Category Archives: Economics

Gregory Clark @ GNXP

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Gregory Clark is quickly becoming the economist du jour due to his recently published (and quite controversial) A Farewell to Alms. Late last year, Sepia Mutiny had a preview of some of the book’s content and, as schedule permits, we will likely cover more of it moving forward. As we said back then, for Mutineers Clark is definitely an economist to watch relative to others due to his outsized focus on Indian economic history.

So, until we get a chance to dive into more of the detail here, GNXP (Razib’s home when he’s not a 1-man comments machine on SM) has a great interview with Clark up right now and question #1 hits squarely into desi territory –

1) In some early work, you wondered why workers in British cotton mills were so much more productive than workers in Indian cotton mills. You discuss this in the last chapter of A Farewell to Alms. You looked at a lot of the usual explanations-incentives, management, quality of the machines-and none of them really seemed to explain the big gap in productivity. Finally, you seemed to turn to the idea that it’s differences between the British and Indian workers themselves-maybe their culture, maybe their genes-that explained the difference. How did you come to that conclusion?

…When I set out in my PhD thesis to try and explain differences in income internationally in 1910 I found that asking simple questions like “Why could Indian textile mills not make much profit even though they were in a free trade association with England which had wages five times as high?” led to completely unexpected conclusions. You could show that the standard institutional explanation made no sense when you assembled detailed evidence from trade journals, factory reports, and the accounts of observers. Instead it was the puzzling behavior of the workers inside the factories that was the key.

What was this “puzzling behavior”? Well, unfortunately, it appears a good chunk of it was IST.

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p>Read the rest, let it whet your appetite for more, and expect to see Clark here on SM in the near future

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Money for nothing

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Over at Marginal Revolution Tyler is putting his money where his mouth is. He has just published a book where he makes an argument for how to best help people. Now he wants to follow through and give money to people in India. They don’t have to be engaged in charitable work at all, they just have to do something with it that helps India, and they get the money no strings attached:

2. Send your email to DiscoverYourInnerEconomist@gmail.com. Only emails to this address will be considered. The email must contain the legal name (as documented on ID papers) of a person who will receive the money, his or her state in India, and the city of his or her local Western Union branch. You can be the person yourself, or you can send the information on behalf of someone you know.

3. With your email, send a one sentence proposal of how the money will help India… Proposals of all kinds are eligible, including using the funds to help expand your steel factory, and yes using the money to open a new call center. But you must not give the money to beggars.

4. Only one email per person is allowed.

5. By the end of the week I will send $1000 to India, via Western Union. One person will receive $500, the other recipients will get $100 a piece; I will email the wire numbers to each approved person… If/when Discover Your Inner Economist is published in India, further names will receive transfers. I will send at least the net, post-tax value of my Indian advance. [Link]

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Some Idol News, for Idle Mutineers

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A Chinese Guru Nanak.jpg

An anonymous tipster (thanks!) updated our news tab with the following story, which I found quite interesting:

After the Chinese-made kirpans (daggers) nearly wiped out local manufacturers of one of the five ‘K’s of Sikhism, it is the turn of Guru Nanak Dev’s idols with ‘Chinese characteristics’ to flood shops across Punjab. [link]

Yes, apparently the figurines make the Guru look like a “Lama”, i.e. Tibetan. But more on that (and the Kirpans!) later.

The figurines, which have been in the market for some time, are available for Rs 100-150. They are popular gift items, with the smaller ones finding a perch on car dashboards “since it reassures the driver of divine protection”, as one user put it.
The larger versions are seen in restaurants, stacked along with statuettes of deities of other faiths. Not everybody, though, is pleased. In fact, the Sikh clergy have issued directions to the community to refrain from buying these idols.
The order ostensibly stems from the fact that idol worship is banned in Sikhism. Idol worship, including performing of ‘aarti’, was prohibited by Guru Nanak himself, while Guru Gobind Singh even declared that those indulging in such practices would be ostracized from the faith. [link]

The fantastically-named Sikhi Wiki has this to say regarding idolatry:

Idol worship was heavily discouraged by all sikh Guru’s. This was believed to have been a manipulation by the preistly (sic…no pun intended) caste to keep the power in their hands. The concept of ‘worship’ does not exsist (sic) in Sikhism, sikhs may only bow down to Guru Granth Sahib for respect, and may mediate on God’s name (nam simran). [link]

What I’m wondering is, who is buying these figures? Maybe they aren’t Sikh? Or is that irrelevant?

Is this the real source of conflict and potential teeth-gnashing:

Moreover, the Chinese-made idols sport a Chinese look, like slanted eyes and Mongoloid features. [link]

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TV Saves

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I generally cover the “economics beat” here on SM and one of my favorite nuggets is the complex interplay between econ and culture. There’s a certain non-PC’ness there that I love to indulge although it admittedly leaves many feeling a tad uneasy. Why non-PC? Well, if culture and economics are intertwined…. and since econ outcomes are (generally) measurable…. and it (generally) ain’t too hard to say that richer is better than poorer…. you end up treading dang close to quantifying how one culture might (generally) be better than another.

A purveyor of oppressively unrealistic bourgeois imagery or the fountain of liberation? The numbers are starting to come in…

A mighty sticky ball o’ wax indeed but a subject we’ve nevertheless hit on SM a couple of times (here, here and here, for ex.).

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p>There are a couple of important “pressure escape valves”to keep in mind though. First, cultures are as non-uniform as they are notoriously difficult to define (“model minority” discussions – for ex here – usually wade deep into this territory). Second, and in our case perhaps more importantly, the economic + technology machine’s dynamism necessarily turns around and affects the host culture. This impact is both for better and for worse with a range of attitudes on where it all nets out (shouldn’t be hard to figure out where I land )

While we’re quick to note the emergence of social networking or blog culture on the Internet, the real, important change happens at a comparatively more pedestrian level, and often with far less cutting edge tech. This latter effect is profoundly visible in India (and, of course, China) and is now yielding some fascinating new research looking at the effects of a liberalized television market on rural Indian women…

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Woman on top – is it better?

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On July 25th, Pratibha Patil became India’s first female President. Because the Presidency is largely a ceremonial position, this is less significant than Indira’s ascension to the PM’s throne over 40 years ago.

Patil may be far from an exemplary figure, dogged by a long list of controversies including her advocacy of eugenic sterilization, allegations that she protected her brother from a murder charge, and her habit of speaking to dead people without being Haley Joel Osment, but at least she can do little harm as President.

What interests me more is the general question of whether the gender of a politician matters. Certainly, it’s hard to argue that there was anything about Indira’s reign that would reveal her gender.

However, at least at the village level, there is some compelling evidence that gender does indeed matter, but that female performance is unappreciated. Economists examined the effects of a 1993 constitutional change that reserved one third of village council leader positions (randomly allocated) in Bengal and Rajasthan for women. This is what they found:

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  • Female pradhans spent more on public goods preferred by women. [Link]
  • Female pradhans are objectively better – they provide more public goods, the quality of these goods is at least as good as elsewhere, and villagers are less likely to pay bribes. [Link]
  • Despite that, “voters are less satisfied with the performance of female pradhans than with that of male pradhans in providing all services, including drinking water, for which quantity and quality is objectively better … Surprisingly, those unhappy with women leaders include both men and women, and they blame women even for the service levels of those goods that the GP doesn’t provide.” [Link]

    • That’s right – women’s performance on the job is objectively better, they are less corrupt, but even so male and female voters are less happy with their performance and blame them for things entirely outside their control. While President Patil may have come to disfavor based on her own actions, in general it’s the story of Fred and Ginger for women politicians – they have to do everything that men do, but backwards and in heels.

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    My life as a loan shark

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    I wanted to write a quick follow-up post to this one I wrote last year about the micro-credit organization Kiva.org. In May of this year I lent $100 to Farzhana Mosah Khan, a tailor in Afghanistan:

    Farzhana lives in district 17 of Kabul, Afghanistan. She is a tailor. She is married and lives with members of her family and she wants to help her husband support her family. She wants to take a group loan to expand her business and buy new machines because she wants to send her children to good schools to be educated. She hopes that if she works hard to be a good business dealer in the future she will make a good monthly income for her family. [Link]

    The total loan amount requested by Farzhana was actually $175, which means that another lender provided the difference. Farzhana needs about a year to pay back my loan (interest free). This isn’t a charity. You get your money back but simply have to forgo the interest. What that means is that if you already have a “charity portfolio” that you give to every year this isn’t really another charity to spread you thin.

    I decided to check out who the other lender was and his page documents the tremendous success he has seen during his involvement with Kiva. He gets paid.

    Farzhana posted the first installment of her loan ($22) in June. I think I am going to make some more loans. Need a demo? Check it:

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    What’s up in the UK?

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    An interesting set of stats posted on the SM news tab talks about workforce participation amongst South Asians in the UK –

    Six million Britons are living in households where nobody works – costing the taxpayer almost £13 billion a year in benefits alone, a spending watchdog report reveals today.

    …The problem is concentrated in cities including inner London – where one in four households are workless – Birmingham, Liverpool and Manchester, and is worse among some ethnic groups. Pakistani and Bangladeshi households are the most likely to be workless at 22.3 per cent, while Indian households are the least likely, at 6.8 per cent.

    Internationally Britain has one of the worst rates of worklessness. Around 13.5 per cent of the UK population live in workless households, compared with compared with 11 per cent in France, five per cent in the United States and less than 3 per cent in Japan.

    For next door neighbors to be both the worst and the first on this sort of distribution is pretty interesting. Anyone (Razib?) know what diffs in immigration patterns b/t Pakistani & Bangladeshi’s vs. Indian’s to the UK might be?

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    Mira Mang- Don’t Mess With Kerala.

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    fresh from getting its kundi kicked.jpg

    Ah, I love being from Kerala. Now I can claim genetics as the reason for my refusing to shop at Wal-mart. Ha!

    The Communist government of Kerala is threatening to ban “retail giants” from setting up shop in the Indian state. The measure, which appears to be backed by all the major political parties in Kerala, is chiefly aimed at India’s version of Wal-Mart, Reliance Industries. The concern is that a proliferation of large retail outlets would drive tens of thousands of mom-and-pop shop operators out of business. [Salon.com]

    Hmmmm. That last sentence explains why I prefer Olsson’s > Borders, too.

    Kerala made headlines not so long ago for attempting to ban Coca-Cola; the state has a long history of pursuing its own unique path to development. Naturally, the more gung-ho-for-capitalism elements of Indian society aren’t mincing their deprecating words: An editorial in the Indian Express made no attempt to restrain its sarcasm:
    Coke poisons people. Highway tolls exploit them. Fiscal discipline starves projects that can better their lives. So, of course, big retail chains, as Kerala’s Left explained to this newspaper on Monday, are anti-people … Food minister … C. Divakaran is ever so bold in proposing to ban a business activity permitted almost everywhere bar places like North Korea. [Salon.com]

    Yo, I totally feel exploited by highway tolls. It’s the only thing I don’t miss about driving to NYC. Anyway, I think it is a bold move, and an interesting one at that. Salon’s Andrew Leonard raises a sobering point:

    Let’s switch venues. The safety of Chinese-made products is in the news again today, as China’s government announced that a whopping one-fifth of the products on the shelves of Chinese stores were found to be substandard or tainted. The immediate, and understandable impulse, is to blame the health hazards of Chinese products on the lack of regulatory enforcement in China, a state of affairs exacerbated by state corruption, a weak judiciary, and a general absence of effective checks and balances in Chinese society. But that’s only one-half of the picture. The other half is the imperative, in the biggest markets for Chinese exports, that demands ever-lower prices for everything.
    In “The Wal-Mart Effect,” Charles Fishman makes a compelling argument that Wal-Mart’s market power inevitably forces its suppliers to cut corners on quality in order to deliver the lower and lower prices that Wal-Mart demands. So those suppliers close their American manufacturing facilities and start sourcing their products in China — if they don’t, they’ll lose their place on Wal-Mart’s shelves. [Salon.com]

    Mein Gott, I’m starting to feel like a very pink democrat…

    But the symbolism of Kerala’s “bold” move, however quixotic, is still potent. Markets left to themselves do not deliver perfect outcomes. Sometimes government has to push back.

    Indeed, especially since those sell-outs in Bengal don’t have the stones to do so. 😉

    Interestingly, in the other Left-ruled state of West Bengal, Chief Minister Buddhadeb Bhattcharjee has rolled out the red carpet to Mukesh Ambani’s ambitious retail initiative, though coalition partners have expressed their reservations on the issue. [CNN-IBN]

    Compare that reaction to THIS thenga-flavored one:

    “The public mood is against Reliance, so we will stop them in their tracks,” Food and Civil Supplies Minister, C Divakaran said. [CNN-IBN]

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    Rupees Are Worth A Lot These Days

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    rupee.jpgI’ve been watching with a mixture of excitement and unease this past year as the Rupee has edged up on the Dollar; earlier this spring, the Rupee/Dollar ratio reached close to 40:1 (right now it’s dropped back to about 41:1). Now, I understand this could have all sorts of implications for the Indian economy, some good (it’s a sign of a strong economy) and some bad (it could discourage foreign investment) — but I’d better leave it to the economists in the house to sort out “what it all means.”

    What I’m interested in today is an entirely different kind of Rupee inflation, specifically the repurposing of Indian Rupee coins in eastern India. BBC reports that 1 Rupee, 2 Rupee, and 5 Rupee coins are being melted down and turned into razors, at which point they are smuggled into Bangladesh:

    Police in Calcutta say that the recent arrest of a grocer highlights the extent of the problem. They seized what they said was a huge coin-melting unit which he was operating in a run-down shack.

    The grocer confessed to melting down tens of thousands of Indian coins into razor blades which were then smuggled into Bangladesh, police said.

    “Our one rupee coin is in fact worth 35 rupees, because we make five to seven blades out of them,” the grocer allegedly told the police. “Bangladeshi smugglers take delivery of the blades at regular intervals.”(link)

    The problem is worst in West Bengal and Assam, which border Bangladesh. The BBC article describes some of the details of the problem — touts who buy coins operate with impunity right in front of the Reserve Bank where new coins are issued. And the coin depletion problem persists, even though the Mint has now reduced the metal content of the coins. (You can see a nice group of diagrams describing the constitution of the coins at the RBI website. 1 Rupee coins are made from stainless steel, while 2 and 5 Rupee coins are made of a copper-nickel alloy.)

    Normally the metal in coins is worth less than the cost of melting them down and turning them into something else; it has to be that way, for the system to work. But apparently that’s no longer the case in eastern India. Indeed, unless the market in razor blades made from Rupee coins becomes saturated, causing the price of razors to drop, I can’t see how or why the current black market in coins should lose steam. Continue reading →

    The Dharavi Slum

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    An anonymous tipster posted a fascinating story on the SM News Tab about the underground economy in the Dharavi slums outside Mumbai.

    Poor but far from Idle

    Dharavi, considered Asia’s biggest shantytown, two square km (0.8 square miles) [consists] of open sewers, muddy lanes and ramshackle tenements that is home to almost a million people.

    But strip away its squalid veneer and Dharavi bares a unique entrepreneurial spirit, and multi-million dollar micro-businesses, that breaks all the stereotypes of a slum.

    …Arguably the most prosperous among the world’s biggest shantytowns, Dharavi has about 5,000 single-room factories and hundreds of cottage industries that together have a turnover of around $1 billion.

    Practically every home here produces something to sell – incense sticks, poppadoms, pickles, soft toys and candles among the many crafts.

    Much like the startling statistics about the face of poverty in the US, a similar spate of data about Dharavi lifestyles showcases accoutrements which would have been decidedly middle and perhaps even upper class just a few decades ago –

    …In recent years, prosperity has been trickling down to Dharavi’s residents. There is 24-hour electricity and running water, and 2006 research shows 85 percent of households have a television, 56 percent a gas stove and 21 percent own a telephone.

    So if they’re so productive and have such amazing turnover, the obvious question is why is the place a slum?

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