Chocolate and Gold Coins

Friday, September 30, 2005

The Bluffmaster

“I think we should partner with Tata Consulting. They have a lot expertise in this area.”
My wife was talking to a small group of colleagues. In that group was a bluffmaster:

“Oh, I’ve heard of Tata. It’s spelled “T” “A” “T” “A” and it comes from the first four genes in DNA. They mapped the human genome you know.”

The others looked impressed. My wife suppressed a strong urge to laugh.

Micro vs. Macro

Café Hayek has an essay on the difference between microeconomics and macroeconomics. Don Boudreaux writes:

Microeconomics focuses on the actions of individuals; it examines how individuals respond to incentives, as well as studies the various incentives that individuals in different circumstances confront. Gary Becker is a living example of a premier microeconomist.

Macroeconomics involves tracing out the unintended consequences of various actions and sets of individual actions. It studies the logic of the spontaneous, unintended order (or disorder, as the case may be) that emerges when each of many individuals respond to the incentives identified and classified by microeconomics. On this definition, Hayek is certainly one of history's greatest macroeconomists.

This definition is, I believe, unnecessarily complex. The distinction between micro and macro is that micro looks at one market in isolation and macro looks at all markets collectively. You might intuitively think that the sum of all the micro models is a macro model. Indeed that is a good description of general equilibrium. And you would be right if you assumed that a good macro model is a whole lot more complex than a good micro model.

So a micro model might look at supply and demand for some market, for example pencils, and try to estimate the supply curve and the demand curve. This is entirely possible because it is easy to look at this market in isolation. One need not consider the possibility that a shift in the demand for pencils might affect other markets like automobiles and airlines.

Now consider an increase in the price of oil. This price increase will reverberate throughout the entire economy. It will affect the automobile industry, the airline industry, and any other industry that uses oil. But it doesn’t stop there. When the price of oil rises, the demand for other types of fuel shifts as well because there might be some partial substitutability between different types of fuel. Electricity might become more expensive, natural gas might become more expensive, and so on. A model of the petroleum market might be really complex.

Actually, the distinction between micro and macro is more fundamental. In practice, micro modelers are econometricians, and these people are experts in statistics. They have marketable skills that allow them to decide between academia and business. Econometricians rule economics.

And almost all econometrics is bunk. This is because it is notoriously difficult to sort out cause and effect by just looking at data. Usually, both cause and effect are mixed in. Let me give a simple example. Econometricians have been trying for years to estimate what factors improve scholastic performance. They wonder if a better student/teacher ratio helps. But you will never observe schools with the whole range from 5 to 50 children per class. If you observe one school with a lower student/teacher ratio, you will have to wonder: is it that they just decided to lower the student/teacher ratio or were they compelled to do so by declining test scores. A low student/teacher ratio could mean a willingness to pay for academic excellence or a desperate attempt to compensate for a failing education system. You might not be able to figure this out just by observing data. This is why most econometrics is extremely suspicious.

In the 1970’s and 1980’s, macroeconomics was revolutionized by a radical idea: general equilibrium. It had the ambitious goal of modeling the entire economy as a closed model. Everything would be included in the model. Prices in all markets would be simultaneously computed. But the models were just too complex to compute. Modern computers are much more capable, but generations of macroeconomists forced to endure the hard mathematics of general equilibrium are now pushing back. General equilibrium isn’t dead but many economists are openly contemptuous of the field.

The problems with general equilibrium come on many levels. The complexity of the modeling requires a collaboration of many people and economist tend to work in very small groups. The models are technically very complex, and most economists didn’t study economics to be some kind of a software engineer. There is also fear that modeling the economy is the first step in government controlling the economy. But another subtle issue is the idea the economy is just too vast and unpredictable to ever allow itself to be modeled. Economic order is created out of the process of the marketplace and is not something predictable.

General equilibrium could allow one to at least attempt to answer a question like, “What would happen if we switched from income tax to consumption tax?” No model could accurately predict all of the subtle effects. But a big model could greatly improve our intuition about what might happen over time. A model is simply an analogy. Instead of saying, “Well, Luxemstan switched to a consumption tax and see what happened to them,” we could say, “In the model, the only thing we changed was the tax policy and see what happened in the model economy.” It gives us something to work with.

I studied general equilibrium in graduate school and understood it very well. I would have hoped that there would be a market for someone with my skills but I am not using those skills at all today. Basically, the market for general equilibrium is underdeveloped. It seems a pity. But there is plenty of work for all types of economists, so I cannot complain.

Monday, September 26, 2005

Teaching Economics to Everyone

I am wondering if economics is a subject that everyone should know something about. I wonder if economics should be taught in high school so that everyone with even a high school diploma would have some exposure to economics some political economy.

What prompted this thought are a couple of interesting pieces about the general public’s knowledge of economics. The first piece was a Wall Street Journal Econoblog with Russell Roberts and William Polley. Here is an excerpt (Roberts addressing Polley):
Bill, in your last post, you mentioned the depressing (and seemingly inevitable) conceptual mistakes that the media makes when discussing natural disasters like Katrina. Why do you think that is? The obvious answer is that most members of the media have little or no economics training. True, but I suspect the reason for that lack of knowledge is that there's little or no demand for it. The average citizen doesn't understand the economic way of thinking, so bad economic writing is rarely punished.

For better or worse, understanding economics isn't a particularly useful investment of time and energy for most people. Understanding the true impact of Katrina or the true impact of price controls on gasoline in the aftermath of Katrina isn't valuable to the average person.

Read the whole article.

A second essay is from Atanu Dey and it is his attempt to explain the way economists think. Here is a nice excerpt:
Studying people exercising choice is what makes economics a study of behavior. Behavior – both human and non-human – has to do with rewards and punishments, gains and losses, in other words incentives. To some, the broadest generalizations that a study of economics leads to are, first, incentives matter, and second, markets work. The rest of economics is an elaboration and detailed arguments about those two generalizations. Recalls to mind what Ernest Rutherford had said about physics: “All science is either physics or stamp collecting.” That is, physics is central and the other bits of science are just a collection of facts that are peripheral and mere detail that one should not be overly concerned with.

Economics is all about codified common sense. I think that is what draws me to economics: I like common sense and I am appalled at the lack of common sense I see around the world. Setting aside the question of why common sense is called such when it is so uncommon, one may ask why economics is difficult if what it concerns itself with is apparently so commonsensical. I think it is difficult because its simplicity is deceptive.

Read the entire article. I think all economists tend to think economics is common sense, but apparently "common sense" is only common among economists.

The common theme in these articles is that the common man is woefully ignorant about economics and harbors many dangerous misconceptions about the economy and the role that government should play in the economy. In general, there may be little motivation for individuals to really learn economics. One doesn’t really need to understand how the economy works to be able to participate in the economy and even to make a lot of money via the economy. Economic knowledge is only really useful to decision-makers. It would be extremely useful for politicians to learn more economics. But voters also need know more about the subject if they are going to cast knowledgeable votes.

I recall reading that one of the first decisions of the founding fathers of the United States was to create provisions for land to be set aside for public education. It must be understood that the motivation for public education at that time was very different than it is today. They were not thinking that this would be a good way to produce marketable skills in the population and to make poor people into more productive citizens and help them out of poverty. Helping the poor really was not a motivation. The idea was simply that they recognized that only a well-educated citizen was likely to be able to be a competent voter. I still think this is an important idea. To some extent, the problems that India has had developing its economy can be traced to the problem of having a not very well educated electorate.

When I was in high school, I was required to take a half-year course called “civics” that basically covered the government. We spent a long time reading the whole U.S. Constitution, which was knowledge that was very unlikely to be retained by any ordinary American. A better use of that time would have been a more general course covering economics and politics and culminating in some simple public policy analysis. The point of the class would be to try to train people to be better and savvier voters.

My feeling is that in high school, it is less likely that people will learn so much from studying dry theory. Younger people learn more from hands-on experience. But how do you give people hands on economics, politics, and public policy experience? Well, with computers, anything is possible. It is actually very possible to create computer models of simple economies and let the students play around with them. They would learn the way scientists do: by trial and error. And students would develop intuition about how markets work and how poor public policy could lead to serious problems.

The one really big drawback of my idea of teaching economics and public policy via computer simulation is the expense of creating the software. This would probably require several tens of millions of dollars to produce. Of course, this would only be a few dollars per student, but someone would have to fund this initial investment.

So do you think that students might profit from such a course? What are your opinions?

Sunday, September 25, 2005

Queuing Up For The Roller Coaster

We took our son to an amusement park on Saturday and he greater enjoyed riding on the roller coasters. I didn’t mind so much, and it is always fun to see him so excited, but I did think the queues were too long. Obviously, most people who go to amusement parks want to ride roller coasters, and since they are free to ride (once inside the park) the quantity demanded exceeds the quantity the market can supply without waiting. In effect, the queue is a form of rationing.

The curious thing about the queue at the roller coaster is that it is an additional cost of riding the roller coaster that provides no benefit to the owners of the amusement park. People who are waiting in the queue are not being entertained, and they aren’t spending money on any of the video games or any of the various stores or eateries, so the time in the queue is a pure waste.

Some parks charge a separate fee if you want to ride the most popular roller coaster. You will get a ticket with a time and this allows you to avoid waiting in a long line for that one roller coaster. However, you will still waste time at the other two or three roller coasters that the park might offer.

Walt Disney World has a clever system. It is called FastPass and it allows you to schedule your ride. You go to ride and enter your tickets and it will give you a little ticket with a time on it. You come back at that time and your wait is only 15 minutes, which is acceptable. It gives you time to shop and rest and do other fun things while you wait for your ride time. But as the day progresses, the time you need to wait until you can return to the ride gets longer and longer.

Some restaurants in malls give you a pager that allow you to shop around the mall while you wait for your table and then they just page you went it is time.

I like the idea of combining these ideas. Maybe the amusement park could give the visitors a pager/computer that allows the visitors the ability to schedule their rides remotely. When it gets close to the time of the ride, you pager will alert you and even offer directions to the ride from wherever you are (this would be a nice feature at Disney World).

Thursday, September 22, 2005

Avian Flu Outbreak?

This is scary.
Consider the possibility of a new disease that kills more than 50% of all the people who get sick. Is this science fiction? Sadly no. And it may be coming your way.

Broken link corrected, thanks Abhishek.

Wednesday, September 21, 2005

Avoiding Cricket Mismatches

As I am writing this, India and Sri Lanka are in the process of destroying Zimbabwe and Bangladesh, respectively. In the case of Bangladesh, they are struggling to avoid not only an innings defeat but also a defeat in two days. Zimbabwe fought back in the morning session, but another innings defeat seems very likely. If the recent Ashes series between number one Australia and number two England was what test cricket was supposed to be, these current mismatches are examples of what’s wrong with test cricket.

There have been suggestions that Zimbabwe and Bangladesh should lose test status, and other suggestions that these two nations be relegated to a “Plate” division, and not play with the “Elites”. I can understand these feeling very well. But I think that both suggestions miss the mark. These minnows need some exposure to better teams so that they can improve. Bangladesh has great potential, but second division status would permanently kill that potential.

The problem with the current round robin style for test matches is that it produces too many mismatches. Currently, the 10 test teams play each other both at home and away at least once in a five year cycle. This means 90 series in 5 years and of those, 34 involve Zimbabwe and Bangladesh – and only 2 of those involve Zimbabwe playing Bangladesh. This means that more than 35% of all test matches are mismatches involving a top eight team with one of the minnows.

My suggestion is to replace the current round robin system with a ladder system. In a ladder, the teams are ranked (they are anyway) and the teams are only obliged to play other teams that are four spots above or below their ranking. So Australia, which is number one, would be obliged to play England, India, South Africa, and New Zealand. Australia would have the option to either play or not play against Sri Lanka, Pakistan, West Indies, Zimbabwe, and Bangladesh. Now I would assume that Australia would be happy to play Sri Lanka, Pakistan, and even West Indies. But the point is that it would be their option and their privilege for being the top team. They could and probably would refuse to play the minnows, and this would reduce their already packed schedule.

The four up and four down method would eliminate 18 of the current 32 mismatches between top eight teams and the minnows. The number of tests series in five years would go down from 90 to between 60 and 72 (depending on whether test teams choose to option out of tests series with teams like West Indies and Pakistan).

Zimbabwe and Bangladesh would play fewer tests, but they would play teams that they might actually beat (like each other). It would give them more time to develop a real rivalry between these two bottom dwellers. Also, they might upset one of these other bottom teams. They could have more opportunities against West Indies, which is the one test team that might lose to either minnow at least on the minnow’s home grounds.

In practice, the ICC would have to schedule all 90 series in the five years just as they do now. A year to six months before the series is played, when the details of the tour would be worked out, the dominant team could announce that they are canceling the tour with the minnow. Each team could either have a rest, or they could schedule other tours. This would give time for India to play Australia in a four or even five test home series, something most cricket fans would enjoy much more than another India Zimbabwe test series.

Tuesday, September 20, 2005

Voting Schemes

Crooked Timber had a very interesting post on schemes to improve voting in U.S. style elections. The main idea is to eliminate the need for a special runoff election. But maybe more importantly, any election reform should strive to reduce, to the greatest possible extent, the problems that multiple-choice elections create.

If there are only two choices, democracy is easy: the majority choice should win. But if there are three or more choices, it gets complicated. Suppose there are three candidates and one is arch-conservative, one is moderate, and one is extreme-leftist. Maybe the extreme leftist will not get more than one or two percent of the vote, but he might draw votes away from the moderate and help elected the arch-conservative. This probably happened in 2000 when Ralph Nader helped elect George Bush in a close election with Al Gore. A runoff would have prevented this problem, but a better ballot could have produced enough information to determine the result of the runoff without bothering with a whole extra election.

There has been a lot theoretical thinking about elections and unfortunately there is no way to run an election without some potential pathology. However, there are ways to make minimizes these pathologies. One pathology that an election could produce is that it might eliminate a candidate who could beat all other candidates in a head-to-head election. Such a candidate is called a Condorcet winner. If there is a Condorcet winner, he should be the ultimate victor, but most voting schemes don’t guarantee this result.

A practical problem is to make the election simple enough for people to participate in and not be terribly irritated by it. Here is a list of election requirements:
1. It must always produce a result
2. It must be able to handle any number of candidates
3. It should be able to use your vote even if you do not bother to list a full list of preferences
4. It should result in the Condorcet winner being elected if one exists

Here is an important point: if I don’t want to force people to rank all 1000 candidates for an election, I need to allow people to voice each extreme of their preferences. This means that I need to allow people to cast negative votes: a vote that is specifically cast to negate the vote of someone else’s positive vote. This is necessary because otherwise, the voter cannot convey the message that candidate number 456 is someone she cannot live with and should be eliminated straightaway.

Here is how the election would work: The ballot would give you a limit number of choices. For each choice, you could either approve or reject a candidate. So maybe first choice is to reject H. Then second choice is to approve J, and so on. You need not give any more choices if you really don’t care to.

The computer would take in all of this information and look at all of the head-to-head elections among the candidates. If there is a Condorcet winner, that’s the result. If there is no Condorcet winner, a candidate is eliminated and we proceed as if that candidate never existed. After n – 1 steps, the computer gives a winner.

The person who is eliminated is the one who came closest to being the anti-Condorcet: the one who came closest to losing to everyone in a head-to-head election. The computer figures out the minimum number of vote changes necessary for each candidate to be the anti-Condorcet and eliminates that person.

The advantage of this system is that it isn’t so hard for people to use: most people know whom they like and dislike and can list the first five or six preferences easily. People will no longer have to vote strategically: “I prefer A but he has no chance, so I’ll vote for B and make sure C cannot win.” This would be a major benefit for U.S. style elections. I am not exactly sure how parliamentary elections work (I believe they vary from nation to nation), but I would guess that similar improvements could be used there as well.

It occurred to me that an easy way to implement this method is to simply tabulate all of the head-to-head contests involving candidate X and against all others and add up X's votes. The low vote getter could never be the Condorcet winner and would be the obivious one to eliminate. It is actually very easy.

Monday, September 19, 2005

Things We Rarely Do

There are some things that my wife will not be interested in doing at all for months and months, and then one day she will want to do it for hours and hours. For example, we hadn’t been to the temple in so long that I cannot remember, and then Saturday we got an overdose of it.

My wife and I woke up early and I fixed my son one of his favorites: cinnamon rolls. Then my wife announced: we’re going to the temple. It was 8:00. If we left by 9:00, we could have done all of our pooja by noon and then eaten lunch. It never works that way.

I got ready but my wife decided to plan our trip to India. She web surfed for an hour while I tried to get my son ready. Of course he wouldn’t get ready as long as his mother was web surfing. So we didn’t leave home until 10:00.

My wife’s favorite temple is about 30 miles from our house. We live near Tyson’s and the temple is in Greenbelt. Even when we lived within walking distance of a temple in Springfield, she always wanted to go to the one in Greenbelt. It’s some North Indian-South Indian thing. Oh well, I wouldn’t mind too much but we hit traffic. It doesn’t matter what day of the week or what time of the day, there is always traffic on the Beltway.

We got to the temple at about 11:00. We went first to the Ganesha shrine. We made our way to one shrine after another until we got to the main Sri Balaji shrine (Lord Venkateshwara, not the bowler). There were several priests chanting and a large crowd of devotees. My wife got a chant book and started chanting. I sat down and slowly came to realize that this was going to take hours.

After one-half an hour, my son became antsy. I suggested to my wife that I would take him to the other shrines and come back. He had fun putting coins into hundis. He loves spending money - that is for sure. He also likes ringing bells. I wasn’t really sure if he was allowed to ring the bells so I stood aside, let him ring one bell, and then immediately said, “That’s enough of that,” while pretending that I just caught him in some mischief.

Then we went into the main hall and sat on the carpet and played “animal game (20 questions)”. I always choose banana slug so he gets it very quickly. He chooses some dinosaur I never heard of.

Then we went back to the Sri Balaji Shrine. There was standing room only by this time. We were standing there when my son pointed to the chubby lady in the grey salwar kameez, “There she goes again.” “What?” I asked. “She keeps coming by here.” Sure enough, the chubby lady in the grey salwar kameez was circling the room, pushing through the crowd. For some reason, she was trying to combine devotion and exercise, while irritating hundreds. I cannot say for sure, but I have the strongest feeling God, (should one exist), would want people to do their exercising outdoors. Anyway, she was providing a little entertainment to my very bored son.

The reason why the chanting was so mind-numbingly boring is that neither my son nor I had a clue what they were saying. My wife might have had at least a clue. But it is odd that the chanting is done in a language that no one uses. Well, it not odd, it kind of like the way Catholicism was until maybe 50 years ago. Its kind of the way Islam is outside the Middle East. For some reason, religions think religious words are too holy to translate into languages that the locals understand.

My son got hungry, so I took him downstairs to get some food. They have a little concession stand downstairs. I got him idli-sambhar. Unfortunately, the idlis were contaminated by sambhar. My son was very upset. He won’t eat idlis contaminated with sambhar. I had to carefully wipe off the sambhar. Luckily, he was hungry and he ignored that sambhar juices that had seeped into the idlis.

Finally, the Sri Balaji pooja was over, but my wife wanted to do a special Durga pooja. This was the typical two-banana pooja. The priest asks a series of questions having to do with my wife’s ancestors and the priest chants some things we don’t really understand. Then we get some holy water, we touch the flame, and we get two bananas.

Later, my wife explained that this was special pooja for her sister on her birthday. My wife didn’t call her sister on her birthday. She didn’t send flowers (like I suggested) or a card or a present or anything. She hasn’t talked to her for months. She’s still upset. But she loves her sister and she did special pooja. And somehow that is supposed to help her sister. I would think a simple apology would be better, but my wife has never apologized.

I have learned that the only way to keep my wife happy is to always apologize even when my wife is at fault. Sometimes I don’t know what it is that I’m apologizing for. My wife will quiz me, “You’re sorry for what?” “I’m sorry for whatever.” “Humpf!” Well, it generally works for me. My wife and her sister are two of a kind. They are playing the defect-defect strategy forever.

My wife had one more task to perform. She asked, “How much money do we have in our checking account.” That’s never a good question. She wanted to write a check for $1001 to the temple. I remembered when she wrote a check for one-month’s salary to thank God for her job and she lost that job within two weeks. I bit my tongue.

After nearly three hours of pooja, I was hungry. So was my wife and my son was still hungry. But we left too late to make it to Gaithersburg to our favorite South Indian restaurant. So we went to another one in Tacoma Park that is nothing special. They had a buffet. It had some good items, some bad items, and some awful items.

After we left the restaurant, we went back to the Beltway and it was a parking lot. Then I made a stupid decision. I decided to exit the Beltway and cut through D.C. The reason why the Beltway is always congested is because the roads through D.C. are hopeless. The city was designed by some mad Frenchman who had a premonition that Americans would one day hold his homeland in contempt so he planned his preemptive revenge. He put road in all kinds of bizarre angle, and he created these traffic circles to maximize confusion. It’s such a mess that I would say that one day we just bite the bullet and bulldoze the city and start over again. It’s the only way.

Finally, after much yelling and screaming between the occupants of our car, we made it to familiar roads. We just got on to the freeway (I-66) and passed the Balston exit when my son said that he needed to go potty. And we hit traffic. And there was nowhere we could exit until West Falls Church some four miles ahead. My son began screaming in pain. I was under extreme pressure, but there was nothing I could do. Finally, we exited at West Falls Church and went straight to a McDonald’s. I just left the car in the middle of the parking lot and rushed him to the bathroom. His bladder must have been near the bursting point, but we made it.

When we were home, my wife asked me if I remembered what happened the last time that she had donated such a large sum of money. “You lost your job.” She shot me a look that could kill. “No, I got steady raises every year until after four years, I made more money than you.” Since it was our money, I failed to recognized the cause and effect. I had thought that her steady raises were due to her hard work and dedication, working evenings and weekends, while I wasted time writing a stupid blog.

That evening, my wife rented a simply awful British movie (I know, the “awful” is redundant). I don’t know why she rents these things. I would have like even a silly Hindi movie more – at least I could laugh at the silly song and dance. Sure, I don’t understand Hindi, but I can barely understand Scottish English.

After that, my wife said that we needed to go to the temple more often. She said that we needed to make it a priority. I agreed. If we went more often, maybe it would be more pleasant. And maybe my wife would be happier and more content and that can only be good. I just wish the temple weren’t so far.

Sunday, September 18, 2005

The Impossible and the Impractical

Some things are just impossible. It isn’t possible to turn lead into gold by chemical means. It isn’t possible to send a spacecraft to a distant galaxy and have it return in a week’s time. These things are prohibited by the laws of science.

Other things are impractical. It isn’t practical to mine oil shale for its oil content. It isn’t practical to build ships that are a mile long. It isn’t practical to send people to the Mars. It isn’t that any of these things are impossible. It is just that the cost of doing them would exceed the benefit of doing them. The set of impractical things that man has serious contemplated doing greatly exceeds the set of impossible things that man has seriously contemplated doing. In fact, many people around the world are currently doing impractical things, but no one is doing impossible things.

There is a very clear difference between these two and you only look foolish if you say something is impossible when it is merely impractical. The problem with saying something is impractical is it often depends very much on current market prices, and when the market changes, the impractical suddenly becomes practical. It might be better to say, “It isn’t practical to mine oil shale at today’s prices, but it might be practical to mine it if the price rises above $70, (for example).”

Now at the risk of beating a dead Chiru, I want to return to the subject of domesticating the Chiru and collecting its wool to prevent the Chiru from being hunted to extinction (see Uma’s post and my response). The central issue in the discussion is whether it is possible to take wool from the Chiru and not kill the animal. Uma says no it is not possible, but cites evidence that makes it look like the process is impractical.

It may be that it is not possible to take the wool from the Chiru without killing the animal. I do not know, and neither does Uma, Swaminathan Aiyar, or you, and quite possible anyone on planet Earth. We don’t know because probably no one has seriously tried to do it. If someone had tried, they might discover that it is impossible because, for example, the animal would bleed to death. Sheep don’t bleed when you cut their wool off (they might suffer some minor cuts due to carelessness but in theory, cutting their wool does not cause them to bleed). But maybe the Chiru is different.

However, this isn’t the kind of evidence we are presented with. Instead we get an argument that it is not practical to remove the wool without killing the animal. There might be several variations on this argument. It isn’t practical to remove the wool off of a live Chiru because:

  1. They are really big and mean and will kick you, (I could believe this),

  2. They only eat grass from the tops of mountains, and it would be too costly to create farms on mountaintops (not very convincing but maybe)

  3. They only eat the grass from the tops of mountains where it is cold and removing their wool would mean that you would either have to keep them in a warm barn for several months or you would have to put a warm artificial coat on them until their wool grew back (neither sounds ridiculously impractical).

  4. It must be, otherwise the poachers would be doing this, (bad argument).

  5. There are many Indians who don’t mind if the poachers hunt the Chiru to extinction but do mind very much if honest people try to raise the Chiru like sheep, (why? I dunno).

  6. So-and-so said so (urban legend alert).

  7. It would be cheaper to put armed rangers to protect the Chiru from poachers, (maybe).

  8. It’s illegal, (obviously).

Looking at the above list, some of the arguments might be reasonable and some look foolish. I could easily believe that the Chiru will not just stand there and let you cut its wool off. But there might be ways of gently subduing the creature and removing the wool without great risk to man or animal. Clearly one could not know exactly how expensive it would be until people do it. I don’t know what food the Chiru could eat, but my guess is that they could eat a lot of things (most animals can) and live in a warmer climate (look at the tiger - you think it got its fur coat living in India?). Putting an artificial coat on a Chiru might seem odd, but if the coat you remove is worth $100 and the one you put on is worth $10, it doesn’t seem so odd. The fact that poachers don’t shear live animals is just because they aren’t humanitarians. There is no guarantee that the same poacher will get to re-shear the same Chiru the next year, so why bother dealing with a live animal? It may be that a lot of Indians prefer to stick their head in the sand on this issue, but this still seems an enormously weak argument. Just because so-and-so said you couldn’t shear the wool off of a live Chiru means nothing; no one really knows until someone tries. If plan A isn't working we need to consider plan B, C, D and everything else. This is not an either/or situation. This is an all of the above situation. And I’m sure it is illegal to domesticate the Chiru, but laws can be changed.

The point I am making is that it is clear that if you are willing to spend some money, you can definitely save the Chiru. But I cannot guarantee that there wouldn’t be a host of difficulties to overcome. The question is: is the Chiru worth it? I would think so. It is hard to put the value of a species, but it could be enormous. It might be easily into the billions of dollars since future generations of Indians (who might be fabulously wealthy) might have a great desire to see animals that either went extinct or just avoided extinction. Even when you discount the future, the value of an entire species might be very large.

In any case, it is clearly not impossible to save the Chiru, but it may be impractical to save it if people hold their own preconceived notions to be more valuable than the fate of the Chiru.

Friday, September 16, 2005

Stupid Quote of the Day

Desipundit linked to Uma’s Animal Rights blog. The post was about saving a wild antelope called the Chiru whose wool is used to make Shahtoosh shawls. The obvious question I had was: “If these animals were domesticated, would it be possible to get their wool without killing them?” Uma says no and links to this article:

Q: Is it necessary to kill the Tibetan Antelope to obtain its wool?
A: Yes. Tibetan Antelopes live on the Tibetan plateau and their wool protects them from the region's sub-zero temperatures. If this protective coat of wool is removed, the animal cannot survive.

Argh! How could the person who wrote this paragraph be so stupid!

My guess is that the Chiru could be raised just like sheep (in a warmer climate, of course). I’m not advocating it but it seems a great shame that they are being hunted to extinction for wool that could be obtained by not killing the animal.

But thieves and poachers have little mercy. They have nothing invested in the Chiru. That’s a big part of the problem. Indeed Swaminathan Aiyar is correct, the Chiru would be saved by domestication. If you own Chirus, you won’t kill them if it isn’t necessary.

My opinion: if you cannot stop the poaching, you need to consider plan B. Otherwise, bottom line, the species goes extinct.


My wife always is bumping into people she met in high school. This would not be so unusual if she lived in the same city that her high school is located in. But her high school was in Madras, India, and she meets these people in Minnesota and in Virginia.

My father is always bumping into people he met in the military, (he fought in WWII). One time he was telling a story to me about his experiences in Italy when a fellow came up to him and introduced himself. It turns out that they served in the same division.

I find that odd. I have never met anyone from my old high school or college since leaving. Occasionally, I see the names of people I know in unusual places. For example, I found the name of a good friend in high school in a reference in a textbook I bought. I found the name of my boss referenced in another textbook. But I cannot claim this is so much of a coincidence. A lot of people know someone who wrote a paper that was referenced in a textbook.

Maybe this is more bizarre: today I was reading the Indian Economy blog and it referenced a paper by “Smith and Joshi” (I changed the names). I thought, “Is that Sunil Joshi?” Sure enough, it was. He is the father of one of my son’s classmates.

But this made me wonder: is this really so much of a coincidence? After all, Sunil Joshi (again, not his real name) is an economist and so am I. It is not so much of a coincidence that we wound up in the Washington, D.C. metropolitan area; a very large percentage of all of the world’s economists live near D.C. It isn’t such a coincidence that we send our children to the same school; this school is very popular with economists and my wife and I chose this school for exactly that reason. It isn’t a coincidence that Sunil Joshi would write a paper on India’s economic development since he does work for the IMF and he is from India. It isn’t so much of a coincidence that I would be reading a blog about the Indian economy because I am interested in economics and in India. But still, it does seem like a coincidence.

Now this might be a coincidence. While I was writing this very post, my wife called to say that she met someone from her hometown that was a friend with my wife’s favorite cricket player. And oddly enough, this person met the cricket player at Tyson’s Corner Virginia, just two miles from our home. How odd is that?

So, does anyone else have a coincidence that might be worth sharing?

Tuesday, September 13, 2005

The Wise Old Woman Who Lived In a Cave

People came to the wise old woman who lived in a cave. She solved their problems; they paid her well.
One day, the taxman came. “You’re wise. You can pay.”
She smiled. “If I’m so wise, why do I live in a cave?”
The taxman left.

If you don’t know what this is about, read here.

Read Rahul Bhatia's 55 word story of childhood love (unfortunately, no permalink).

Update 2
Read Gaurav Subnis's 55 word story of unnatural job satisfation, (I'm not so sure that it would be so unusual though).

Sunday, September 11, 2005

Was the New Orleans Flood a Man-Made Disaster?

I haven’t commented earlier on the New Orleans disaster, but I do have some opinions on the subject. As it turns out, another blog wrote basically what I was going to say: the city of New Orleans should have been more proactive in making sure the levees around their city were adequate. Here is an excerpt from Coyoteblog:

The only reason locals would even tolerate federal involvement in disaster preparedness is $$$. Every local politician loves federal dollars. And even a hardcore libertarian like myself is probably willing to admit that some of the preparedness investments truly are public goods. Take levees for example. I am willing to have them as public goods. However, no one can convince me that levees whose sole purpose in life is to protect New Orleans are federal public goods. Why do I need to pay for them? Why don't New Orleans people bear the full cost of their choice to live below sea level? My family chooses to live in a place that is relatively free of disasters (though if the Colorado River dries up you can come visit our bleached bones as we are consumed by the desert). Why should I subsidize people's choice to live in a location that sits in mother nature's cross-hairs?

But beyond my cantankerous libertarian desire not to subsidize you, those of you who live in disaster areas should demand to take responsibility for your own preparedness. The feds are never going to value your safety the same way you do (as evidenced in part by the 40-year ongoing fight for levee funding in New Orleans) and are never going to understand your local problems like you do. In fact, the illusion of federal responsibility for disaster preparedness is awful. It gives irresponsible local authorities an excuse to do nothing and a way to cover their ass. It creates a classic moral hazard and sense of false security.

Read the entire article.

It really comes down to the idea that it is better for people to take care of their own problem than to expect others to come in and help. I’m not a Christian but I have always liked the phrase: “The Lord helps those who help themselves.” I believe that the Federal government should act in the same way. It should help local governments that are already taking steps to solve their own problem. In this case, it would have been reasonable for the Federal government to ask either the State of Louisiana or the City of New Orleans to pay for at least half of the cost of a better levee. This way, the Federal government won’t waste money on boondoggles: if the locals don’t care enough to pay for something that is for their benefit, no one else will care.

But there is another really good question associated with the New Orleans flood: how did so many homes get built in an area that was below sea level and so vulnerable to a major flood. When my wife and I have bought homes, we had to get homeowner’s insurance to cover the risk of disaster. This was mandated by the mortgage company. Now what private insurance company in their right mind would ever insure homes like these? None did. It was the government. It turns out the notorious FEMA provides flood insurance:

Nearly 20,000 communities across the United States and its territories participate in the NFIP by adopting and enforcing floodplain management ordinances to reduce future flood damage. In exchange, the NFIP makes Federally backed flood insurance available to homeowners, renters, and business owners in these communities.

Flood damage is reduced by nearly $1 billion a year through partnerships with communities, the insurance industry, and the lending industry. Further, buildings constructed in compliance with NFIP building standards suffer approximately 80 percent less damage annually than those not built in compliance. And, every $3 paid in flood insurance claims saves $1 in disaster assistance payments.

These statistics are pre-Katrina. I wonder if they would be so brazen to pretend that they are saving money post-Katrina.

This might rank as the stupidest government program ever. They are paying people to live in a flood zone. The talk about “enforcing floodplain management ordinances” is probably little more than wishful thinking.

Without this insurance, new home construction in floodplains would stop. People couldn’t get homeowner’s insurance and therefore they couldn’t get a loan. You cannot sell homes to people who cannot get financing. Over time, the community simply dies; and this is a very good thing. People will be forced to live in safer communities.

If a really good levee were built, private insurers might take the risk of offering insurance. The market would make a much better determination of the risk associated with a levee than government would. So if the government says the levee is safe but no private insurer will take the risk, the market is sending a clear message.

But the above quote hints at the third part of humans causing a natural disaster: the role of disaster insurance. There is a classic moral hazard problem in Federal disaster relief. After the disaster, it seems nice to help those who suffered. But before the disaster, it is hard not to notice that many people chose to live in harm’s way. The insurance seems to encourage people to live exactly where they shouldn’t.

My solution to this moral hazard problem is to replace disaster insurance with a line of credit. The states would have money available in the short term to pay for disaster relief. In the long term, all of that money would have to be paid back by the state government. This would force states in high-risk areas to be more proactive in dealing with disaster preparation. Also, the high state taxes would discourage firms and people from relocating to that area, and would tend to put people in low-risk states.

I should point out that Shrikanth pointed to the moral hazard issue associated with flood insurance here. I read that post and forgot where I read it, but I meant to give Shrikanth credit.

Thursday, September 08, 2005

Children’s Education: Who Should Guide It?

Sunil Laxman had a post recently in which he discussed some results of a survey on childhood education. What he thought was ridiculous was that 42% of respondents did not believe in evolution and that 41% believed that parents should have the final say in what is taught in schools. He seemed to be implying that parents could not be trusted to have a role in guiding their children’s education because they are too ignorant to perform that role.

Now I agree with Sunil that it is sad that so many Americans are ignorant about many things. I am not that bothered about polls about evolution because I figure most Americans just don’t care about that subject and I honestly don’t see why they should. Evolution is not something most people use everyday. Naturally, facts that seem useless are quickly forgotten.

What bothers me is that so many Americans are poorly educated in areas that really do matter. Many Americans are very poor in mathematics and in language skills. Most Americans have very poor knowledge of economics and economics is something every American is confronted with everyday and this ignorance can affect their choices in elections. So a reasonable question is: “Why are Americans so poorly educated in many areas that do matter and what could be done to reverse it?”

Ironically, I believe that much of the poor results of the American education system can be traced to basically the kind of technocrat revolution that Sunil seems to be advocating. Really? Technocrats have been in charge of American schools and still people are ignorant? How can this be?

Long ago, many schools in America were one-room rural schools with a single teacher that taught all grades. Parents were largely farmers and largely ignorant of most subjects in the world, but they knew that if had any concerns about the school and the way that the kids were being taught, they had a lot say about it. They could easily remove the teacher if they didn’t like him/her. The teacher was accountable and this system work reasonably well. My grandmother taught a school like that in Montana.

In my father’s time, the school system consolidated over the entire county. There were economies of scale here and they were able to offer more subjects and more teachers. The parents had less voice in this system, but it still wasn’t negligible. Since there was only one high school for the entire county, parents still had some voice in the system.

When I went to school, the technocrats took over. These high holies of education decided that that education needed to be revolutionized. They brought in a variety of new ideas; almost all of them were bad. The brought in the “new math”: which centered on set theory and Venn diagrams. The parents hated it. They brought in the movie projector: the idea was to replace boring lecture with infotainment. The movies were entertaining, but you don’t learn by watching movies or T.V. They also brought in “whole word” as opposed to phonics. Children really struggled with reading.

Parents were left out of all of this because by this time, most school districts were very large. The population had increased and then number of school districts reduced. This meant that the average parent had very little voice in the school system. They might grumble at home, but why voice your concerns at the school? The school was subservient to the district school board. And no one at the district school board would bother hearing the concerns of the average parent. What would be the chance that that one vote would make a difference in a district of 50,000 students? Voter apathy is so high that most school board members are virtually unopposed. They are accountable to no one.

In this environment, unions could come in. This brought in another dimension of politics into the public schools. Out went the motivated teachers who just wanted to teach the kids; in came the teachers who thought of teaching as a nine-to-five job.

Parents ceased to be involved in the whole education process and children learned that if they parents weren’t concerned, they shouldn’t be either.

Things have gotten even worse: now much of the control of schools in at the state level and the new “No Child Left Behind” is extending control to the national level. More and more, the decisions about what is taught and how it is taught in public schools is left to bureaucrats. And bureaucrats don’t love a kid like a parent would.

The key to good education is to keep the control of the school local and to let parents decide which school is right for their kids. If parents are behind the school, kids will sense that education is important and they will naturally learn more. But parents won’t back a school they had no say in choosing or creating.

This is why I am a big supporter of parents being able to send their kids to private schools. My wife and I send our son to a very nice (and expensive) private school. If more parents were able to send their kids to private schools, I believe that competition would force prices down.

I agree that we need a public education system in the sense that children of parents with low income should still have access to quality schools. This is why the voucher system is attractive and I really wish Democrats would give it a thought. It could really improve the quality of education in the U.S.

But the most important thing is that people should be free to make the fundamental choices that affect their families. Parents should be able to choose their home, their place of work, and their schools. Parents might not know about a lot of things but their instincts are basically correct. A parent would never approve of a kid watching movies all day in school. A technocrat might, and apparently did. Freedom works: trust freedom.

Friday, September 02, 2005

Lucky Duck

I came home yesterday and my seven-year-old son says, “Guess what Daddy, I’m a lucky duck.” He then shows me the new ball he got. It’s just a simple rubber ball, but he thought it was cool because he can see though it and in distorts images in an interesting way.

Later, my wife took him to the library to collect his prize. He read at least 15 books over the summer (including three Harry Potters) and he received a booklet of valuable coupons. In the car, he told my wife that, “I’m a lucky duck because I got a book of coupons. But I’m really a lucky duck because I have you and Daddy.”

When my wife told this story to my parents, who are here for a visit, my mother explained: “At the store, he said he was a lucky duck because he now has a new ball. I told him that he was a lucky duck, because you have a wonderful mother and father.”

He said: “Yes, but if they weren’t nice, I would just live with you and Grandpa.”

Perhaps it is a bit humbling to know that none of us are indispensable, but, indeed, he is a lucky duck.

Thursday, September 01, 2005


That excellent blogger, Sunil Laxman, posed an interesting question on the post about corruption in a maternity hospital in Bangalore. He wanted to know what causes corruption and what can be done about it. Here is an excerpt from a recent article of his on this subject:

Now, let's take the example of a village with around 200 houses. 150 of them don't have electricity, though the village is officially "electrified". You investigate, and find out from the villagers that the only way to obtain an electricity connection would be to pay a fairly large bribe, say some 1500 rupees. This may not seem too exorbitant, but we're talking about very poor villagers, who spend about 40 rupees per month on kerosene for their lanterns. Many of them want electricity so that they can have a couple of light bulbs at home, their kids can stay back and study in the evenings, and perhaps they can afford a fan to use in the summer months. Seems very basic, but this small change means a lot to them. And they cannot afford to pay the bribe, and remain powerless (pardon the pun). The situation was thrown open to us, and we were asked for possible solutions.
Read the whole article.

It turns out that two very good articles have been written about corruption recently. The first one is by Richard Posner, and he gives a classical economist view of the causes of corruption:

Since public corruption seems on balance inefficient, the question arises why it is so common. The answer is that corruption flourishes where the economy is heavily regulated but the legal framework is weak. The more heavily regulated the economy, the more irksome restrictions there are that will create a demand for methods of avoiding compliance with them, and bribery of the enforcers of the restrictions is one such method. The weaker the legal framework, the more difficult it will be for the government to prevent bribery, a classic "victimless" crime because bribery is a voluntary transaction; and it requires a sophisticated legal machinery to detect and punish such crimes.
Read the whole article.

Then Atanu Dey wrote about the example of Singapore:

This is what I heard. A certain minister, very close to Lee Kuan Yew [Singapore's Leader], in charge of housing (or some such) was involved in some kick-backs. The word went around that the guy will surely get off easy since he was in the inside circle. Lee asked the minister to see him. The meeting was brief. Two days later the minister blew his brains out. The message was clear: zero tolerance.

In India we hear of some high-level bureaucrat or politician robbing the public purse blind with sickening regularity. But we have never heard of even one high-ranking corrupt public official or politician ever being punished for his misdeeds. We have a free press of sorts and people get to know about how the most corrupt get away with murder. The notion that it is OK to be corrupt is internalized and soon enough we justify our own petty corruption by referring it back to those high and mighty whose corruption is legendary and who are never punished. We grow cynical and the society suffers as a whole. Our culture erodes and standards of probity and justice fall until we are a nation of petty thieves ruled by mega-robbers.
Read the whole article.

So let me explore some causes of corruption. Keep in mind that all or some of these causes might be relevant:
1. Low pay/lots of power This is always a dangerous combination. Power tends to corrupt. The lack of adequate pay tempts. Posner writes about this.
2. Too many dumb rules Posner points out that corruption can in some cases work to the public interest – initially - as a way of circumventing too many arbitrary regulations. However, he points out that this can lead to perpetual dumb rules because now you have lots of people who benefit from ignoring them.
3. Ineffective legal system You need to punish people to change behavior. But if the legal system really isn’t up to the task of meting out adequate punishment, then the incentives are wrong. Again Posner mentions this.
4. Inadequate punishment Politics might prevent the dismissal of corrupt people when they are caught with their hand in the cookie jar. If it is easy to dismiss people, it is easy to enforce rules.
5. Education matters Ignorant people choose corrupt leaders. Educated people make better choices. Case in point: Bihar.
6. It starts at the top If the big cheese stinks, the little cheeses smell bad also. You need to put some high politicos in jail to convince the minor players that it is wrong to be corrupt. Atanu Dey writes about this.
7. Founding fathers matter If your country was founder by George Washington or Lee Yuan Kew, then you have a hope of living in an uncorrupt society. If your founding father was Robert Mugabe or Saddam Hussein, then you’re doomed. Indian is somewhere in between. Again, Atanu Dey writes about this.
8. Tradition matters Once practices become traditional, they are hard to reverse. Along these lines, Uma of Indianwriting has an excellent essay about dowry inspired wife suicide/murder.

Any other suggestions?