code

The IPC is an abomination created by the British in the 19th century to make it easier for them to rule us, and to impose their Victorian morality on us. That it still exists is a disgrace. It contains ridiculous laws like Section 295 (a), which makes it a crime to “outrage religious feelings or any class” and Section 153 (a), which criminalizes any act “which disturbs or is likely to disturb the public tranquility”: both of these have been used to clamp down on free speech in the country. So has Section 124 (a), which aims to punish anyone who “brings or attempts to bring or provoke a feeling of hatred, contempt or disaffection towards government established by law,” and could be applied to this column, as these laws are open to interpretation and discretion. Section 377, which effectively criminalised homosexuality, has thankfully been overthrown in a court of law, but other archaic laws remain on the books, including some that punish victimless crimes. Many of these threaten our freedom directly.

Four: Ensure Free Speech in India

The IPC alone cannot be blamed for the absence of free speech in India. Our constitution itself does not protect it, and while Article 19 (1) (a) pays lip service to it, Article 19 (2) introduces caveats to it under the guise of “public order” and “decency and morality”. Practically anything one says could be a threat to public order, depending on how it is interpreted, which makes it easy for those in power to clamp down on those without. If we don’t even have freedom of expression, how can we call ourselves a truly free country?

Five: Respect Taxpayer’s Money

I run a series on my blog called “Where Your Taxes Go”, chronicling the various absurd ways in which our tax money is spent by government. These including paying the salaries of 22,800 fake employees of the Delhi Municipality, a Rs 42 crore mansion for Mayawati on “a sprawling 1,00,000 sq foot area”, a school for monkeys, the sponsorship of second honeymoons for people who delay having children, and, most recently, on a newspaper advertisement where the chief minister of Karnataka challenges his predecessor to do ‘God promise’ on certain allegations he made. (Yes, you can’t make this stuff up.) Governments need taxes to exist, but if you strip our government down to its necessary functions, you might find that we will pay a miniscule percentage of what we actually pay now.

It’s ironic that Mahatma Gandhi’s famous Dandi March was held in protest against an unfair tax; most taxes today are far more draconian. Sit down sometime and calculate what percentage of your income goes into taxes: if you pay 33%—chances are you end up paying more, if you include indirect taxation—it means that until the end of April every year, you are effectively earning for the government. This is freedom?

Six: Treat the Right to Property as Sacred

In 1978, the 44th amendment removed the right to property from our list of fundamental rights. Even had this not happened, the poor of India are habituated to having their property snatched from them: eminent domain has long been used by corrupt governments in a crony capitalism system to line their own pockets. One of our biggest problems is that even after so many decades of independence, clear land titles do not exist in many parts of the country. (My fellow columnist, Mohit Satyanand, wrote about this a few weeks ago, as did Devangshu Datta in an old piece.) This makes it ridiculously easy for a ruling government to infringe on the rights of its poor people—and it stands as a huge impediment to economic growth.

Seven: Reform Schooling

The state of education in this country makes for black comedy: the government pours more and more money into education, and after decades of this, the results remain dismal. There are various complex reasons for this government dysfunction, but a huge one is that the private sector is hugely constrained from entering this area. As I wrote in this old piece, even desperately poor people have shown a preference for those low-cost private schools that do manage to exist, despite governmental hurdles, than inefficient government ones. It is ironic and tragic that while private enterprise is allowed to flourish in trivial areas of our lives, like the production of shampoos and potato chips, it is constrained from competing with the government in this most crucial field. I am not recommending that the government stop spending money on education: just allow private enterprise to flourish as well. Consider the cost and quality of air travel in India when we only had Indian Airlines at our service—and look at what it has become today. Isn’t education far more crucial to our progress as a nation?

Eight: Reform Agriculture

We romanticize the farmer, and we want to keep him poor. It is shocking that 60% of our countrymen work in the agricultural sector: the equivalent figure for most developed countries is in single digits. There are various reasons for this, one of many being that farmers are not allowed to sell agricultural land for non-agricultural purposes. This prevents an escape route for many farmers, and also hampers industrial growth in many parts of the country, which would automatically provide alternative avenues of employment. More industrialisation would lead to more urbanisation and greater economic growth, but we hamper this process right at the start. It is a vicious circle that traps poor farmers in poverty. As Manmohan Singh once said, “our salvation lies in getting people to move out of agriculture.” He is right, which is ironic, given that he is our prime minister and is doing exactly nothing in terms of reforming that sector. Words come so easy.

I can think of many other worthy aims, such as making government more local and less centrally directed, so that it is more responsive and accountable, and reforming our legal system. I’m sure you can add to this list. But at one level, India’s second freedom struggle remains a pipe dream. We are a nation colonized by the religion of government, and we display a lazy reverence for it. We look for specific quick fixes to problems, instead of recognising that many of them emanate from structural issues with our system of government—and from how we think about it. What is worse is that we largely do not even think of ourselves as unfree—so who needs a freedom movement then? Do we? What do you think?

*  *  *  *

Also read: this similar wishlist from another time.

* * * *

My thanks to Shruti Rajagopalan, Parth Shah, Arun Simha, Chandrasekaran Balakrishnan, Salil Tripathi, Deepak Shenoy and Gautam John for providing inputs to this piece.

Posted by Amit Varma on 29 June, 2011 in Economics | Essays and Op-Eds | Freedom | India | Old memes | Taxes | Politics | Viewfinder


Keynes vs Hayek

This video is pure genius, one of the best things I’ve ever seen on YouTube:

You can read the lyrics here.

I’ve watched it in utter delight about five times now, and each time I notice wonderful new details. Like Say and Mises being in Hayek’s corner during the boxing match, and Malthus in Keynes’s. It’s a brilliant production, and Russ Roberts (of Cafe Hayek) and John Papola deserve much credit.

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Trivia: The security guard in that video is Mike Munger, the libertarian economist.

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The embedded video above is a sequel to this one, by the way. I prefer part 2, as it happens.


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And yes, regular readers of this blog would know whose side I’m on. Much of my worldview is shaped by Hayek, who is one of my intellectual heroes.

Posted by Amit Varma on 29 April, 2011 in Arts and entertainment | Economics


Squirrels, Trees and Economists

Here’s Russ Roberts on economics:

I have often said that economics, to the extent it is a science, is like biology rather than physics. Let me try to make that clearer. By biology, I do not mean the study of the human cell, which we have made a great deal of progress understanding though there is more to learn. I am thinking of biology in the sense of an ecosystem where competition and emergent order create a complex interaction of organisms and their environment. That sounds a lot like economics and of course it is. But we would never ask of biologists what the public and media ask of economists. We do not expect a biologist to forecast how many squirrels will be alive in ten years if we increase the number of trees in the United States by 20%. A biologist would laugh at you. But that is what people ask of economists all the time.

Beautifully put—and you can make the same comparison with medicine. I am just reading The Emperor of All Maladies, Siddhartha Mukherjee’s magisterial history of cancer, and the similarities between medicine and economics in the last century are striking. You see hubris, false certainties, ideological fervour, and mistakes on a giant scale that cause the suffering of millions and are diagnosed only in retrospect. Both fields have grown by quantum leaps and achieved much: Just look at the radical increase in life expectancies and living standards in the last 100 years. But complexity still abounds, cancer still kills, economies still fail, and humility is always a good thing.

Posted by Amit Varma on 08 January, 2011 in Economics | Science and Technology


Happy Birthday, Mr Bastiat

Reader Sridhar Loke writes in to inform me that today is the birth anniversary of Frédéric Bastiat, one of my intellectual heroes. I had once won a prize named after him, and had a written a tribute to him shortly after that. Here it is: Remembering Frédéric Bastiat.

And here is his classic essay, That Which is Seen, and That Which is Not Seen.

Posted by Amit Varma on 30 June, 2010 in Economics | Freedom | Personal


Beware of the Cronies

This is the ninth installment of Viewfinder, my weekly column for Yahoo! India.

In 1944 a group of seven businessmen, including JRD Tata, GD Birla and Kasturbhai Lalbhai, came together to produce a document titled A Brief Memorandum Outlining a Plan of Economic Development for India. As the name indicates, it outlined an economic vision for soon-to-be-independent India. It envisioned a mixed economy with strong government intervention in markets, a huge public sector, and much protectionism so that Indian companies would be sheltered from foreign competition. Jawaharlal Nehru’s eventual economic policy would be on the lines of what this document laid out, and one of its authors, John Mathai, was even a finance minister in Nehru’s government. Because ‘A Brief Memorandum Outlining a Plan of Economic Development for India’ is a most unfunky name, the document eventually came to be called The Bombay Plan. (Just as Hindus may be offended at their religion being associated, in name only, with the Hindu Rate of Growth, I am not too happy about that document being named after my beloved city. Ah, well.)

In his fine book, India After Gandhi, Ramachandra Guha cites the Bombay Plan as an example of the support Nehru’s Fabian Socialism got from industrialists of the day, and writes, “One wonders what free-market pundits would make of it now.” At a colloquium of classical liberals I attended a few days ago in Bangalore, one attendee wondered why more industrialists in present-day India don’t speak up for economic freedom. The answer to this is simple: big business is as much the enemy of free markets as big government is.

The cornerstone of free markets, competition, is great for consumers, as it delivers better-quality products and services at lower prices. But it is terrible for established businesses, which are constantly under pressure to keep prices low and salaries high, and may be wiped out by more innovative and efficient competitors. There’s nothing they’d like more than high entry barriers in their industry, so that their place is secure. Thus, to expect the established industrialists of the 1940s to support free markets would be naive: economic freedom is actually against the interests of big business. The journalist Seetha Parthasarathy pointed out at the colloquium I attended last week that the Swatantra Party, which spoke up so ardently for free markets in the 1950s and ‘60s, hardly got any funding from businessmen and industrialists of the day. That makes perfect sense: they would have felt threatened by it.

This is why it irritates me no end when critics of free markets point to the evils of big business as a repudiation of our principles. The truth is that a libertarian or classical liberal is as wary of big business as a socialist is. Indeed, now that communism is dead, one of the greatest threats to freedom everywhere is not socialism, but crony capitalism. To look after the interests of the common man, we must beware of the cronies.

*  *  *  *

Death, taxes and crony capitalism are inevitable. When I am in a pessimistic mood, generally after a bad meal or a spell of television surfing, I lose hope that we will ever have economic freedom. Free markets, indeed, seem slightly utopian. After all, we don’t live in an economy that is a blank slate. We live in times of big government. Big governments only get bigger, not smaller. (This is true even in the West, when the size of government expanded even under fiscal conservatives like Ronald Reagan and Margaret Thatcher.) It is not in the interest of those who run governments to curtail their power or the money available to them. (Like, duh.) It is a beast that keeps on growing, and feeding on us.

Power and money always go together. The more power government has, the more it can subvert markets, the more big business runs to it, with big money, to safeguard its own interests. Crony capitalism is inevitable. Big government is one ass cheek, big business is another, and together they’re shitting on capitalism.

*  *  *  *

What about the recent financial crisis in the US? The notion that it illustrates the inadequacy of free markets is a simplistic one, like most narratives generated by the media. The crisis came about because of a melange of complex factors, and we’ll be debating the respective merits of those for decades. There is no shortage of actors to blame. The low interest rates of the Fed in the early 2000s played a key role. (It amuses me when Alan Greenspan is sometimes described as a libertarian. Whatever his youthful infatuations may have been, the chairman of a central bank can no more be a libertarian than General Dyer was a freedom fighter.) Defenders of free markets will also point to the Community Reinvestment Act, and the role played by Fannie and Freddie, both quasi-government entities. But it is true that there were structural issues with the way markets themselves functioned at the time.

Short-term incentives in the finance industry weren’t aligned with long-term interests. If you worked in Lehman Brothers, and had to choose between chasing massive short-term profits (with the consequent bonuses for yourself) that carried a long-term risk to your company, and a prudence that would put you out of step with your peers, for absolutely no benefit to you and the risk of losing your job, what would you do? C’mon, it’s human nature. As Chuck Prince famously said, “As long as the music is playing, you’ve got to get up and dance.”

How does capitalism deal with this? Simple: when companies screw up, their bottomline gets affected, and sometimes they go bust. The learning percolates through the markets, and the incentives change for future players. The problem here is that when the long-term consequences of their short-term behaviour hit the finance industry, the government stepped in. Lehman Brothers was allowed to go bust, but others were bailed out on the grounds that they were ‘too big to fail’, and that their failure threatened the entire economy. (Was this really so? We’ll never know. We’ll just have to take their word for it.) The result: Moral Hazard. The sort of short-term risk-taking that led to the crisis wasn’t punished, and the incentives haven’t changed. On the contrary, the financial whizkids out there will now be further emboldened to keep taking wild risks, secure in the knowledge that when things go bad, the government will bail them out.

What would you call this? Free markets? I don’t think so.

*  *  *  *

Until 1991, capitalism in India was crony capitalism. The license raj ensured that the markets were a tijori and the government held the key. All big industrialists had liaison offices in Delhi whose job was to deliver adequate chai-paani to government officials in exchange for licenses and other favours. Money chased power; power sought money.

The liberalisation of 1991 didn’t really change much. Firstly, it was a limited liberalisation, and most markets in India remain unfree. Secondly, the government still retains enormous power. As this paper (pdf link) points out, crony capitalism continues to thrive in India. R Jagannathan wrote in DNA last year: “In his current avatar as PM, Manmohan Singh, architect of the initial reforms involving delicensing, deregulation and downsizing, has presided over the largest expansion of government spending in living memory. In the current fiscal year (2009-10), government will borrow more than Rs 400,000 crore (probably Rs 500,000 crore, if you consider off-budget items like oil bonds), a figure that’s larger than the entire central expenditure for 2004-05, the first year of the UPA. Large government is invariably accompanied by crony capitalism. Reason: when government spends more, private companies do more business with it.”

And here’s an excerpt from a speech Manmohan gave in 2007: “Are we encouraging crony capitalism? Is this a necessary but transient phase in the development of modern capitalism in our country? Are we doing enough to protect consumers and small businesses from the consequences of crony capitalism? [...] Do we have a genuine level playing field for all businesses? What should be done to inject a greater degree of competitiveness in the industrial sector?”

One has to wonder, why on earth was he asking those questions? He’s the prime minister, no?

*  *  *  *

So should I be pessimistic? Naysayers of free markets argue that they’re a utopian construct, and that a perfect free market, with a government that limits its role to administering the rule of law and enforcing contracts, does not exist anywhere. Perhaps. But here’s the thing: perfect good health is also a utopian construct, and there is no one in the world who is perfectly healthy. And yet, it is something to aspire to, and as individuals, we’re constantly trying (or should be trying) to get as close to it as possible. (Just don’t ask me what I had for dinner last night.) Similarly, it is my contention that free markets are the surest route to prosperity, and we should keep fighting to make our markets as free as possible. We, the people, the consumers, are the biggest beneficiaries of this. Not the fat-ass businessmen, in bed with the sleazy politicians, who just want to milk us dry. As long as we are aware of this, there is hope—for we do live in a democracy, don’t we?

*  *  *  *

Further reading: I’d written a column on this subject a couple of years earlier: ‘Arpita and the Bombay Plan’.

My column last week was on a related subject: Indian Liberals and Colour Pictures

Also, here’s a superb debate on Cato Unbound: ‘When Corporations Hate Markets’.

Previously on Viewfinder

Indian Liberals and Colour Pictures

We are All Gamblers

Homeopathic Faith

Give Me 10,000 Hours

Match ka Mujrim

The Man with the Maruti 800

Internet Hindus and Madrasa Muslims

The Hazards of Writing a Column

Postscript:  My thanks to Chandrasekaran Balakrishnan, Mana Shah, Raj Cherubal, Sumeet Kulkarni, Deepak Shenoy, Vikramjit Banerjee, Parth Shah, Seetha, Arun Simha, Sunil Laxman and Devangshu Datta for their part in discussions that helped me refine my views on this subject.

Posted by Amit Varma on 25 June, 2010 in Economics | Essays and Op-Eds | Freedom | India | Politics | Viewfinder


‘Haiti Needs Business, Not Business As Usual’

That’s Salil Tripathi, on why foreign aid is the last thing that Haiti needs.

And here’s Bret Stephens on the same subject.

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To shift the context to Africa, check out this wonderful TED Talk by Andrew Mwenda:

Also, here’s an old piece by William Easterly: “What Bono doesn’t say about Africa”.

Posted by Amit Varma on 22 January, 2010 in Economics | Politics


Fat Man Flying

Reuters informs us that Air France has denied that it plans to charge overweight passengers extra. There had earlier been speculation that they could “bar obese passengers from flying.” Well, that’s been clarified.

Here’s the interesting thing, though: fat passengers do cost more for the airline to fly then thin passengers, as greater weight leads to more fuel consumption. It would politically incorrect and logistically impractical to charge passengers according to weight, of course, so the airlines don’t make that a factor in their pricing. As a result, thin passengers end up subsidizing fat ones.

I would have complained about this bitterly in my college days, when I was slim like a male Kate Moss. But I couldn’t afford to fly in those days, and had no stake in the matter. Today, I’m probably one of those benefiting from the subsidy, so you won’t find me complaining anytime soon. It’s all worked out well.

(NDTV link via email from Sudipta.)

Posted by Amit Varma on 22 January, 2010 in Economics | News


Subsidies

This is brilliant. The last line of the letter, especially, is a killer.

Posted by Amit Varma on 22 January, 2010 in Economics


Bulls and Bears

The Sensex has just touched “a 23-month high.” This will, I have no doubt, make many investors feel bullish. And yet, that is an absolutely inappropriate response. If I had money in the stock market, I’d be bearish right now.

Call me a fool—but watch that space.

Posted by Amit Varma on 05 January, 2010 in Economics | India | Small thoughts


Naxalism and the Jagannath Turtle

Reuters reports:

Hundreds of poor Hindu villagers in eastern India have refused to hand over a rare turtle to authorities, saying it is an incarnation of God, officials said on Tuesday.

Villagers chanting hymns and carrying garlands, bowls of rice and fruits are pouring in from remote villages to a temple in Kendrapara, a coastal district in eastern Orissa state.

[...]

“Lord Jagannath has visited our village in the form of a turtle. We will not allow anybody to take the turtle away,” said Ramesh Mishra, a priest of the temple.

Ok, my question to you: What does the Jagannath Turtle have in common with Naxalism?

Answer: They are both indicators of the fucked-up lives of so many of the people of rural India. There is no development, there is little chance of upward mobility, there is often no law and order. Their lives are so screwed that they actually derive hope from a turtle that they think is Lord Jagannath. How sad is that?

And Naxalism is born in that same well of despair and anger.

Needless to say, the state of these people justifies neither Naxalism (or Maoism, or whatever you want to call it) or such stupid superstition. Anyone who resorts to the kind of violence the Maoists have taken up must be crushed. Equally, a belief that a turtle is a reincarnation of a deity should be given no respect whatsoever. (Leave the turtle aside, anyone who believes in a deity to begin with… never mind.)

But while we crush the Naxalites and go WTF over the turtle worship, it makes sense to remember why people give in to such madness. It is because of how abject their lives are. And if we don’t sort that out, we’ll have more batches of Naxalites after this one is dealt with, and more turtle gods. (A leech deity makes much more symbolic sense, actually.) There’s no point boasting of our ‘soft power’ and our IT revolution while 60% of the population survives on agriculture. (The figure in developed countries is around 5%.) It’s like showing off a gym-toned body with much muscle while there’s a cancer in the liver and a farm of worms in the intestines. That’s fool’s vanity.

No?

Posted by Amit Varma on 13 November, 2009 in Economics | India | Politics | Small thoughts


Why Ayn Rand was a ‘Genuine Capitalist’

I am not a fan of Ayn Rand’s work: Her prose is mediocre and her novels are cheesy. Even though I agree with many of her beliefs, that is neither here nor there, as they weren’t original to her, and the brand of classical liberalism (or minarchist libertarianism) I believe in took off at least a century earlier than her. So I am never quick to defend Rand when she is being criticized. I’ll make an exception, though, for a recent piece on her in The New York Times by Adam Kirsch.

In his piece, a review of a biography by Anne C Heller, Kirsch relates how Bennett Cerf, the head of Random House, wanted to edit out Galt’s speech from Atlas Shrugged. Rand refused. Then:

Cerf offered Rand an alternative: if she gave up 7 cents per copy in royalties, she could have the extra paper needed to print Galt’s oration. That she agreed is a sign of the great contradiction that haunts her writing and especially her life. Politically, Rand was committed to the idea that capitalism is the best form of social organization invented or conceivable. [...]

Yet while Rand took to wearing a dollar-sign pin to advertise her love of capitalism, Heller makes clear that the author had no real affection for dollars themselves. Giving up her royalties to preserve her vision is something that no genuine capitalist, and few popular novelists, would have done. It is the act of an intellectual, of someone who believes that ideas matter more than lucre.

This is a strange comment, and I have two points to make:

One: Rand might well have agreed to the chop on commercial considerations alone. She might have calculated that the book would sell more copies if it included the speech, and that the extra royalties from those extra sales might offset the 7 cents per copy that she gave up.

Two: “Genuine capitalists” would look to serving their self interest as much as possible. But they need not view this in purely monetary terms. Rand might have placed a higher value on spreading her ideas in the world than on merely making money. It would then be entirely rational for her to accept a notional monetary loss for the sake of keeping a speech that many of her supporters today regard very highly. This is entirely consistent with being a capitalist.

The deal between Rand and Cerf was one between two private parties that involved no coercion. Both of them got what they wanted. It might even have ended in a double ‘thank you’ moment. How on earth could it non-capitalistic?

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On a personal note, I regard myself as a capitalist as well. And pretty much all the important decisions I’ve made in the last few years have reduced my income vastly. First, I opted to give up a senior job in journalism to become a freelancer; and then, I opted to give up freelancing to focus on writing novels. In the short run,  this has decimated my bank balance. And yet, I have no regrets over these decisions—and they are not noble in any way. They arise out of sheer self-interest. I’m a greedy capitalist pig.

But Heller and Kirsch would probably think otherwise.

Posted by Amit Varma on 01 November, 2009 in Economics | Freedom | Small thoughts | WTF


Capital Gains

Ashok Malik writes in The Hindustan Times that the BJP has hurt itself by chasing “straightforward capital gains” in a few states. He is right—but this is true of all parties in all states. People join the pursuit of power because they want the spoils of power. I would wager that not a single prominent politician in the country today gives a damn about public service.

This is not a problem by itself. We are all driven by self-interest, and that’s worked well for us. Human progress is based on individuals serving the needs of others for their own profit. In politics, this would work just fine if we held our politicians accountable for not serving us.

Sadly, in India we have retained the feudal mindset that our governments are there to rule us, not to serve us. With our apathy, we allow them to loot us—for their capital gains are really our capital to begin with. Our political parties are nothing more than competing mafia clans. If the BJP is down right now, it’s not because they are crooked, but because they’re not as smart as the other crooked players in the game. Such it goes.

Posted by Amit Varma on 29 October, 2009 in Economics | India | Politics | Small thoughts


The Bastiat Winners for 2009…

... have been announced. My congratulations to John Hasnas for winning the Bastiat Prize for 2009. Hasnas beat out former winner Robert Guest with this superb piece of his: “The ‘Unseen’ Deserve Empathy, Too.” Going by previous years, I have no doubt that all the nominees were most worthy.

I won the prize in 2007, and the prize candlestick, which I can see now across the room, is one of my treasured possessions. The prize money enabled me to give up freelance journalism and focus on writing novels, an effect that, for the Bastiat organisers, was surely in the category of “that which is not seen.” I’d count it as a one-off positive externality, so all’s well.

This year, the Bastiat guys also instituted a separate prize for online journalism. I was one of the judges for this, along with Jimmy Wales, Esther Dyson and Scott Banister, and was blown away by the quality of the entries I read. I’m delighted that the prize has been shared by Daniel Hannan and Shikha Dalmia—both of them deserve it, and this is a fitting result.

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Oh, and here’s the column I wrote after I won the Bastiat Prize in 2007: “Remembering Frédéric Bastiat.” And here are the three pieces I’d entered that won me the prize:

“Where’s the Freedom Party?”
“A Beast Called Government.”
“The Devil’s Compassion.”

You can read all 48 installments of my column for Mint, Thinking it Through, here.

Posted by Amit Varma on 27 October, 2009 in Economics | Freedom | Personal


Like a Government Department

In an excellent column, Vir Sanghvi looks at all the reasons why Air India is run so badly. To sum it up:

If you run your country’s flag carrier like a government department, a decline is inevitable.

His remedy, which flows naturally from this, is to privatize Air India. I agree with him. But here’s a question:

If Air India should be privatized because it is run like a government department, what about government departments?

Posted by Amit Varma on 05 October, 2009 in Economics | India | Politics | Small thoughts


Good Intentions

There’s a Facebook status message meme going around that goes like this:

[Your name here] thinks that no one should die because they cannot afford health care, and no one should go broke because they get sick. If you agree, please post this as your status.

This is about as useful as candlelight vigils and online petitions. I could just as easily come up with a status message meme that goes thus:

[Your name here] thinks that no one should die or be poor, and no one should feel sad or lonely. If you agree, please post this as your status.

You get the drift. No doubt all these things are desirable, but stating that is kind of obvious. The big question is, how are these things to be achieved? In answering that, hazaar thorny issues crop up, and no one solution is a panacea. (Some, in fact, run counter to one another.) All that a Facebook status message of this sort does is help you make a statement about yourself. So why not simply put up a message that says:

[your name here] is a kind and compassionate person, and you should be impressed by that.

There. Cut to the chase!

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On a personal note, a friend SMSed today in great concern, asking if all was well with me. Apparently he saw an unusual lack of activity on India Uncut, and got worried. Well, yes, I’ve been immensely lax recently, but I’m back now, and intend to be regular. I promise. Smile now. Say cheese. Who’s a good reader now, bolly wolly golly?

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Update (sep 5): Sriram Gopalan writes in to share his FB status message:

I am an evil, evil person who thinks poor people should die without healthcare, so that the rest of us can harvest their organs. If you agree, please make this your status for the rest of the day.

Isn’t that so much more fun?

Posted by Amit Varma on 03 September, 2009 in Economics | Personal | Small thoughts


The Wonder And Glory

It isn’t space travel that ought to evoke our awe, but something much closer to us, explains Don Boudreaux pithily and eloquently.

I feel the same way about space travel funded by our taxes, as I’ve mentioned here and here. Especially for a country like India—fix the damn drains of Mumbai first.

Also, on the theme that Boudreaux touches upon, check out this classic essay by Leonard Read: I, Pencil.

Posted by Amit Varma on 23 July, 2009 in Economics


Indians Are Human Too

Aakar Patel writes in Mint:

Some characteristics unite Indians. The most visible is our opportunism. One good way to judge a society is to see it in motion. On the road, we observe the opportunism in the behaviour of the Indian driver. Where traffic halts on one side of the road in India, motorists will encroach the oncoming side because there is space available there. If that leads to both sides being blocked, that is fine, as long as we maintain our advantage over people behind us or next to us. This is because the other man cannot be trusted to stay in his place.

But the point is, when these same Indians go abroad, they’re following the traffic rules, not cutting lanes and so on. The behaviour isn’t ingrained into us—it’s contextual. Break rule in India, where sab chalta hai; be a model citizen in Singapore, where you’ll get into trouble otherwise.

Equally, everyone’s opportunistic. It’s a human characteristic, not an Indian one. How much we follow rules depends on the incentives offered. Abroad, as in Singapore, the laws of littering may be strict; or your peers may frown upon loutish behaviour, which is disincentive enough. In India, laws, where they exist, aren’t implemented; and littering and jumping lanes in traffic is normal, not deviant, behaviour.

Aakar speculates that many of the aspects in our culture might have come from our religion. For example, he says that “the Hindu gets his world view—which is zero-sum,” from Hinduism’s recognition that “the world is irredeemable.” In my view, you’d find that kind of zero-sumness in every developing society, where most people are poor, and accessible resources are relatively scarce. It has more to do with economics than religion. (And some might argue, biology, as our genes were shaped in pre-historic times when life must have seemed zero-sum, in addition to nasty, brutish and short.) But as societies progress, they grow more and more aware of the non-zero-sumness of life, and cultural change happens. So give it a couple of decades and then see.

(Link via email from Rohan D’Sa.)

Posted by Amit Varma on 08 July, 2009 in Economics | India


The Chaddi Indicator

According to Alan Greenspan, sales of men’s underwear should go down during a recession, as “hardly anyone actually sees a guy’s undies, [so] they’re the first thing men stop buying when the economy tightens.” By this reasoning, the recession hasn’t affected me—I bought much new underwear recently.

That said, writers in India are immune from a recession—we earn nothing anyway.

(Link via email from Subrata Majumdar.)

Posted by Amit Varma on 04 June, 2009 in Economics | Personal


The Cigarette Quota

The London Telegraph reports:

Local government officials in China have been ordered to smoke nearly a quarter of a million packs of cigarettes in a move to boost the local economy during the global financial crisis.

The edict, issued by officials in Hubei province in central China, threatens to fine officials who “fail to meet their targets” or are caught smoking rival brands manufactured in neighbouring provinces.

Even local schools have been issued with a smoking quota for teachers, while one village was ordered to purchase 400 cartons of cigarettes a year for its officials, according to the local government’s website.

Yes, that’s The Telegraph, not The Onion. Reality is reinvented as farce. The thing is, this is no less absurd than any protectionist measure. Think of any subsidy or tariff, and at its heart it amounts to forced cigarette smoking. We don’t laugh about most of that, though.

(Link via email from Aniket Thakur.)

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I couldn’t help but remember Frédéric Bastiat when I read that news, so here’s a reminder that the Bastiat Prize, which I won in 2007, is now open for submissions for 2009. They have an additional prize for online journalism from this year, so all ye freedom-loving bloggers, go forth and enter.

Also read: Remembering Frédéric Bastiat.

Posted by Amit Varma on 21 May, 2009 in Economics | Freedom | Politics | Small thoughts


The Freedom To Trade…

... is one of the most important freedoms there is. It is at the heart of human progress, for the only way we can improve the quality of our lives is by trading with others to mutual benefit. This is true at the individual level—and it is true when it comes to trade between nations. This is so apparent that it shouldn’t even need to be said—and yet, it is forever under threat.

Check out the wonderful video below about the perils of protectionism—it looks to the Great Depression, and shows how the Smoot-Hawley tariff, by severely constricting free trade, harmed economies across the world. It is relevant to America today, where protectionism is in danger of making a resurgence—and it’s relevant to India as well.

If you agree with the video, do sign the Freedom To Trade petition. And here’s the Facebook group.

Posted by Amit Varma on 06 May, 2009 in Economics | Freedom


Christian Lowell III In Urgent Need Of Assistance

Check out this marvellous piece of satire by Rupinder Gill.

419 scams lend themselves to satire quite well, actually. Here’s a piece I’d done a couple of years ago: A Business Proposal.

When everything’s a scam, could every scam be considered ironic, you think?

(Link via email from Salil.)

Posted by Amit Varma on 05 May, 2009 in Economics | Small thoughts


Jefferson’s Candles

Check out Alex Tabarrok speaking about why the future is bright:

For more, here’s a follow-up interview of Tabarrok on the TED blog.

Posted by Amit Varma on 30 April, 2009 in Economics


The Manmohan Myth

Aakar Patel has a piece in the latest Lounge where he compares LK Advani with Manmohan Singh. His analysis of Advani is spot on, and I’m with him on his opposition to the man. But he looks at Singh through rose-tinted glasses:

At 30, he understood the problem with Nehru’s economic model. At 59, he got the chance to set it right, and he did.

This is flat-out wrong. In the little I’ve read of his writings and speeches before 1991, Singh doesn’t say a word against against Nehru’s economic policies, and in fact seems to support the Fabian Socialist framework he built. I have the transcript of a seminar on price controls that was held in the early 80s, and Singh, in his speech, speaks just like a Nehruvian apparatchik. His reputation as a reformer came after 1991.

And the reforms of 1991 came about not because of the inner conviction of Singh or Narasimha Rao, but because there was simply no choice. We faced a severe balance-of-payments crisis, and the IMF loan we needed to save the country was conditional on reforms being carried out. And so they were, and worked wonderfully well. However, once that crisis passed, the pace of reforms slowed.

In his years as PM, Singh has carried out very few reforms. This is not entirely his fault: the government depended on the support of the Left for much of this time, and they blocked many of the reforms that we need. But he also supported schemes that Nehru and Indira would have been proud of, such as the NREGA—though one could argue that this was Sonia Gandhi’s baby, and he didn’t have an option. Regardless, nothing he has done in these last five years justifies his reputation as a reformer.

That said, I obviously support Singh over Advani as PM: the divisive politics of the BJP is a deal-breaker for me, though this is a matter of degree, as the nature of Indian politics dictates than any party that wishes to do well must be divisive. Such it is.

Also read: Profit’s No Longer a Dirty Word.

Posted by Amit Varma on 26 April, 2009 in Economics | India | Politics


A Smooth, Oily Mortgage Salesman

I’m a great admirer of Barack Obama, as regular readers of this blog would know. But I have to admit, Kunal Sawardekar has a point.

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Allow me to be anal here and point out that when I say I am “a great admirer” of Obama, I mean that I admire him greatly, and not that I admire him and I am great. Just in case, like, you thought otherwise.

Posted by Amit Varma on 20 April, 2009 in Economics | Politics


A Real Bonus Outrage

Writing about the infamous AIG bonuses, Allan Sloan says:

If you want a real bonus outrage, consider this: The operation getting the biggest taxpayer subsidy of all - the federal government - pays bonuses to its employees too. This year it plans to hand out about $1.6 billion of bonuses, despite running more than $1 trillion in the red.

Ironically, many of the people who have cried themselves hoarse about how a private company is misusing taxpayers’ money have nothing to say about the astronomical wastage that takes place of the taxpayers’ money that is actually with the government—in any country. It is almost as if the government has a right to that money, for they are our rulers and we, their subjects—and not the other way around.

And here’s a thought—it’s much harder to bail out a government than an insurance company or two.

Posted by Amit Varma on 08 April, 2009 in Economics | Old memes | Taxes | Politics


The Morality Of Zeroes

The WTF line of the day comes from The New York Times:

In a week when Mr. Obama scolded business executives for creating a culture of runaway salaries and bonuses, a disclosure form filed Tuesday showed that he signed a new $500,000 book agreement five days before taking office in January.

Does it even need to be said that the $500k that Obama got in his book deal is not taxpayers’ money? And that the AIG bonuses Obama has been pissed about are just that? The juxtaposition makes absolutely no sense, and I don’t see why Obama’s outrage over AIG even needs to be mentioned in this piece. Seriously, if I was paying anything to read NY Times, I’d want my money back just for this.

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And while we’re on the subject, I agree with Michael Lewis that as a scandal, the $163 million that AIG paid in bonuses pales before the $173 billion (or $173,000 million, to put it in perspective) bailout that the US government gave AIG to begin with. Such large amounts, and the uses they are put to, boggle the mind, so taxpayers ignore them. Bonuses to fat cat executives are an easier target.

Posted by Amit Varma on 21 March, 2009 in Economics | News | Old memes | Taxes | Politics | WTF


Now Housewives Want Sops

This is quite the WTF headline of the week:

Kerala housewives demand pay from govt

Actually wait, on second thoughts, what’s so WTF about it? Why is this odder than any damn subsidy that the government of India gives? If the GoI can support failing businesses (for by definition only a failing business needs a subsidy), and pilgrims headed on pilgrimage, and all manners of interest groups, then why not housewives? If you take from Peter to pay Paul, and Prakash, and Pervez, and Pestonjee, then why not also pay Parvati?

Needless to say, that’s our tax money out there, and we’re all Peter. But we’re reconciled to that now, and apathetic towards it, so we’re never going to fight over the way it’s used. Also, some of us are fighting to be Paul and Prakash and Parvati, so there’s that. Maybe I should start a movement to subsidize bloggers?

(Link via separate emails from Shyam and Vineet.)

Posted by Amit Varma on 11 March, 2009 in Economics | India | News | Old memes | Taxes | Politics | WTF


Where Your Taxes Go: 37

Nobody knows.

One day I also want to vanish through the Great Black Hole that our money travels through, and build a life for myself in the parallel universe on the other side. Such affluence must be there, no?

(HT: Neel. For more on how our government loots us, check out my Taxes Archive.)

Posted by Amit Varma on 02 March, 2009 in Economics | India | News | Old memes | Taxes | Politics | WTF


Naive Or Mad?

You have to be either naive or mad to start a business in India, I believe—and if you are the first of those, you may soon become the second. Check out this piece by Sandeep Kohli on the difficulty of doing business in India: “The License Raj Is Dead. Long Live the License Raj.”

Honestly, Kohli’s piece makes it appear that he had it easy. I have friends who run businesses in India who have been driven to the verge of nervous breakdowns by local authorities out to fleece them. In most places in the world, a business is successful when it fulfills the needs of its customers; in India, you first have to fulfill the needs of a thousand assorted babus—only then do you reach your customers, with your costs already so high that you can’t give your customers anywhere near as good a deal as you otherwise would be able to.

Check out The Corruption Rant for an example of what a businessman in India has to go through. Also consider the fate of the Four Seasons hotel in Mumbai, the opening of which “was delayed by at least two years” because “the hotel needed 165 government permits - including a special licence for the vegetable weighing scale in the kitchen and one for each of the bathroom scales put in guest rooms.” 165 government permits. Licenses for weighing scales. What kind of crazy country are we living in?

Also read: India’s Far From Free Markets.

(HT: Reuben and Mohit, separately, for the Kohli piece; Reuben for the Four Seasons piece.)

Posted by Amit Varma on 19 February, 2009 in Economics | Freedom | India


The Decalogue And Financial Modeling

Whenever I am asked what my favourite films are, I think first of The Decalogue—even though it is not one film, but a set of ten short films. But what cinema! I like it more than anything else by Krzysztof Kieslowski—and I love the Three Colours trilogy—and revisit an episode from time to time when I have just an hour to spare, and am in the mood for something sublime.

A couple of days ago a friend came visiting, and she hadn’t seen The Decalogue before. So I popped in the DVD and we watched the first episode. I must have seen it four or five times before, but every time I enjoy it as much. Having seen it, we headed off to Borivali, from where she had to catch a train to Baroda. I had estimated that an hour and a quarter of travelling time would be enough to get there at that time of the night (from Andheri)—but hadn’t taken the petrol strike into account. Naturally, there were no autos on the road, just people everywhere trying to flag them down. Oops.

We got there in the end, thanks to my legendary resourcefulness—but had we missed it, the film would have seemed ironic in that context. If you’ve seen it, you know what I mean.

And so it’s apt that I should come across this today:

The Financial Modelers’ Hippocratic Oath
by Emanuel Derman and Paul Wilmott

~ I will remember that I didn’t make the world, and it doesn’t satisfy my equations.

~ Though I will use models boldly to estimate value, I will not be overly impressed by mathematics.

~ I will never sacrifice reality for elegance without explaining why I have done so.

~ Nor will I give the people who use my model false comfort about its accuracy. Instead, I will make explicit its assumptions and oversights.

~ I understand that my work may have enormous effects on society and the economy, many of them beyond my comprehension.

You can read their full manifesto here. (Thanks, Mohit Satyanand, for the link.)

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My statistical analysis of the Best Asian Blog category in the 2008 Weblog Awards indicates that if the trend of the last 12 hours continues, India Uncut might end up in second place. My once-healthy lead is being eaten into rapidly. The competition is on for three more days, and people are allowed to vote once every 24 hours per computer they have access to, so vote now (and again tomorrow, etc) and change the basis of my analysis. Thank you!

Posted by Amit Varma on 10 January, 2009 in Arts and entertainment | Economics | Personal


Larry Flynt Seeks Bailout

Larry Flynt of Hustler and Joe Francis of Girls Gone Wild have decided to ask the US government for a $5 billion bailout for the porn industry. Flynt explains it thus:

People are too depressed to be sexually active. This is very unhealthy as a nation. Americans can do without cars and such but they cannot do without sex.

With all this economic misery and people losing all that money, sex is the farthest thing from their mind. It’s time for congress to rejuvenate the sexual appetite of America. The only way they can do this is by supporting the adult industry and doing it quickly.

Meanwhile, Michael Musto tells Keith Olbermann: “People aren’t paying for sex anymore, Hugh Grant has a girlfriend, for God’s sake!” And there’s the usual joking about stimulus packages and downsizing.

Me, I’m not so worried about porn—it’s the second-oldest industry, after all. I’m more worried about writers, and heartily support Julian Gough’s proposal.

(Links via separate emails from Salil, Deepak (both Flynt), Gaurav (Olbermann) and Neel (Gough).)

Posted by Amit Varma on 08 January, 2009 in Arts and entertainment | Economics | News | Politics


Grains, Grains Everywhere

This is quite the WTF headline of the day:

Govt may run out of space to store grains

I find it astonishing that no one questions the existence of the Food Corporation of India. If the free market was allowed to operate in agriculture, prices would be lower and distribution would be far more efficient, as supply would follow demand. We certainly wouldn’t have the perverse situation where lakhs of people are in danger of starving while government godowns overflow with grain. (Some of this grain, a friend informs me, may be as much as two decades old, which is beyond surreal.)

Imagine if there was a Soap Corporation of India, doing to soap what the FCI does to food. What a stink there would be.

(Link via email from Rajeev Mantri.)

Posted by Amit Varma on 16 December, 2008 in Economics | Freedom | India | News | Politics | WTF


Advance Warning

The economic commentary of the day comes from Bryan Caplan:

If we really wanted advance warning (and a chance to mitigate) the next financial crisis, we wouldn’t be banning short-selling; we’d be legalizing insider trading.

Read the full post.

Also, David Brooks does some myth-busting in The New York Times:

In the first place, the idea that our problems stem from light regulation and could be solved by more regulation doesn’t fit all the facts. The current financial crisis is centered around highly regulated investment banks, while lightly regulated hedge funds are not doing so badly. Two of the biggest miscreants were Fannie Mae and Freddie Mac, which, in theory, “were probably the world’s most heavily supervised financial institutions,” according to Jonathan Kay of The Financial Times.

Again, read the full piece.

(Caplan link via email from Prashant Kothari.)

Posted by Amit Varma on 20 September, 2008 in Economics


Are We Running Out Of Oil?

No, says Don Boudreaux, we’ll never run out.

Going by the mutton curry I just ate for dinner, my maid would agree.

Posted by Amit Varma on 04 September, 2008 in Economics


The Prisoner’s Dilemma

Krishna Prasad, via Facebook message, points me to some haikus on economics on the Freakonomics Blog, of which by favourite is this one, by Calum:

A friend and I, jailed;
We agreed to stay silent
(But I still confessed).

The others are also excellent, read ‘em all.

Posted by Amit Varma on 01 September, 2008 in Economics


Privatize Stray Dogs

This is an excellent idea, and achieves the following ends:

1] It solves the stray dog problem in our cities, and it ensures that when I go for a walk at 2 am, I won’t be at risk from street dogs that have, ironically enough, been vaccinated with the taxes I pay.

2] It is good for the dogs as well, and puts the onus on those who care about stray dogs to put their money where their mouth is, instead of making others pay for their sanctimony.

3] Because the owners of each dog are liable for damages caused by it, there is more accountability, and less people bitten by dogs.

Read the full piece. There will still be protesters, of course, because the word ‘privatize’ is part of the article. Stray dogs are our navratnas, after all.

Posted by Amit Varma on 22 August, 2008 in Economics | India


India Doesn’t Need Olympic Pride

A shorter version of this piece was published in Friday’s edition of The Wall Street Journal Asia.

It was a gunshot heard across a subcontinent. On Monday, Abhinav Bindra, a 25-year-old shooter from India, took aim for his final shot in the 10-meter air rifle event at the Olympic Games. The pressure was intense, but Mr Bindra shot an almost-perfect 10.8 to win the gold medal. His fans and supporters jumped up in delight in the stands, as wild celebrations began across the country. India’s 24-hour news channels became 24-hour Bindra channels, and there was much talk of national pride.

Mr Bindra’s achievement warrants such celebration. On a national level, this was, astonishingly, the first gold medal India has won in an individual sport in any Olympics. And on the more important personal level, it was a testament to the years of single-minded hard work Mr Bindra dedicated to his sport. Not surprisingly, the government immediately took credit for his achievement.

India’s sports minister, Manohar Singh Gill, came on television and said, “I congratulate myself and every other Indian.” But while India’s shooting association is better than most of the bodies that run sport in the country, it was Mr Bindra’s family that enabled his success. Mr Bindra was lucky that his father is an industrialist who dipped into his personal wealth to support his son. He built a shooting range for Abhinav in his farmhouse in Punjab, and made sure he never ran out of ammunition, which is not made in India and has to be imported.

India and China are studies in contrast. The full might of the Chinese state goes into creating sportspeople who will bring it pride. The Indian government, on the other hand, does a pathetic job of administering sports in the country. Rent-seeking bureaucrats run the various sporting federations – or ruin them, as some would say. A great illustration of this is hockey, a sport once dominated by India, which failed to qualify for Bejing. Even though there is no Indian hockey team at these Olympics, four hockey coaches have duly made their way to Beijing. Franz Kafka would feel at home as an Indian sports journalist today.

Most of India’s finest sportspeople are self-made athletes who owe nothing to the system – Viswanathan Anand, the world chess champion, is a case in point. The sport where India has been most successful, cricket, is not administered by the government. Surely, nationalists would argue, there is a case to be made for pumping more money into our sport.

Such arguments are wrong. India’s leaders need to have a clear sense of priorities, and there are two things they would do well to consider. One, despite the gains sections of our economy have made since the liberalization of 1991, India remains a desperately poor country. Two, unlike China, India is democratic, and its government thus carries a certain responsibility towards its people, and the taxes it collects from them.

Any money that the government spends on sport could be better spent on building infrastructure: roads, ports, power-generating units etc. It would also do a lot of good simply left in the hand of the taxpayers, who would then spend it according to their own individual priorities. Hundreds of millions of Indians are forced to part with their hard-earned money through direct or indirect taxes, and it is perverse if that money is spent towards something as nebulous as an outdated notion of national pride.

For too long now, India has been an insecure nation craving validation from the West. Even many of us who speak of India as a future superpower have one ear cocked towards the west, straining to hear similar forecasts in a foreign accent, ignoring the condescension that such pronouncements sometimes carry. Similarly, we look to the sporting arena for affirmation of our self-worth. That attitude might have been understandable during the days of the cold war – but it no longer is.

Sport is a zero-sum game – for one nation to win, another must lose. But real life is non-zero-sum, and nothing demonstrates the win-win game of life as well as globalisation, with nations (and individuals) trading with each other to mutual benefit. In these times, it is clear we do not need Olympic medals to be a great nation, but economic progress that all Indians have access to. It is beyond the scope of this piece to spell out the many reforms that are needed for that happen – but spending taxpayers’ money responsibly is a key part of the puzzle.

I shall go against the prevailing wisdom, then, and say that I don’t mind if our government spends less money on sport, or even none. Where will our Olympic medals come from then, you ask (as if the last few decades have brought us a slew of them). Well, lift enough people to prosperity, and the sporting laurels will roll in. Ask Abhinav Bindra.

Posted by Amit Varma on 18 August, 2008 in Economics | Essays and Op-Eds | India | Old memes | Taxes | Sport


Migration

This is priceless:

Four students from a school in Garhshankar town in Punjab’s Hoshiarpur district have gone “missing” in the United States during their educational trip to the National Aeronautics and Space Administration (NASA). The teacher who accompanied them did not return either, but sent an e-mail saying that she had got married.

I wish the men and women who make India’s economic policies would ask themselves what it would take to make India a similar land of opportunity.

Posted by Amit Varma on 10 August, 2008 in Economics | India | News


“Don’t Worry, Sir, The Money Has Been Deducted”

I needed to book some train tickets today, so I optimistically hopped over to the IRCTC website to use their online booking facility. The user interface was horribly designed, but as long as I could figure out how things functioned, I didn’t care. I chose my train, filled in my details, made my credit card payment. But after I clicked the last confirmation button that I had to, the screen just went blank.

I thought maybe my tickets had been booked, and clicked on ‘booked tickets’. No luck. So I called their customer service people. The first time I got through, the woman at the other end heard what my problem was, went mmm, hmmm, and hung up. I tried again. This time, I warned the lady who picked up not to hang up on me. Then I gave her my user id so she could access my account details. Then this conversation happened:

IRCTC lady: So what is problem?

Me: The problem is that after I made my credit card payment, the screen just went blank.

IRCTC lady: Just a minute. (Pause.) Sir, was your ticket worth Rs 365?

Me: Yes.

IRCTC lady: Don’t worry, sir, the money has been deducted.

Me: Ah. Yes, well, but my ticket history is not showing that I’ve booked any ticket.

IRCTC lady: Yes sir. That is because the ticket has not been booked.

Me: What? The money has been deducted from my account but the ticket hasn’t been booked?

IRCTC lady: Yes sir. That happens. It is an online site, no?

I was too flabbergasted by this to even lose my temper. She eventually said that I would get a refund, but no doubt that’ll involve bureaucracy and online forms that go blank and so on, and I’ve mentally said goodbye to these 365 bucks.

If the government simply outsourced its ticketing to competing private vendors, I suspect I wouldn’t have this problem. Where there is an unthreatened monopoly, what else can one expect?

Update (8.48 pm): More than 40 readers have written in since I made this post, vouching for the efficient service of IRCTC, and assuring me that I’ll get my refund easily. Given the number of people vouching for the website, I’ll give it the benefit of the doubt for now. What’s more, I will head over there and try to book a ticket again. Let’s see how it goes now.

Posted by Amit Varma on 05 August, 2008 in Economics | India | Personal | WTF


Freeze The Prices!

Bloomberg reports:

Pakistan investors stormed out of the Karachi Stock Exchange, smashed windows and cursed regulators after the benchmark index fell for a 15th day, the worst losing streak in at least 18 years.

“I have lost my life savings in the last 15 days and no one in the government or regulators came to help us,’’ said Imran Inayat, 45, a protester and a former banker who retired early and said he lost 300,000 rupees ($4,175) on the market.

The article does not elaborate on who put a gun to Inayat’s head and forced him to invest his money in the stock market. Instead of calling on others to help him, the man should accept responsibility for his own actions. Did he really think the stock market is some kind of giant safe deposit box?

But the most WTF moment of the pieces comes towards the end:

“We demand that all stock prices be frozen at current levels,’’ said Kauser Javed, who heads the Small Investors Association.

Sigh. Prices, of course, are determined by supply and demand, by what people are willing to pay. If stock prices are falling and the government fixes them at an artificially high level, it will simply mean that those stocks will have no buyers, and their value will effectively be equal to zero. That will no doubt give Javed more cause to protest, and the gent might then demand that the government put together a rescue package for the small investor. Such fun all this is.

(Link via email from skthewimp.)

Posted by Amit Varma on 18 July, 2008 in Economics | News | WTF


Paperwork (aka The Corruption Rant)

One of my friends is in the process of setting up a new business, and I was chatting with him a few minutes ago. Here, with his permission, is an excerpt from the transcript:

[Friend]: I spent half a day in the excise department office yesterday
it’s one of the most depressing places on earth

me: jesus. bribes and shit?

[Friend]: yeah, paperwork

That says it all, but my friend then chose to elaborate, so here’s his unedited rant in full, which I throughly enjoyed, below the fold:

Read more...

Posted by Amit Varma on 08 July, 2008 in Economics | Freedom | India


Goodbye Mao, Hello Olympics

Check out the latest 10 Yuan banknote issued by China:

image

(Via Marginal Revolution.)

Posted by Amit Varma on 08 July, 2008 in Economics | Politics


Politics and the Free Market

Like many of my friends in Mumbai, I am delighted that private taxis now ply in the city. They can be summoned by telephone and provide comfort and great value for money. In particular, I use Meru Cabs, whose service I was also pleased with when I used them in Bangalore recently.

A triumph of the free market? Perhaps. But now Raj Thackeray, who owns Maharashtra, wants a piece of the action. DNA reports that the MNVS, the transport union of Raj’s party MNS, has “registered 450 drivers attached to Meru as its members and has demanded the drivers be made permanent.”

Now, I have no issues with drivers joining unions and making demands, provided all negotiations are peaceful and there is no coercion or violence being used. But does that sound like Raj Thackeray to you?

If the negotiations fail, MNVS has a separate plan to execute. On Friday, it gave a glimpse of what may follow. Some Meru drivers who are now with MNVS assaulted their 10 colleagues for plying the cabs despite a strike of sorts in Dharavi and Matunga.

“Till now, the fight with Meru was held in a democratic way. If Gupta refuses our demands, we will turn the fight into undemocratic ways. I need not explain what those ways would be,” Sheikh warned.

He hinted that if Meru were to shut down its business due to MNVS attacks, the party will start its own cab service. “We will not allow the drivers to remain unemployed. We will take care of them,” he said.

In other words, either the MNVS has its demands conceded and becomes a powerful interest group within Meru Cabs on the basis of nothing but the threat of violence, or it uses violence to get Meru out of the market so it can take its place. Once it does that, no doubt it would then also find similar ways to deal with competition.

A free market, of course, can only exist when the rule of law is strong. Not in India; not in Mumbai. I have no doubt that Mumbai’s police will not protect Meru’s drivers and property, or take action against these thugs after they strike. I’m sure Meru’s owners know that as well. All that remains to be determined is the nature of the hafta—and whether it is paid to the MNS or to a stronger gunda (Balasaheb?) for taking care of the MNS threat. (The stronger gunda may even be the government, mind you.)

So if ever a Meru driver is late or misbehaves with you, a possible reason is that he is not accountable any more with a gunda union protecting his ass. The point of the business, instead of being customer satisfaction, will become the provision of jobs, which is exactly the wrong way around. And just because it is a private company, don’t blame the free market for it: it doesn’t exist in this sector.

The article also sheds light on how Meru managed to get set up at all, given the licensing restrictions that exist everywhere.

A heavyweight politician from Uttar Pradesh is believed to have helped V-Link Taxis Private Limited, which runs the Meru service, to revive the expired national permits from New Delhi. A Meru driver, Nana Sonawane, revealed, “Maharashtra government has not issued any taxi permit since 1996. Hundreds of permits had expired because they were not transferred. V-Link legally got those permits renewed by paying a heavy penalty. They even paid Rs1 lakh to the drivers who owned the permits.”

Imagine, then, how hard it will be for entrepreneurs without political connections to set up a business in this space. What kind of free market is this?

Posted by Amit Varma on 05 July, 2008 in Economics | Freedom | India | News | Politics


What Would You Tip?

That’s the question Deepak Shenoy asks in an email directing me to the image below, posted by Prieur du Plessis, of a dinner bill in Zimbabwe. Note that it’s a dinner for one; imagine how much a date would hurt. Even if you’re a rich man, the maths has got to be daunting.

image

Posted by Amit Varma on 16 June, 2008 in Economics


Accountability and the IPL

Here’s the second edition of Over the Wicket, my fortnightly column for NDTV Convergence: Yes, the IPL really is about accountability.

Related pieces:

The IPL reveals India’s bench strength (May 8, 2008)
Celebrating Twenty20 Cricket (April 20, 2008)
Opportunity, choice and the IPL (March 13, 2008)
There’s Nothing Wrong In Being ‘Commercial’ (Feb 24, 2008)
The Twenty20 Age Begins (Aug 8, 2007)

Posted by Amit Varma on 21 May, 2008 in Economics | Essays and Op-Eds | Sport


We Should Celebrate Rising Divorce Rates

This piece of mine was published this Sunday in Mail Today (pdf link).

We live in times when progress is often denoted in statistical terms: the Sensex rises by this much, the economy grows by that much, inflation is so much, poverty is that much, and so on. In a complex world, any single piece of data always tells just part of the story. So which statistics do a good job of illustrating India’s progress? One very good one, in my view, is the divorce rate.

Divorce rates are going up across India. The figures that exist for our cities and towns show a sharp increase in the last decade or so. Many commentators bemoan this trend, speaking of the breakdown of families, the loss of family values and the influence of the West. But to me, the rising rate of divorces is a trend to celebrate. It is the single best statistical indicator we have of the empowerment of women.

Rising divorce rates tell us one thing for sure: that more and more women are finding the means, and the independence, to walk out of bad marriages and live life on their own terms. If we judge ourselves as a society on the state of our women – and surely that must be a parameter – then this is good news. We do not need to credit either feminism or Western culture for this – the emancipation of women in real terms, across the world, has been enabled by technology, and can be explained most easily with economics.

Economics

In economic terms, the biggest factor behind human progress is the division of labour. If we all hunted our own meat and grew our own food, we’d still be hunter-gatherers. Adam Smith used the example of a pin factory to illustrate how division of labour improves productivity: if one man attempts to make pins all by himself, he might make about one pin a day; but his productivity can increase by as much as five thousand times if every person in the factory focuses on just one aspect of the pin production. This is true of everything in our lives, such as this newspaper you are holding: if every employee of Mail Today set out to write, design and produce the whole newspaper, it would take weeks for each person to put together a single issue, and they would all be substandard in one way or another. Instead, they specialise, and the result is in your hands every day.

Well, in the words of Tim Harford, who devotes an excellent chapter to this subject in his book The Logic of Life, the family is “the oldest pin factory of all.” In old days, before the advent of modern technology, for a single man or woman to earn a living and look after the household all by himself or herself was immensely difficult. It became a little easier if two people came together and split both tasks half and half. But it became exponentially easier if they specialised. For evolutionary reasons, and because women were stuck with child-bearing, it so happened that men traditionally got the role of earning a living while women raised kids and looked after the house. 

These gender roles evolved out of circumstance, and not necessarily because women weren’t capable of earning a living. Indeed, in cases where the wife was better at both earning a living and keeping house, the traditional role allocation would still make sense for them as a unit if the husband was especially bad at housekeeping. (Economists call this “comparative advantage”.) Thus, the incompetence of men at keeping house might have played a greater role in the perpetuation of gender stereotypes than any shortcoming women might have had in the workplace.

These gender roles got reinforced culturally. If men earned a living and women looked after the house, it made economic sense to bring up children to specialise in those areas. Thus, the boys got a better vocational education while the girls were taught to cook. This also reinforced prejudices in the workplace, intimidating women from taking up a profession. Women thus became dependent on men, unable to break out of bad marriages because they simply didn’t have choices available to them. No wonder divorce was so rare.

All this changed in the 20th century. The catalyst for these changes was technology.

Technology

Technology freed women in two ways in the last century. One, household technology made it possible for women to finish off household work quickly, while it was otherwise enormously time-consuming. The cooking range, the microwave, the mixer-grinder, the pressure cooker are all commonplace kitchen items today, but imagine how arduous preparing a meal was before they existed. (It still is in poorer parts of the world and our country, which partly explains why the oppression of women varies with class.) Once these gadgets entered the kitchen, women found themselves with more free time at their disposal, which they could use to take up a job or to get an education.

Two, the pill allowed women to delay child-bearing and plan parenthood. This meant that they could be sexually active without the risk of pregnancy, and thus delay marriage. That allowed them to study further and be as qualified as men for the workforce. And, most importantly, it gave them options.

A qualified woman who chose family over work is much better placed than a woman who hasn’t got any skills to help her earn a living. She has more leverage within the relationship. One, it is easier for her to quit the marriage if she feels unhappy with it. Two, because that option is open to her, her husband cannot take her for granted, and has to treat her better than he otherwise would.

Harford, in his book, points to a study by Betsey Stevenson and Justin Wolfers that showed that as states across America passed ‘no fault’ divorce laws, allowing women easier routes to divorce, “domestic violence fell by almost a third.” When incentives were in place for men to behave better, men tended to behave better. Thus, technology not only enabled women to walk out of bad marriages, it also made them more powerful within a marriage.

In India affluence acts, in some cases, as a substitute for technology. In Mumbai, for examples, the typical middle-class house is too small for household devices like washing machines and dishcleaners. But in families that can afford household help, maids take care of those functions, freeing up women’s time in ways that technology does in the West.

Tradition

Families have such sanctity in Indian tradition because until recently, people needed the division of labour that a family provides. Indeed, joint families used to be common here because, when we were a poorer country, they made economic sense. (A common kitchen for 20 people provided economies of scale.) But times have changed, incentives have changed, and to value these things for the sake of tradition alone is irrational. 

As a society, our highest value should be to ensure that every individual has the maximum opportunities possible to find happiness. This means educating our daughters to be independent and removing the stigma that comes from a broken marriage. Every divorce means that two people have a better chance at finding fulfillment than they did in the marriage, and that is surely cause for celebration. In America, divorce rates climbed back down after the surge of the 1970s, mainly because young people took greater care in getting married, and premarital relationships were not considered sinful. Change is happening at different rates across classes in India, and the divorce rate will continue to rise for many, many years. That is a sign of progress, and we should be happy about it.

*  *  *

For more on this subject, I highly recommend checking out the chapter on divorce in Tim Harford’s The Logic of Life. It’s written in an American context but its insights are universal, and it cites a number of studies that you can Google and read for yourself. My review of Harford’s book is here. I’ve also briefly touched on this subject in these two old posts: 1, 2.

For more essays and Op-Eds by me, click here.

Posted by Amit Varma on 19 May, 2008 in Economics | Essays and Op-Eds | Freedom | India | Science and Technology


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