Poverty in Pragati

As promised, I have an updated and expanded version of my post on The Poverty Numbers at Pragati. From my blog post, I have subtracted some things in the interest of space – the discussion on the recall period being most prominent. More importantly, I have added some things, so you should read the Pragati piece even if you’ve read my post.

I have referred to some papers in the Pragati article. Here are the original links to those:

  • The Tendulkar Report on the methodology on estimation of poverty.  Suresh Tendulkar, by the way, was an excellent free market economist.
  • Angus Deaton’s 2008 paper on why Indians are consuming fewer calories is here (PDF link). Look at pages 53 onwards for discussion on the calorie decline.
  • Deaton’s other paper on how the divergence between the NSS data and the CPI affected poverty numbers is here.
  • All of Deaton’s work on poverty can be viewed here.


Venu says

I find it worrisome that you are making quite strong claims (global warming can be handled by markets alone) and then casually stating that you don’t have any evidence for them.

No! I didn’t say that.  All I say is that we will not act on Global Warming at the optimal time. To use an overworked analogy – Hitler. Perhaps there was a time at which he could have been tackled without the enormous carnage of WWII. My view is that given what human nature is, this was unavoidable. We aren’t good at foreseeing and agreeing to act on uncertain threats in the distant future. We are, however, good at getting our act together in the face of a crisis. When we do try to fix problems too distant in the future, we make a lot of mistakes and there is a good chance that we make things worse. So, I propose that we go with the flow and not do anything about Global Warming, and leave things for our children to fix. When we do fix it, we will probably not rely on the market entirely, but we will still be relying on market-like mechanisms.

Ritwik says

Isn’t the market nothing but an aggregation of human behaviour? If you’re agreed in theory and premise with the behaviourists (about hyperbolic discounting, etc.), how are your recommendations so different from the ones they make – why do you (and others like you) consider subject matter expertise to be so important in say, science, but not in policy?

Because behaviourists have not yet come up with practical and actionable recommendations. I know that you have written out the theory of how behavioural economics will prove the EMH wrong. But behavioural economics, while it explains very well why bubbles form, is still unable to tell us the exact, or even approximate moment at which the bubble will burst. Without that, we do not know how to profit from the irrationality of the stock markets.

Likewise, all their “policy recommendations” amount to:

  1. Here is a behavioural quirk that causes ordinary human beings to behave in a way not predicted by standard economic theory
  2. Here is a policy recommendation that fixes the above, which we will assume, for the purposes of simplicity, will be put in place by detached technocrats not subject to the quirks above.

We do not yet have a model of human behaviour that can be used to make predictions about the impact of specific policies when all behavioural traits are considered, and when the fact that even policy-making and implementation is subject to the same quirks is considered. Given this, I did the only scientifically responsible thing possible – I used behavioural psychology to understand (science) but not recommend (policy)

Not everything reduces to incentives, at least in the way that we formally study them. Incentives are great at explaining the average truth, the usual explanation for why something happens. They fail miserably when explaining fringe behaviour or initiatives to tackle fringe issues. By fringe here, I mean not unimportant, but at the edge of our knowledge, efforts and motivations. Of course, one can use a slippery definition of ‘incentives’ and then everything can be considered a function of incentives.

What has this got to do with my post?

And at the end of it all, I am still wondering what your point is. Is it that we won’t be able to ’solve’ global warming, assuming that it is a problem in the first place?

See above – that we will not be able to solve Global Warming at the “optimal” time, and that we shouldn’t try to solve problems too much in advance.  Also, correcting for market failure is not a simple thing.

A Drafting Error

How could Shekhar Gupta write this sentence with a straight face?

That is why it is fascinating that the most commonly stated discomfort with the Sharm el-Sheikh joint declaration is with its drafting. (The big rewrite)

The “drafting” in question says  that India will talk to Pakistan without insisting that Pakistan prosecute those responsible for killing Indian citizens on 26/11 and without insisting that Pakistan takes action to prevent future such attacks.  Is Gupta saying that this is a drafting error? No, because he goes on to claim that this is a game changing move, which is entirely to Manmohan Singh’s credit. He goes on to suggest that we should do exactly what the draft says. Then why say that the “discomfort” with the declaration is only “with its drafting”? 

He keeps saying that we should not concentrate on tactical issues, but on strategic ones. I am not quite sure what he means by tactical issues. If he says that the “drafting” is the tactical issue in question, then he is misrepresenting opponents of the declaration, because they are in fact concerned with the substantive issue of terrorism, not with the “drafting”. If he is saying that terrorism itself is a “tactical” issue, then it is a disgraceful statement.  Terrorism is a tactical issue for Pakistan, a tactic to achieve its larger goals in India. Stopping terrorism against India is a strategic issue for India. In fact, as far as I am concerned, that is the only issue. Prosecuting those responsible for the deaths in Mumbai is a tactical step towards that goal.

He goes on say that India should “engage” Pakistan while keeping up the pressure on it to prosecute those responsible for the massacre on 26/11. But what did the declaration achieve except reduction of that pressure?

The Politics of Reservations

In the  July 2009 Pragati, you can find my article on the politics of reservations.
Whenever supporters of reservations have to make the case for extending reservations for another 10 years, they are faced with a dilemma. If they admit that reservations have achieved their goal, then why do they want them extended? And if they admit that they have not achieved their goal, then why are they persisting with a failed policy for over 60 years? The generally accepted solution to this is to claim that reservations have had some effect, and the policy would be even more effective if it had been properly implemented, and for that they need to extend reservations in time and scope.  This is what I meant when I compared reservations to Yossarian’s liver in Catch-22 – if doctors can confirm that it is a disease, they would have to treat it. If they pronounce him cured, they would have to discharge him. Because the problem was invariably in between, Yossarian could stay indefinitely in hospital.

Here, I would like to respond to some points that were made by Anubhav Agarwal, who made these points as twitter replies. The points here have been edited for readability:
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