Econ mom and the Rubik’s Cube of Indian Polity

Lil One is on his way to become a cube master. Much to the consternation of the family. Why, you may be thinking. That’s quite a positive trait in a child, isn’t it? Try sitting next to the cube master in a movie theater, where he is watching the film while his hands are loudly clicking on the cube. “I solved it in 3 minutes here, Ma. That’s akin to solving it blindfolded!” he pretty much yelled to the theater, causing the woman next to me giving me such an evil look that I could have sensed it blindfolded.

Early morning, as soon as he opens his eyes, his hands start on the cube. I have just about prevented him from taking it into the bath for a shower. Watch TV and click, click, click, goes the cube. At the dinner table, while me n Hubby lick the plates, Lil One clicks the cube. To my yelling that he cannot possibly do it during studies, pat came the answer. “I am doing it with one hand, without even seeing the combinations, Ma.”Uh, oh.

A quick visit to the Phadke household is quite a trauma for the poor, unsuspecting guests. They come into the living room to find different cubes spread out all across, the 2×2, 3×3, 4×4, mirror cube, pyramid cube…oh, it just goes on. After that first delighted “OMG, is it the little guy who does this?” most are treated to a non-stop show of prowess by Lil One on all cubes, and then just when they think this is the last cube and it’s finally over, he jauntily blindfolds himself and then does ALL of the damn things again.

By this time, the poor dear guest has this transfixed kind of a glassy smile on her face and last week our auntie (when I say “our”, it means its Hubby’s) and my (note the change in the pronoun please) severest culinary critic almost jogged despite her rheumatic arthritis to the dining room after the Great Rubik Demo. Normally, I would have had to deal with “Oh, but this is not how Pulav is prepared. Don’t feel bad haan, beti, I am just telling you so that you can improve!” Grrrr. But seeing her in jogging form was good fun! I innocently and sweetly called out to Lil One and said “And did you show the latest octagonal cube to Grandmom”, on which Grandmom, in a fit of panic actually started asking me for my recipe to cook the Pulav. I paid a silent homage to Rubik.

Apart from controlling irritating relatives, the cube has its own intellectual advantages. What is really special about the cube is that you cannot solve it by solving each side individually. In fact, most of the times, when Lil One tries out his “algorithms”, I tend to sit there biting my lip, sure he’s doing something wrong. Up Side Down Side Up Side Side Down. Because, it looks all wrong. Till quite the last step, the observer does not really understand where the pattern is heading.

“Ummm, are you sure that turn is right?” I asked with trepidation.

“Your problem is that you want to sort out one thing and then go for the other. But that is exactly where Rubik creates the challenge. You have to see the solution as a whole, Ma, not just sum over smaller solutions. You’ll never get the cube that way.”

The whole is more than sum of parts“, that is what he’s trying to tell me. Look for the overall solution, don’t just solve one issue. We’ll never get the cube that way. Econ Mom rose and moved into her research field.

My current research is on functioning of the Panchayati Raj Institution in general and on Mahila Sarpanches, in particular. It is in this context that I’ve been meeting up with quite a lot of stakeholders involved in the system. From Government officials to corporators, from Mahila Sarpanches to NGOs; everyone has a different take on why the system does not work efficiently.

The Government has got in reserved seats for women so that their participation in active politics is increased. However, whether this reservation alone will serve the objective is a HUGE question mark. Let me share some of the very interesting insights I got on field whilst working on this.

Government officials say that this will work in the long run. And they are damn right. Talk to any woman Sarpanch and she tells you that it takes around 2 years to find her feet. And then the work really commences. Thus, only if the reservation can be put into place for 2 terms i.e. they get a continuous term of 10 years, only then can they really make a difference. There was a lady who told me that if she is anyway not going to get continuity or salary (Sarpanches do not receive any salary), why go against the wishes of the family and attend all those Gram Sabha meetings that eat into important housework?

So I got thinking that maybe lack of continuity is a big practical problem that serves as a deterrent in terms of women entering politics. So should we then enforce women seats for two continuous terms? Will that solve the issue? Will that better the system? Unfortunately, and stunningly, the answer is NO.

You reserve a seat for women for 10 years and the male leaders who’ve created local development networks will pretty much stop working in those constituencies. They either shift constituencies which is a monetarily and politically painful process, or they simply won’t do any constructive work. Worse, some of them may get disruptive and not allow the woman to work.

So, the person with power won’t work and the person in power does not know what to do. It is indeed fair to give 2 terms to a woman to find her feet in a man’s world, but is it fair to displace the men-centric systems, that with all of their messy and machoistic problems, work? Can the system be held in limbo till the time that we’ve ensured gender equality, is a classic issue of the Indian polity and economy for many decades now. And, there are no answers.

The problem as I see it today is that we are unfortunately, a culturally gender-unequal society. There are gender biases built into the very way we think and act. Gender equality comes through a culture of acceptance and this acceptance involves the fact that men and women work differently when facing different issues. And this is going to take time. In the meanwhile, our policy makers are left with no other option than to reserve seats for women.

What women reservations do is that they try to impose political equality on a system that is socially, economically, culturally, physically and emotionally unequal. And that’s why they create so many issues.

It’s exactly what my Lil One had warned me against. It’s like trying to solve only one side of the Rubik’s cube and pray that all other pieces will automatically fall into place.

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Watch out for the next article: Issues of the Mahila Sarpanches in Maharashtra.

 

 

 

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To Maggi it or to Volkswagen it: That is the question!

Dear Reader,

This is a satire piece on “Old Brands, New Catchwords” that appeared in the Hindu Business Line today under my column titled Tweakonomics. You may want to read it at http://www.thehindubusinessline.com/opinion/columns/talking-business/article7802864.ece. Else, read it here directly. Enjoy!

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Maggi is back! The Harvard MBA programme, which is always on the lookout for some Indian story of riches to rags and back to riches, is thrilled to bits. After all, it has been a while since the Railways managed to post profits and Laluji visited Harvard to talk about the “phinancial” ratio analysis of the Railways. Many claim the Phinance Phaculty has not been the same since.

The success of any MBA programme, amongst other things, depends on the discovery and usage of new phrases, which sound fancy and mostly don’t mean a dime. Harvard is now debating introducing a new catchword: To maggi (verb). Meaning: To be at the height of success after braving all odds (such as the maida content concern of the atta-savvy Indian mommies), to be suddenly pushed to the nadir by a flip coin-cidence and then to stage a slow but steady come back. Economic usage: The Chinese devaluation led to a sharp depreciation of the rupee but it maggied back bravely. Poetic usage: The trader married, the market maggied. Other uses: Even as the polls revealed a complete washout for the UPA, there remain innocent souls who are hoping to see an overall maggying of the party.

The other is “to volkswagen” (verb). Meaning: To cheat using past reputation as a shield. Economic usage: Earlier, a reduction in the repo used to translate into a cut in the lending rate, but there is increasing evidence of banks volkswagening the RBI directive. Poetic usage: Hell hath no fury like a hedge-fund volkswagened. Or: “Won’t you volkswagen it,” said Goldman Sachs to the sly. Other uses: Indian consumer courts increasingly find themselves saddled with cases of real estate players volkswagening customers.

Other phrases with etymological connections from the past are “to cadbury it” (verb). Meaning: To emerge unscathed even after wormy controversies. Economic usage: Much to the pride of the RBI, the Consumer Price Index continues to cadbury successfully by showing deflation numbers even though the pulse of the country is affected by the pulses of the country. Poetic usage: Man buries, God cadburies. Other uses: Many questions have been raised on the methodology used in the GDP series revision. However, even as the CSO cadburied the revision, the world started accepting that the growth rate of the Indian economy is indeed 7.5 per cent.

To coca (verb). Meaning: To be accepted. To cola (verb). Meaning: To have a feeling that something is wrong. To coca-cola (verb). Meaning: To accept something despite that niggling feeling that something could be wrong. Economic usage: Even as most countries have coca-colaed the low oil prices, how long these would persist depend heavily on the dynamics of West Asia. Poetic Usage: All the oils of Arabia cannot coca-cola this little hand. Other uses: The government needs to show some fast action on policies before the coca-colaing displayed by the public cools down suddenly.

Syllabus revisions at Harvard are under way even as the Indian brand issues unfold. Finance students will be taught the art of maggying stocks back into the game. Volkswagen it, only if you can cadbury it, is what the marketing students will be told. If you’ve coca-colaed a new employee, train him immediately, will be myntra carried in HR manuals. Students opting for operations management will be put under the Six “Stigma” certification course, with low tolerance margins for cocaing what is apparently to be colaed out. Harvard is flipping the kart! How Amazon!

Econ mom gets Dabbang on corruption

 It was very “Saturday afternoon”. After a heavy lunch, we settled down to watch Salman Khan vs. the baddies in Dabbang. The great fun in watching Hindi films with many members of the extended family is that people are really on their own trips.

The women were tittering about Sonakshi Sinha’s many costumes, her weight, her forehead, her dance and what not. In the meanwhile, the kids, showing superb level of disinterest in the moves of the femme fatale (God bless them!), were playing cards. They were however extremely tuned in to the movie and were singing all the songs together with the lead playback with great gusto. The place where the cards would be forgotten is the dishoom-dishoom sequences, which is where the boys were really perking up.

Last but not the least, there were the males. Sigh. Most of them never watch films for the film sake. Rather, this is the platform they use to make loud comments about the general state of economics and politics in the country. They can use any scene in any movie to make sure that the women of the house are treated to a parallel course on inflation (please spare me!), growth and development, nutrition, pollution, women welfare (that could be increased if you just let us watch the film peacefully), gym charges, how brawn is negatively correlated to brain, how films have deteriorated across time, religion, mythology and of course, politics.

Watching the evil Bacchha bhaiya dealing with the local Bihar politics in his own uncouth fashion was simply too much for most of them. A few elderly men reacted spiritually in the “Khuda ko mooh bhi dikhana hain ek din yaaron” strain. Hubby and cronies reacted in superb disdain to this strain of thought and focussed more on showing off their prowess and astute gyan of Bihari politics (Really, now!). This is what you’d have heard in my living room that day:

“She was 105 kilos and now just look at her.”

“Of all the goons that are literally nurtured by politicians, Biharis would really lead the way.”

“Goes without saying. That’s why their level of development has been so pathetic despite such huge natural resources.”

“Tea or coffee?”

“Mom, he is cheating on me and sees all my cards all the time.”

“Arre, it’s simply not possible to reduce like this through gymming. Wouldn’t we have reduced? Its liposuction, I tell you”

“And then after geography classes, I have the PT period and they make us play in the sun. I hate school.”

“But the situation has improved drastically after the Laloo-Rabri dynasty politics reduced. They are actually making decent progress.”

“Beta, no sugar in my tea.”

SIGH! The level of noise in our living room was really increasing and we were all yelling at the kids not to yell so much, when suddenly, the unifying thought came through from my uncle as a welcome relief. “Why they need so much money, I don’t understand. Corrupt, all of them!”

This is the most agreed upon thought across all families in India and a thought no one can deny. Everyone started aligning themselves to this agreeable intellectual position though Econ Mom was already moving back in time to last week, where she had to meet with a number of local politicians to understand local body election dynamics.

Multi-disciplinary is the mantra in economics. Ranging from climate change and insurance products to using economic tools for political analysis, projects require economists to have a handle on fairly diverse issues. At the Gokhale Institute of Politics and Economics, we are currently trying to understand the dynamics of local body elections since many local bodies will move into election processes from around November 2016.

It is in the course of this study that we have meetings with journalists, economists, law makers, Maharashtra Government officials and of course, corporators lined up now. Last week was superbly interesting because I was looking at issues from a politician’s angle, rather than from a common man perspective.

A local young candidate in Pune, who has huge political aspirations and wanted to contest from the Paud road constituency shared some very interesting insights. “This entire process of getting a ticket and then winning/losing is a big, big headache,” he remarked. “Madam, in the past 5 years, I have been working in this basti trying to get some basic things in place for the people. And that involves getting a loan for someone’s ironing laundry business to solving marital problems wherein the woman of the house gets beaten up by the husband. Each day is a new problem. Someone comes and says the water pipe is broken. I have to give money. Someone wants to paint the entrance gate to our basti. I pay money again.”

While listening to him, I realized that for him, money was survival technique. I have largely grown up with the thought “Why do they need so much money” and it was very interesting for me to meet with someone who was giving me the answer to this largely rhetorical question of the middle class Indian.

“I have some 800 young boys who do these odd jobs for me. They are mostly school dropouts but have a skillset of local intervention, which you educated people lack. People keep saying that literacy will solve the issues in Pune but literate people will never understand how to quickly create funds in half an hour to facilitate emergencies. And we are constantly looking at such problems.”

“Now you can imagine how much money I must have invested in the past 5 years.” How very interesting! He used the word investment, not expenditure! Pre-election investments are a huge gamble for these people. The closest simile I could think of in our white collared world was the payment of astronomical fees for the medical school, wherein the expenditure on the would-be doctor runs into crores before you get the degree.

“And Madam, when the party declared that I would get a ticket, the boys went overboard. Because now there was a genuine chance that our efforts in the past 5 years would pay off. They arranged for a huge, really huge procession. Mikes, cars, garlands, you name it. I went to the procession like a king only to return and find out that my ticket has been cancelled.”

He stopped for a moment. “Can you imagine what a shock I must have got? My boys were crestfallen. It’s not a political game, Madam. It’s a financial one. People who’ve given me money in the past did so on the faith that once I won the local elections, I would be able to do something for them. But now they’ll need their money back. And I want more money to sustain the work till the next elections; else, the earlier investment is down the drain.”

Why do politicians need money? Because most of them and I’m talking about those who’ve come from the grassroots, do significant amount of financial transactions even before they are formally enrolled in the game. And once they’re in, the money flows like water and they look at it as redemption amount. For all the headache and heartbreak. For all the good work that went unappreciated when they were not in power.

And it doesn’t stop here. Once in power too, the money spinning abilities are required. Most people who approach the local politician, do so for money. Or for a job. “I need a job, Sahab. I am a seventh standard drop-out and I’m not getting a job anywhere. Even for a peon’s job, we now need BA.”

These huge quasi-Government or quasi-corporate structures of dairies and sugar factories and educational institutes that have been created in Pune or Kolhapur are all ways of making sure that these young people get absorbed into the stream at some point in time. It is easy for Sahab to make a call and set up a job for a seventh standard dropout as a lab-boy or as a driver in one of these quasi-businesses.

Quasi businesses give the system a much needed boost. They create job opportunities for the youth in the area. They also create a useful facade behind which cash transactions can be easily swept. Most importantly, they create goodwill and votebanks for politicians. It’s self-sustaining.

Now, to create this kind of a quasi structure is tricky and again requires big money. Hence, once in power, you not only need money to clear the transactions you carried out as “investments”, but you also need money to keep gambling for the future.

End of the day, these are unique systems that have been created in India, as a private response to the failure of provision of public goods. It’s very easy for us to say that politicians are corrupt, but frankly till the time that the underlying delivery mechanisms are changed, it would be not only impossible but maybe also unfair to get rid of corruption! Till such a time that bank are not able to fully offer financial inclusion and till such a time that enough private sector jobs are not created across skill-sets, such person or politician driven systems will always thrive in the country.

Don’t get me wrong. I’m not supporting corruption. I am suddenly alive to the fact that it’s a different ball game when watched from the other side.

I thought Salman Khan summed it up extraordinarily well when he claimed to my indignant-about-corruption family, “Hum yahaan ke Robinhood hain, Robinhood Pandey.”

Ganapati Bappa and SEZs!

Dear Reader,

This is a piece I wrote for the October Edition of Equilibria, a magazine run by the students of Gokhale Institute of Politics and Economics. The article was written when the Ganesh festival in Pune was in its heyday- sometime around mid-September.

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It’s the Ganeshotsav fervour in Pune. Like every year, the city has ramped up with pandals, shows, decorations, lighting and music. People go out every evening to see the themes and shows hosted by the Ganesh Mandals all over Pune. The jostling, police bandobast and the terrible traffic jams, milling crowds, overfull eateries; all of this is very much Ganeshotsav.

This entire event of course, centers around one force, the Bappa. Artisans create differently themed Bappa idols for the Mandals. So you are bound to find a Ganpati Bappa idol in a Saibaba avatar or a Bal Ganesh idol somewhere or a dancing Ganesh reminiscent of the Nataraj somewhere. Interestingly, the Bappa idol themes also enjoy a huge connect with what is popular in media or cinema. This year, with the huge box office success of the mythologically themed movie Bahubali, one sees a lot of Mandals with Bahubali Ganesh as the chief attraction for drawing crowds!

If the demand for these different idols is created by the Ganesh Mandals in Pune and elsewhere in Mahaashtra, the supply of the same largely comes from the definitive idol making hub of Maharashtra, Pen. Pen is a village situated near Panvel and is famous for its idol making skills. Pen idols are not only supplied to Mandals in Maharastra but are also enjoying a huge success with exports. While it is difficult to put down a very formal number on such an unorganized business, one estimate is that Pen supplied 16 lakh idols, big and small, this year to Mandals as well as to retail end customers who celebrate the Ganeshotsav at home.

Even while I was reading about these numbers in the local newspaper, my mind went back to Pen. It was the year 2007. I was then working with the Mahratta Chamber of Commerce, Industries and Agriculture (MCCIA). MCCIA was coming up with a report on the impact of Ganeshotsav on the local socio-economic-political structure of Pune and I decided to visit Pen to meet with the artisans and understand the issues involved in supplying Ganesh idols on such a huge scale.

It was one colourful visit. As you enter Pen, there are three main streets that are full of Ganapati idol makers. As far as the eye can reach, there are only Bappa idols. We first visited Mr. Deodhar, one of the very well known artisans in Pen. He spoke about how the ecological concerns had raised the demand for the Shadu-clay idols. But it’s much easier to make PoP idols using basic moulds whereas Shadu idols require some level of crafting, hence raising demand for artisans as well as the costs. He also was vocal about how difficult it is to get the next generation into the idol making business when youngsters really want to move to the cities in the search of a more stable job with higher pay packets.

All idol-makers voiced similar concerns about getting skilled manpower. Skilled artisans (especially those who draw the eyes for the idol) are hard to come by. There were nearly 4 idol-makers who rued how difficult it had been that year to access these skilled artisans. “Why? What’s so special about this year? I am sure you must have faced this problem every year,” I said.

Imagine my shock when one of the artisans said, “Yes, we do face the problem every year. But this year the problem has become even more acute because Reliance is sourcing land for their SEZ in Pen!”

And suddenly, my eyes started seeing the tell-tale signs. Oh, how could I have missed it! I was so involved in seeing the idols that I had failed to take cognition of the huge signboards carrying the Reliance logo, the fencing around vacant lands, the banners outlining the protest issues around me. I was standing spang in the middle of the Raigad land acquisition program.

The SEZ act was passed in 2005 and Reliance had decided to put up a huge SEZ in Raigad district. The acquisition was happening fast and furious and on enquiring about it, a couple of farmers told me that the going rate for land was between R. 8 lakh per acre to Rs. 12 lakh per acre. “A skilled artisan gets Rs.100 per idol he finishes. Who is going to work for that rate when you have just sold your land for Rs. 8 lakh?”said one idol-maker. Another made a very interesting observation. “Madam, you will be hard pressed to find good schools and hospitals in this area. But there’s a Bolero standing in front of every house in my village.”

And that was really true. As sudden cash entered the village through the land deals, families didn’t know how to handle those windfalls. There were reports aplenty, of families having been destroyed due to frittering away the money on cars and lottery tickets and having no back up since they’d lost the land. Reliance too intervened with an NGO activity; later deals saw FDs or insurance policies being given to the families instead of cash.

As an economist, it was interesting for me to see how the plans for the Navi Mumbai SEZ had changed the entire socio-economic fabric of an artisan village. As fringe land around the village was acquired and became more expensive, the Ganapati idol making units, whose main requirement is land, had been forced to lease out land farther away from the village. New villages came up with cheaper land and hence cheaper idols. Some idol workshops relocated to these villages, leaving the workshops in Pen vacant. Artisan availability went down drastically.

It’s 8 years after that visit. The SEZ never really went through. There were extensions given on land acquisition but the program was never completed. The SEZ wave came in and went away, but in its wake left behind a lot of disturbances in a quaint, laid-back, artistic village known for creating the Lord of Wisdom.

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Coffee and the Sensex: A lot can happen over both!

Dear Reader,

Hi! This is a humor piece I wrote for “Tweakonomics”, my column in the Hindu Business Line, on the IPO done by Café Coffee Day. You can see the article at http://www.thehindubusinessline.com/opinion/columns/coffee-and-the-sensex/article7766480.ece. Else, read it here directly. Enjoy!

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As CCD gets more stock savvy, there are major changes at its counters. The staff is being trained to understand the stock appetite of customers so that you can be offered the right coffee.

The basic humble cappuccino is for stock market novices. Do you put all your savings into FDs? Do you have crores invested into life-and-other insurance products? Do you buy gold for that rainy day? Aah! And you’ve just started that SIP, but you’re disturbed, eh? Awright, you stock novice! Enjoy the cappuccino. It’s an Italian espresso smoothened with steamed and foamed milk. Just like you’ve smoothened the stock risk with gold and insurance.

And then there are those unfortunate mega-bulls. Even when the Sensex goes to 28500, they say with childish enthusiasm, “We’ll sell when it goes to 29000!” These new-Newtons believe that whatever goes up has to go up even more, and immediately. The poor idiots are always latte in selling and drive their investment managers crazy. We’ve analysed your stock persona! Have the Hazelnut Latte, with espresso representing your indomitable spirit with the essence of those you’re driving nuts!

Oh, and you are quite the opportunist, aren’t you? No long-term investments, no brand loyalty. You go where the money is, you are impulsive, always trading. Hmmm. The quintessential Dalal Street types, always on the lookout for the best “mauka.” Yessir! Try out Cafe Mocha, our special beverage combining the hot milk of risk appetite with opportunity, that sinful chocolate sauce!

How interesting! In enters the modern woman fund manager. This is a new day combination. Modern, yet tied to the roots. Packs off the kids to school in the morning and creates hungama on the markets through the day. Uses technical analysis to forecast stock movements, but will also use her womanly sixth sense to predict what to buy.

Her life is a milk shake, with different influences blending into one wonderful, heady drink. She has just entered a cafe, but to offer her a coffee would be far too mundane. This is one tough customer, alright, but we’ve got just the right beverage for you! Introducing the Blushberry Frappe, chunks of strawberry in a shake topped with whipped cream.

For the old hands, those who’ve spent their life dabbling in stocks, go for the traditional Hot Tea. Newbies, go for the Fruiteazers, but beware of the “Meltdown”! For those who continue with their reckless investment pattern despite bad experiences, there’s “Devil’s Own”. After all, it’s better to have traded and lost than never to have traded at all. For those whose mood depends on the Sensex level, there’s the “Cold Sparkle”. And for those who’re now philosophically rather than fiscally following the Sensex, there’s “Kaapi Nirvana”.

Futures traders can take coffee beans home at today’s price to enjoy coffee at the same price in the future. Try AROMA instead of ARIMA models! Those who don’t desire customised intervention can take away the vending machine.

The “Tropical Iceberg” is the derivatives offering, with layers of chocolate and other gooey stuff, with coffee as the underlying security. CCD is also tying up with insurance firms to give you a full ENT check-up, should you feel a bit uneasy after trying those icy drinks; that’ll mark the foray of CCD into more exotic products such as Coffee Default Swaps.

The indicative price of the IPO is ₹328 per share. Forgo 3 coffees today, to enjoy a lifetime of coffee. Open for business!

Angus Deaton and an unequal world

Dear Reader,

Hi! My article on the implications of Deaton’s work on India appeared in the Hindu Business Line today. You can read it below or may want to read it at  http://www.thehindubusinessline.com/opinion/angus-deaton-and-an-unequal-world/article7757876.ece

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The Economics Nobel winner has blended meticulous data with broad-based field observations to interpret inequality

His book titled The Great Escape: Health, Wealth and the Origins of Inequality grips the reader with vivid examples and similes.

The book starts by talking about the movie, The Great Escape. For those who haven’t seen it, the movie is about a South African from the Royal Air Force who is captured by the Nazis and escapes the prisoners of war camp multiple times only to be recaptured multiple times.

The movie shows how a handful of prisoners build tunnels right under the nose of the Nazis to escape from the camp. All but three are recaptured; a few die. What is it that the enterprising prisoners wanted? They wanted freedom, and were willing to risk their lives for it. Such great escape episodes have happened numerous times in the history of mankind.

The Industrial Revolution or reforms initiation in India could be examples of a concerted effort by a section of the population to move towards a better, more unencumbered life. It is here that Deaton comes out with a mind-boggling issue. He says that even if the movie did not dwell on those who did not manage to escape, it makes sense for a social scientist to do so.

Escape and after

Very often, it is those left behind who suffer the consequences of the great escape in that it is they who bear more physical hardships or reduced freedom after the escape. And herein lies the genesis of inequality. Inequality, says Deaton, is a natural by-product of those who desire growth. Re-escape and recapture: That is the way growth progresses.

But it leaves in its wake numerous and sometimes more severe problems for those who don’t manage to escape. As global growth episodes sharpened, especially after 1985, there were billions who benefited from the process. Just as there were billions who got hurt due to the great escape.

However, it is not only poor income levels that affect the living standards of the underprivileged in the developing economies. There’s also poor nutrition levels and poor health issues.

Whenever great epidemics have made their presence felt, great escapes from the epidemics have also come in the form of new vaccines. Vaccines for malaria and cholera helped everyone across the board, but to begin with, it helped the richer classes access a better life, broadening the gap in living standards.

That smoking causes cancer is a beaten-up statement; yet it is the richer classes that manage to quit smoking more successfully than the poorer classes.

Here’s a beautiful quote from Deaton that is particularly striking in this context: “Necessity may be the mother of invention, but there is nothing that guarantees a successful pregnancy.”

Nutri-puzzles

Deaton has made a number of observations on the Indian economy in various published papers. In a very interesting paper, ‘Food and Nutrition in India: Facts and Interpretation’, published in the Economical and Political Weekly (2008), Angus Deaton and Jean Dreze cite data from 1983 to 2005 to highlight a number of “nutri-puzzles” in India.

The first of these puzzles is that in the period under consideration, there was a rapid increase in per capita income levels, whereas the per capita calorie consumption seems to have fallen.

Secondly, while people have definitely reduced the consumption of cereals, there also seems to be a reduction in the per capita consumption of pulses. So it is not the case that carbohydrates have been substituted by protein.

The third puzzle is that even the relative food prices in the period under consideration have not increased substantially. Fourth, reduction in calorie consumption may not only indicate worsening nutrition status, it may actually be indicating lesser requirement of calories as physical hardships have reduced over time.

To resolve these puzzles, Deaton makes a clear case for harmonising and dovetailing nutrition statistics (currently compiled by the National Nutrition Monitoring Bureau and the National Family Health Survey) with the NSS data so that nutrition and health patterns can be read more clearly.

In another 2008 paper, Deaton has used the consumer price indices for agricultural and rural labourers (CPI-AL) and for industrial workers (CPI-IW) to make a commentary on poverty levels.

Whilst measuring poverty, poverty levels are held constant in real terms and are then multiplied by CPI indices to get the nominal measure. Deaton makes the point that poverty levels in real terms are firstly under-quoted.

Secondly, he shows that the food component of the CPI-AL often understates food inflation. Hence, the nominal poverty level calculation in India manages to understate the level of actual poverty significantly.

His paper calculates that in 2004, the official figures of poverty as calculated by the government were at least 3 per cent short of the actual poverty levels.

Tackling poverty

He has also done incisive work on anti-poverty strategies, some of which is relevant to Indian policy in the current context. In a paper that he writes with Princeton scholar and wife, Anne Case, Deaton argues strongly in favour of cash transfers as an anti-poverty tool. Calling it a “first best transfer scheme”, he highlights how cash prizes enhance consumption choices, reach direct beneficiaries and can be made women-centric.

On the other hand, poverty alleviation programmes that have second-best in-kind transfer schemes very often are problematic since they provide goods, whose shadow value to the beneficiaries is often less than the cost of the same to the provider. These and such arguments have also been rapidly making the rounds in India even as we debate revamping the PDS and moving towards a DBT scheme of food security.

As Thomas Piketty says, it’s an unequal world. Deaton’s genius is to open all the various facets of the inequality through minute data-based evidences as well as broad-based field observations. The Indian government may do well to ponder on the ‘Great Left Behind’ even while it tries its Great Escape.

Angus Deaton: The Economics Nobel Prize Winner 2015

It’s out. It’s Angus Deaton. A prize for outstanding empirical contribution towards understanding consumption, poverty and health better.

Angus Deaton has been on the Nobel radar for a while now and whilst I haven’t really read him extensively, there are a few things that I’ve always admired about him and I thought an informal, quick blog on his contribution today wouldn’t be really out of place.

For starters, Angus Deaton isn’t your average talk-smart-so-that-noone-understands-you economist. The man writes in pure English (FULL points from me on this!) and it is here that his entire explanation of poverty becomes extremely accessible and interesting for the student of economics or even for an averagely intelligent common man. His book titled “The Great Escape: Health, Wealth and the Origins of Inequality” is one of the most interesting pieces of work done by a Nobel Laureate.

The book starts by talking about the movie “The Great Escape.” For those of you who haven’t seen it, the movie is about a South African from    the Royal Air Force who was captured by the Nazis and re-escaped the camp multiple times only to be re-captured multiple times. The movie shows how a handful of prisoners build three tunnels Tom, Dick and Harry right under the nose of the Nazis to escape from the camp. All but three were re-captured and a few died.

What is it that the enterprising prisoners wanted? They wanted freedom, and were willing to risk their life for gaining a better life. Such great escape episodes have happened numerous times in the history of mankind. The Industrial Revolution or Reforms initiation in India could be examples of a concerted effort by a section of the population to move towards a better, more unencumbered life.

It is here that Deaton comes out with a mind-boggling issue. He says that even if the movie did not, it makes sense for a social scientist to dwell on what happened to those who did not manage to escape. Superb! Very often, it is the others left behind who suffer the consequences of the great escape in that it is them who bear more physical hardships or reduced freedom after the escape.

And herein lies the genesis of inequality. Inequality, says Deaton, is a natural by-product of those who desire growth. Re-escape and re-capture: That is the way growth progresses. But it leaves in its wake numerous and sometimes more severe problems for those who didn’t manage to escape. As global growth episodes sharpened, especially after 1985, there were billions who benefited by the process. Just as there were billions who got hurt due to the great escape.

How do we measure inequality? As an economist, one would be tempted to go by the usual GDP rule. Has the gap in terms of GDP widened? A lot of economists put a lot of energy in describing how to measure this gap. Deaton remarks that it is not about how to measure, but rather about what to measure. He is almost Amartya Sen-esque when he alludes to the rising health inequality being as important or maybe even more important than the rising wealth inequality. He has been prolific in terms of the empirical body of evidence he provides to prove that health gaps have increased so much in the past few years that measurement of the wealth gaps by themselves are almost meaningless.

Whenever great epidemics have made their presence felt, great escapes from the epidemics have also come out in the form of new vaccines. Vaccines for malaria and cholera helped everyone across the board, but to begin with, it helped the richer classes access a better life, broadening the gap in the living standards. That smoking causes cancer is a beaten-up statement; yet it is the richer classes that manage to quit smoking more successfully than the poorer classes. Here’s a beautiful quote from Deaton that I am particularly fond of “Necessity may be the mother of invention, but there is nothing that guarantees a successful pregnancy.”

There is one more thing about Deaton: He has been particularly fond of the Indian case-study in his numerous works on poverty, health and welfare. This prize should help the Indian reforms and growth-distribution debate to come into sharper focus and hence will hopefully create more insights for Indian policy-makers.

All in all, a superb choice. I have only one small concern which stems largely from my rightist orientation. The award is a Great Escape for the left camp. Let no one say that left is not right. I only hope it won’t cause more pain in the Great Left Behind camp of those policy makers that believe in growth. Modiji, are you listening?