Untouchable: An Indian Classic

I was in the Indian City of New Delhi sometime last week for a formal meeting and because I arrived before the conference commenced, I made my way round the book stores on Janpath Road. I entered into a very small book store which had what I considered far too many workers for the size. While browsing from one side of the very small store to the other, I asked one of the attendants to point me to books that would teach something about India.  With minimum hesitation, he turned around to the opposite side of the store and grabbed the book that forms the title of my review here. He handed to me Untouchable by Mulk Raj Anand and added with confidence, "This is an Indian classic".

To start with, I have known for a while that India has a very highly developed publishing industry and has one of the lowest costs for publications among developing countries. Still, the degree of knowledge about titles that the store assistant showed is rare because I would certainly have left that store none the wiser if my attention had not been directed towards that book.

The book addresses the social and economic construction of stratification in Indian society in pre-independent India. In reading the book, I see the duality in the fight that this society faced in designated classes of people as untouchable and unclean. Contact with the low caste people known as sweepers would make one contaminated and require ritual baths to restore cleanliness. This novel is based on the life of the youthful Bakha whose family have been sweepers for time immemorial and who are condemned to living apart from higher caste Indians. Their isolation is aggravated by the fact that they have an exploitative relationship which requires the sweepers to take care of cleaning up toilets.

One cannot miss the contradiction that comes from the fact that the caste system in India as in other places, created bogus distinctions  that endured. At the same time that the priestly and warrior classes enjoyed superior status and avoided the contamination of sweepers, they depended greatly on these oppressed to accept their inferior station and thereby provide cheap labour for performance of the most unpleasant tasks in that society.

Bakha wonders through the day and is human in the fact that he gets hungry and angered, playful and serious and somehow wonders why his family must forever accept their inferior classification. He has three encounters that could provide a solution from three different people and the most convincing one for me is the technology solution. tThe author integrates history in this work of fiction by exploring the role of the Christian church, Gandhian philosophy and suggestions from educated Indians.  In an interesting twist, Bakha returns home in the evening convinced that Gandhi's call for Hindu compassion is part of the solution and wondering whether a flush system would complete lower caste emancipation.

For a book written in the 1930s, it describes from the eyes of an Indian, how injustice can endure when it is justified through religion and culture on the one hand together with an unmentioned but real economic basis.  It also reveals the quest for status that makes other lower caste groups such as washers and leather workers to act with derision towards the sweepers.  I recommend this reading for any person with an interest in the evolution of societies and to Llibertarians with interest in booting cultures that justify subjugation. Putting myself in the shoes (rare among sweepers) of Bakha, it may be debatable which was the more evil system between colonialism or the caste system. Just wondering!

Book cover Image from Amazon.com

Academics and Despots II

In musing about the significance of the series of political events in the Middle east and North Africa over the last few weeks, I posted a piece on an article by Dani Rodrik. And as the post states, it seemed that Dani Rodrik was the only prominent scholar that I had read who addressed himself to the difficult issue of what posture intellectuals should adopt in interaction with despotic regimes. Dani talks about a follow up interview here.

An intellectual from Egypt has now added a different voice to that debate. Nawaz El Saadawi writes with contemptuous regard for Egypt's elite. In the author's view, the intellectuals among Egypt's elite seem to know on which side their bread is buttered. As a consequence, they deploy their ability to communicate to a wide audience by applauding the young revolutionaries while also tacitly trying to prevent full trial of Mubarak. As the article states, they are not driven by the need to stop vengeance "per se", but are merely defending a regime that they have applauded for decades.

On my part, the advise is the same. Keep away from regimes that have no respect for life or dignity at a minimum. Any association with despots rarely turns out well. And I mention this with full knowledge that despots are often very determined for acclamation and the refusal of one academic merely means that there are twenty more who would gladly take that position. 

Luck Comes in Threes for Irish Bettor

Niall Smyth, a part time poker player has shown a remarkably lucky streak by taking small bets successively to convert an initial bet  of €10  into € 550,000. Needless to mention, the odds of betting on a horse race, then taking the prize into a qualifying game for an elite tournament before beating the filed of 614 poker players is very slim. As reported in this article by the Irish Times, this represents an interesting mix of luck and capability on the part of the player that a statistician would claim should happen very rarely. 

Turkey: Another Emerging Economy?

Following a visit three years ago, I have maintained an interest in Turkey's economic growth and political development. I have wondered often whether in spite of all their acclamation, each of the BRICs will of necessity have more successful outcomes than Turkey. From my own assessment then , Turkey had very good prospects for economic expansion on account of its geographical position, diversified economy and secular constitutional order. it is clear hat turkey's political development today is not necessarily guaranteed to result in a more open and stable political foundation on account of the changes in the constitution and an emerging intolerance for diverse views among the prime minister and his party's main adherents.

That aside, one must reckon with the fact that for a populous country, economic growth rates together with consumer demand have been quite impressive. Landon Thomas Jr. of the NYT reports here that there are early signs of excessive issuance of credit may be showing in the economy. Increased consumption of luxury items may be consistent with a rising middle class generated by growth and yet the easy terms of advancing credit may generate massive losses that could stagger that economy. I applaud the innovative ways through which the decisions on credit are made but the central laws of banking and lending remain the same. Banks must guard against issuing unsecured credit to individuals as no economy is immune form dangers of imprudent lending and expenditures.       

Academics and Despots

Few people today would listen to a conversation in which a defence of Libya's leader, Muammar Gaddaffi was offered. Instead, a good number of scholars and leaders both in and outside the continent of Africa have suffered serious embarrassment for their associations with that regime. What is clear is that in  a moment of crisis, the extreme despotism of Muammar Gaddafi and the intolerance of his sons has come fully to the fore. In spite of his record of ruthlessness and intolerance for dissent.

With that in mind, I find Dani Rodrik's frontal confrontation of this delicate matter totally impressive and sincere. As he says, there are moral ambiguities related to interaction in person or through emissaries of despots and leaders who have no meaningful democratic credentials.  And in spite of my full appreciation of the desire to do good that may inform the choice to offer professional advise to despots, one must draw the line where the said leader has previously exhibited unabashed contempt for human life and dignity. As a result, any scholar worth his salt should realize that more often than not, these despots seek  amity with high profile academics in order to create a favourable name as a person who is curious about ideas. And any leader who does not appreciate the central idea of personal freedom probably cannot appreciate many other which flow from that essential one. 

Heritage Health Using Prizes to Cut Costs

I believe that in spite of imperfect human thinking, there are simple devices that can be utilized to achieve a variety of business or public policy solutions. One of those that i would like to see used more often is the use of cash prizes to generate new ideas and solutions to problems. Years ago, Netflix put out a prize of US$ 1 million to provide an incentive to teams to assist it to improve by at least 10%, the predictive power of the algorithm that it uses to recommend movies to clients. This blog argued here and here that this approach was superior in many respects provided it was well designed. 

Slate Magazine's Annie Lowrie records how Heritage Health of the US has gone a notch higher by announcing a US$ 3 million prize for a predictive algorithm on identifying the likelihood of patients to seek hospitalization. It has released its data to registered teams to assist it to identify such patients with the intention to utilize that information to reduce costs. It is laudable that a growing number of private sector initiatives have began to use public competitions to provide solutions to business challenges.

 The main gap remains n the reluctance of the public sector to use similar methods. Instead, public sector approaches its recognized problems by inviting high powered research teams working in secret to deliver a document for implementation. In my view, the secrecy that surrounds government operations and interactions with consultancy firms in many countries is also responsible for the wastage of public resources. One advantage of the public competition method is that it payment is made against real results as opposed to firms that take their money in advance and does not share the risks for proposing a bad idea. 

Irrational Fear of Nuclear Energy

While it is true that the human being is a supremely intelligent creature, it is also clear that we make systematic and very basic errors in reasoning. More recently, the errors that one could point come from the radioactive leakage at the Fukushima Nuclear Plant following  the massive earthquake in Japan weeks ago. In addition to the many deaths that this event precipitated, it also led to the failure of safety systems for Japan's nuclear power plants with a couple of reactors suffering structural damage and causing radiation levels to rise above levels that are considered safe.  

One could easily have anticipated the flurry of activity around countries with nuclear energy plants about the levels of safety. To my mind, the damage caused to the reactors were on account of the intensity of the earth quake. In spite of the clear lesson about the fact that overall, the structures were fine save that an earthquake of that severity is of low probability, calls for a halt on all nuclear energy production work were heard from all over.  It is gratifying however that while this has been going on and those who support commercial development of nuclear energy have been on the defensive, some rare support has come from George Monbiot of the Guardian. 

That article by a convert is worthy of reading because it splits apart the claims of the anti-nuclear lobby at a time when the nuclear industry needed friends in influential media. Lobbies tend to be poor listeners but here s some good advise from a convert.  

Language As Economic Infrastructure

I was recently witness to a debate about which language will dominate commerce and scientific publication in the next century. This discussion arose from the fact that Chinese and Indian economies have grown substantially and are possessed of a large population that could insist on using alternatives to English in commerce and scientific endeavour.

In the talk above, Patricia Ryan, a teacher of English in one of the nations in the Persian Gulf presents an interesting view about the need to accommodate a variety of languages in interactions. Stopping short of saying that the dominance of English imposes costs on growth of knowledge from diverse sources, she argues convincingly that the mass of publications in English stifles the ability of other alternatives from arising. It is true that to equate intelligence or capability with the knowledge of English is not proper.

In her eloquently delivered talk, she mentions that a language goes extinct every two weeks and with this trend, humanity may find that the diversity of languages shrink from 6000 to 600 in short order.  I am unaware of the accuracy of her estimates and the certainty of her figures but her assertion leads to an interesting question. It is clear that there is an enormous advantage to approaching problems of science and communication through diverse languages. What I find interesting is whether there may be an optimal number of languages in the world. I ask this because the distribution of speakers across the 6000 languages would probably show a Power Law, with English spoken by a disproportionate number and other smaller languages spoken by a few hundred at the most. For that reason alone, it is an onerous task to try to interpret every available publication into each language.

Microsoft Complains of Antitrust Violations by Google

It is worthy of repetition that while I am a libertarian, I maintain that regulatory policy is sensible in the area of competition because it is demonstrably possible that a firm could depress welfare through anti-competitive behaviour. At the same time, I am aware that as George Stigler argued, the market is such a tough and dynamic place that most anti trust policy achieves very little that is positive. more importantly, it is clear that calculating corporations may incite or instigate anti-trust investigations against a competitor to defeat with a view to using government muscle to ensure that a competitor is restrained in legitimate market activity.

And perhaps one firm in the modern times that faced a multiple of claims that its behavior as a dominant firm was distorting markets outcomes was none other than Microsoft. indeed some people have made the claim, unconvincing in my view, that the very rise of Google was made possible due to the temporary distraction that Microsoft faced over a decade since its tribulations with competition authorities commenced. so the irony of this came to me starkly when I learned from this piece by Mark Sweeney in the Guardian that Microsoft is suing Google for violation of competition rules.

I have not had a chance to review any official documents in order to make some comments but I still think that as stated in that piece, this is very interesting. And yet, it is clear, with the benefit of hindsight, that it was predictable.I would like to see what the "pattern of actions" that Microsoft has identified constitute violations by Google.      

The Evolution of the Chameleon

A few hours ago, I was seated at a garden restaurant when I noticed a slow moving creature that was perfectly camouflaged against a brownish tree trunk. My stream of thoughts led me to try and trace its slow movement, where one limb moves tentatively forward and then followed by another as it rolled down that tree trunk. Putting on my quasi-scientific thinking cap, I mused, "So this creature is supposed to be perfectly adapted to its environment?"

This question continued to turn in my mind as I tried to figure out what is the evolutionary advantage of moving so slowly in an area with shrubs. It is perfectly understandable that the ability to change color is useful for evading predators and insect prey by being undetectable. On the other hand, once it is detected, its tentative steps condemn it to very easy seizure by a bird or other animal that may feed on it. A straight answer may be that the tentative movements are part of its survival because it is compensated for by a very long, sticky and quick tongue that allows it to capture insects while it is yet undetected.

I am not sure how all this evolutionary advantages fit together for this ugly but amazing creature. I think that there is no perfect answer because it appears that often in the quest to justify the valid scientific process of evolution, we first detect the facts and thereafter adopt a narrative with an evolutionary rationale.

Picture Available at: www.ilovechameleons.com        

Quoting Brian Micklethwait

" Governments are good at destroying stuff but tend to be shambolic at any kind of creativity. The more creative they try to be, the more destructive they end up being. People do creative, not governments". Brian Micklethwait at Samizdata.

Is Japan's Low Crime Rate About Culture?

Japanese people have had to cope not only with the serious effects of the earthquake which occurred a week ago but also with the adversity that it has generated through the severely damaged nuclear power plants. Besides the fortitude that the Japanese have shown is the impressive level of order that has been maintained amidst the grave conditions. Many have attributed this to the cultural predisposition that emphasizes fairness and a deep sense of duty.  

It is difficult to fail to notice the difference between the reaction to this disaster and those that have occurred in the last few years. Christopher Beam of Slate Magazine muses that perhaps the cultural component of this composure under stress is overstated. He states that the phenomenon that we see is supported by incentives that encourage honesty while punishing misdemeanor quite severely. As an example, it states that Japan has a well developed finders fee which is paid out for recovery of an item that is stolen and this is further reinforced by the fact that severe negative incentives apply for captured thieves. This makes every situation one of balancing small positive incentives to the possibility of severe punishment.

Separate from these incentives are a large police force that is both competent and well trained. one sees how this force in turn reinforces the incentive scheme by raising the probability of capture for a thief. On the part of informal law enforcement by criminal organizations, one sees how they may have an interest in enforcing order in the areas of their operations. Notwithstanding my suspicion that these groups can perform a positive role, the article state that some are ensuring an orderly period and also contributing to the relief efforts. Fair enough, but only if the competent police force could just start investigating and prosecuting these gangs. 

Players Union Vs NFL Team Owners

While I make the time to understand most sports events and the character of the franchises, I understood very little about the economics of the National Football League until I listened to this podcast from Freakonomics. I do not only recommend it for enlightening me but for the depth that it revealed about the financial structure of the firms and what the real bone of contention is between the players through their union and the owners of the teams. For instance, while I am aware that incomes among professional athletes tend to be very unequal, i was still surprised that the average career for NFL athletes is less than four years. For all the high incomes, it is clear that the average athlete faces great odds against living purely from that income.

Having listened to that podcast, it became immediately clear to me that the player's union had far more sensible views about the sharing of revenues than the owners. For one, it is clear that the NFL should have no pretense to being a market because it like other leagues, is a cartel and a collusive arrangement. Once team owners have gained entry, they tend to have little skin in the game and usually sit back and are assured of revenue and profits.

James Surowiecki, writing in the New Yorker Magazine has given the dispute an analysis fit for illustrating the behaviour of cartels and the distortions that result from their market power. Immediately evident is the fact that there is less competition for revenues because teams are in a symbiotic relationship in which they rise or sink together. In my view, that's what makes the negotiations critical for the teams because owners know that having decided on the formula, they need to do little less. As the article lucidly explains, the structure under which players and owners transact business does not deserve to be called a market. I am not particularly fond of unions but they have my support on this matter though it is unlikely that their negotiation strategy will try and get the industry to be more in tune with real markets.

As the NFL stands today, the order of benefits is with owners, the players and with fans coming last. My view is that this should be turned by 180 degrees.

Regulation of Market for Lion Hunting

In the last blog post, I posited that the conservation of big cats such as lions will most likely fail unless the movements fighting against extinction adopt some market and prices mechanisms as instruments of conservation. Indeed I made a bold bet with myself that given the choice between moral exhortation and a modest market based alternative, I would choose the latter. Dr. Luke Hunter, who works at Panthera, an organization committed to the worldwide conservation of big cats, addresses the market and price question in the piece in the monthly magazine of the organization. His main attack is against the Endangered Species Act which will forbid Us hunters from collecting trophies of lions. 

It is certainly not the first but is obviously a brave effort at sticking his neck out by stating that hunting of lions may is "unpalatable but necessary" for ensuring their survival. His view is quite pragmatic and seeks to confront the simplistic view that the only option is for the human person to stop being evil lions live. In detail, he states that since hunters are prepared to pay as much as US$ 125,000 to take lion parts as a trophy and this demand could be exploited minimally to raise funds for conservation of the species in general. 

The intelligence of this view is demonstrated in his admission that the ideas that inform determination of numbers to be harvested through hunting is based on shoddy science and may be all guess work. his response is that the use of a market based scheme should apply conservative quotas together with extraction based on the age of the animal would be a giant leap forward. Going further he argues that this scheme, well regulated would confirm that hunting will not necessarily harm numbers and growth of the species. He concludes: "Whatever one's personal feeling, hunting should be regarded as yet another tool in the arsenal of options we must consider to conserve the lion". 

Individual lions facing high powered rifles may not agree but surely that's one step forward in incorporate a form of prices and markets in the options for species conservation.  

Saving Lions Demands A Brave Solution

As expected, it states that demand for the fur, claws and head of the lion are creating a reduction in the population of male lions. Suzanne Goldenberg of the Guardian writes about the danger that the killing of one lion exposes its pride to due to the instinctive eradication of younger members of a colonized pride. The story makes the argument that US based collectors of animal trophies are driving down these numbers by creating demand which is satisfied by illegal poaching in addition to farmers who kill lions in order to expand their farming acreage.

In all, institutions that call for conservation make a strong case regarding the dynamics that affect the number of endangered species such a lions. Nobody would be oppose the need for conservation where the number of lions in the wild have crashed to 40,000 or less,  from 200,000 in a century. However, as I have stated here about the conservation of tigers, it is clear that the curve will go further towards extinction if the conservation approach remains wedded to moral exhortation and reliance on governments that cannot enforce the obligations being placed upon them.

If saving the King of the Jungle is agreed upon, then lessons must be drawn from a fair critique of the model of conservation being pursued. It is anathema to many conservationists, but the incorporation of a market mechanism is inevitable. With 40,000 lions out there, it would help to provide property rights in a creative way to ranch owners or other people to secure a portion of the animals and breed them in the wild. This approach could allow for comparison with the existing conservation model over a ten year time horizon to see what the results are. I would place my bet on the property rights model.
 

Record Price for Comic Book

It is a fact well known that if one was to find the correct price for any good, then a well-designed auction would reveal its price. And this principle has worked again with good effect as reported here that a copy of the 15th edition of Spiderman comics was sold for US$ 1.1 million. That is surely an impressive amount of money and the collector has been rewarded for keeping the comic published in 1962 in good and marketable condition.

Leaving aside those who argue whether a comic book should ever cost that much, my partiality towards markets leads me to ask what are the applicable principles recognizable to a student of economics. To begin with, I am less convinced that the price has been entirely determined by the fact that this is a piece of antique. To me, the proper way to look at it is that its age notwithstanding, this is a classic situation where the price offered was about the scarcity of the item as opposed to the age alone. So the correct principle that a teacher of economics should ask students to take note of is that scarcity operates to determine prices.

My business idea is to consider preparing a catalogue of equally scarce and valuable objects that high income citizens of a prosperous may purchase. Wish me luck!

Adam Smith On Rank

"This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least to neglect persons of poor and mean condition, though both necessary to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments. " The Theory of Moral Sentiments. (Kindle Loc. 999)

Publishers Have Hangups About E-books

It has become clear to me by day that publishers are unable to think clearly about the economics of e-books because they are caught up i comparing it directly with its printed versions. Patrick Kingsley of the Guardian cites  an instance in which one of the largest publishers has insisted that e-books made available to libraries would have to be replaced after being lent out 26 times. The reason given is that print editions have often been replaced after that number.

Now, one does not have to be partial to e-books or particularly like Amazon to see that this is an unbelievably preposterous argument. To start with, e-books are e-books and therefore not printed books and so to try and market them or calculate profitability based on that which is being replaced is laughable. What is clear here is that this publishing house has not made time to think carefully about how e-books will alter their marketing posture and have tried to graft the lives of e-books o that which they know; print versions. And as the story states, two librarians have already proved that the number 26 was arbitrarily determined and is therefore unjustifiable.

I must sympathize with an industry whose leading paradigm is changing rapidly and whose future is uncertain. Still, this is no reason to maintain such woolly thinking by holding on to the familiar. E-books are now going to reduce margins but they have the advantage that they are easily reproducible. A more reasonable approach to how libraries lend out e-books requires rethinking but should not be based on such a poor premise and hangups with paper versions of publications.     

Technology Can Cut Off Corrupt Governments

One of the most monotonous but true arguments deployed by people who are instinctively opposed to foreign assistance is that foreign aid raises corruption in many developing countries. The argument is very difficult to rebut because in many respects, the foreign assistance business is in the hands of developing country governments filled with dishonest people who face no disincentives for stealing public money. On a political economy level, it is also possible that foreign assistance displaces local sources of revenue and thereby isolates these governments from the pressures of responding to domestic business owners who would demand improved services. 

And yet for all these potent arguments, one is surprised that the solutions usually rest with the ideological position that because managing this assistance creates risks of embezzlement, then assistance should cease. My view is that as an ideological position, this stance is legitimate but it is less so as an analytical result. Henry Jackelen and Jamie Zimmerman write in Slate that the use of electronic payments would not only reduce the costs of administering aid programs but would also cleverly circumvent corrupt bureaucratic structures in which developing countries excel.  As they state, there is precedent for use of direct payments in executing development projects and their record suggests that the costs of implementing electronic payments into delivery of assistance would be recovered very quickly. 

Economists Too Have Apples Fall on Their Heads

It is fairly accurate to state that the formation of ideas about the profession to pursue is a very subjective process. And yet one of the most interesting things to read s how an individual navigated the various choices available and settled to being a lawyer, accountant or yes, a professional economist. I remember that every time I encounter a narrative by an economist about how they came to pursue the subject, it is often very well written and altogether authentic.

Among the descriptions that I have read about how a youthful and very intelligent person came to decide what area of academia to pursue are memorable accounts by Paul Krugman, Dani Rodrik, Gregory Mankiw, Avinash Dixit and Amartya K. Sen. A definitive feature of the very different individuals is that most of them came to study economics through various routes and motivating factors. I am unable to create links to all their musings save for the one by Avinash and Mankiw respectively which are readily available to me now.

In this short feature in the Harvard Gazette, Gita Gopinath describes how she settled for economics generally and to the subject of international macroeconomics and currencies. In her case, the subject was chosen because of the coincidence that she was considering her career choice at the time when a financial crisis occurred. This appears to have motivated her to seek explanations for an observed phenomenon. So in this case, the metaphorical apple that fell on her head was that of an international crisis. I suspect that Isaac Newton would add, "Isn't that familiar?"