Economics meets Physics

Slate's UnderCover Economist tries to find answer to questions like "Why poor countries are poor."

The physicists' map shows each economy in this network of products, by highlighting the products each country exported. Over time, economies move across the product map as their export mix changes. Rich countries have larger, more diversified economies, and so produce lots of products—especially products close to the densely connected heart of the network. East Asian economies look very different, with a big cluster around textiles and another around electronics manufacturing, and—contrary to the hype—not much activity in the products produced by rich countries. African countries tend to produce a few products with no great similarity to any others.

Religion and Economics

Recently read another paper (earlier one here) by Dr. Robert J. Barro, titled "Religion and Political Economy in an International Panel". Makes quite an interesting reading.

Two important theories of religiosity are the secularization hypothesis and the religionmarket model. According to the former theory, economic development reduces religious participation and beliefs. According to the latter theory, religiosity depends on the presence of a state religion, regulation of the religion market, suppression of organized religion under Communism, and the degree of religious pluralism.

Passing Note: The dollar bill reads, "IN GOD WE TRUST". I infer that more the dollar bills in my pocket, more is my religiosity ;-)

Caste Based Reservation

Caste Based Reservation (CBR) in India finds its roots to Dr. B. R. Ambedkar’s Poona Pact of 1932. It found new faces with the adoption of Constitution of India and the more recent Mandal Commission. With clauses to apply and observe the reservation system for just a decade, India recently turned 60 year old free republic.
CBR can be considered similar to Rent Control, where the government regulates and controls the supply/demand. So can we call CBR a good thing? In my opinion - Yes. But how would one decide the percentage of reservation? This is where the matters get complicated. In a free economy, the forces of supply and demand would reach equilibrium. In case of Rent Control, degree of rent increases are limited by the Consumer Price Index (change in Consumer Price Index is a measure of Inflation). What is the rationale for fixing the percentage of CBR? It seems to have been largely political driven rather than any “market forces”. It is also proposed to introduce CBR in private sector. I wonder how longer the MNCs can keep calling themselves “Equal Opportunity Employer”

Distance Education

I recently was having a debate with a colleague of mine about the admissions process in Distance Education in India. My colleague was of the opinion that there is no upper limit to the number of students who can enroll via distance education while the economist in me was suggesting otherwise. I was suggesting that it’s not economical viable. This would be a case of limited resources (teaching faculty and administrative staff) being allocated without a limit? (Number of applicants)

The universities do apply rationing instruments, which limit the number of enrollment. Below is a list of a few such instruments. Some are obvious, some not so obvious and some apply to specific cases only

0) Screening test
1) Number of application rounds per year
2) The Last date for applying
3) Fees
4) Reservation (Caste based or otherwise)
5) Duration of the course
6) Prior academic qualification
7) Relevant work experience
8) Age limit

Even though the university claims to be an "OPEN UNIVERSITY" (no entry criteria), in my opinion, the combination of the above instruments does seem to limit the number of applicants.

Bargain vs Fair Price

Scene One - Bargain
National Market, Bangalore – Customer enters the air cooled shopping complex. He is flocked by sellers. “…yes…hello sir, shoes belts watches ….” The list goes on. Customer sees an item he likes.

“How much does it cost?”
“Top item sir….imported…only Rs 1500…full guarantee”
“No no…too costly…I will pay 600”
“Sir latest item, you won’t find anywhere else….best in class, yours for 1200 only”
“That’s too much…I will pay 700 max”
“Tell me a final price, 900…”
“No no…750”
“Ok 800”
“Done”



Scene Two – Fair price
Forum Mall, Bangalore – Customer enters the air cooled shopping mall. He enters the desired shop.

“Hello sir how may I help you”
“I need one ….”
“Sure that’s the item selling like hot cakes….only Rs 999.90….discount price for the festival”
“Seems good…I will have one”
“Sir, cash or card?”
“Credit card”
“Final price 1200 after VAT”



Let’s forget the quality of the product being sold here. How does bargaining fair against fair price? Or is fair price really fair since the customer is not given a fair chance to bargain?

Economic Blog vs Photography Portfolio

My "economics blogging" activity had been dormant during the last week. That does not mean that I have not been reading about economics. It could only mean that my opportunity cost towards another activity was more favourable. I have been spending time building my photography portfolio. Photography has been my hobby way before my interest in economics but recently the photographic hobby is seeing a new chapter. I have been reading and experimenting with post processing techniques using Adobe Photoshop and Photomatix. But the economic question which remains unanswered is what are the incentives that define my behaviour of choosing to work on my portfolio vs blogging about economics? (Still trying to think of an answer)

Traffic Lights

Traffic Lights and Traffic Police as economic agents.

Limited Resource - Roads and side walks.
Consumers - Motorists and pedestrian.
Price - Amount of time spent waiting at stop signal.
Higher the demand, higher the price (since supply of resource can't be improved immediately) - Higher waiting time during peak traffic hours (especially true in case of Bangalore traffic)

Chocolate Economics

Interesting article here on Chocolates and Economics

Role of Substitute

But the shift would make chocolate cheaper to produce, since cocoa butter can be four or more times the cost of Shea, palm oil and other vegetable fats.

Buyer's Preference

“To me, it’s a delicacy. I don’t eat it every day — I don’t want the calories. But when I do enjoy it, do want real chocolate. I don’t want any change in flavor by cheapening the product,” said one opponent, Avanele Bush, 83, a Malibu, Calif., resident who counts chocolates made by See’s Candies Inc. and Ghirardelli Chocolate Co. among her favorites.

Seller's Incentives

“If you’re able to replace cocoa butter with another fat, even at the 5 percent level, you’re saving lots and lots of money, especially if you are a major manufacturer of chocolate bars,” said Bernard Pacyniak, editor in chief of Candy Industry magazine.

Graduate Study in Economics

I have been doing a small (re) search about Graduate Study in Economics, offered by various universities across the globe, and I am amazed to find out that most Graduate Programs in the United States are PhD courses. Only 1 out of top 10 universities in economic studies, offers a masters course. However, the scene is different in Europe and India, where there seems to be a healthy mix of PhD and Masters Courses.

What could be the incentives for these universities to offer these types of courses?

• India has basically mimicked the British Education system.
• 50-60% of American graduate students are immigrants and US has always encouraged research.
• The infrastructure and facilities for higher education in India are poor. (I do not have any statistical information to provide). This could be the reason why, in spite of low cost of higher education in India, number of graduate students (including immigrants) is low.
• The general mentality of the Indian COMMONS is to become a bread winner ASAP. Higher education is still for the privilege few.
• Research funding in US usually comes in the form of corporates pouring in the dollars hoping to reap the benefits of the research at a later point of time. This does not seem to be happening at a similar scale in India.

The above points cover Graduate study in general but my question still remains specific to graduate study in economics. Why do most US universities offer only PhDs and not Masters in Economics? The answer could lie in the answer to the following questions - What do graduates in economics worldwide do after their graduation ?

I am still (re) searching for this answer.

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Footbath Economics

Stunned to see this article in NY-Times today. What could be the economics behind this?

• More than 10% of the students are Muslims. University of Michigan seems to be interested in attracting more Muslim students. After all, Michigan has higher percentage of Muslim residents than any other American State.
• $25,000 towards foot washing stations in several wash rooms. Who pays for this? This can not be imposed on the Muslim students alone since the washrooms could be used by any student
• Altering the rest rooms to install wash stations would mean lesser space for regular closets, sinks etc.
• Training janitors to clean the new wash system.
• The scene would be similar to the common house hold bathroom in India - Wet !!!. So the new washrooms in the University would have a permanent sign "piso mojado"