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Rent Control in Mumbai

By Shubham Paliwal

Demand and supply mismatch created by price ceilings causes poor and reduced accommodation for the lower income people.

 The ‘Bombay Rents, Hotel and lodging House Rates Control Act, 1947’ served its purpose in the short term but in the longer term it led to reduced supply of houses for rents, dilapidated houses, black income and reduced taxes to the government. The rent control act should have been modified and the second generation rent controls should have been adopted as was done by many European countries.

The ‘Bombay Rents, Hotel and lodging House Rates Control Act’ was introduced because of the acute shortage of houses in Bombay due to the world war and partition of colonial India. The purpose of the act was to prevent exploitation of the tenants and to prevent speculation. The prices were kept low to provide relief to the city’s migrants after the partition. It was supposed to benefit the tenants.

Under it, the state put a cap on the amount of rent a tenant paid to a landlord, and this amount remained virtually frozen irrespective of inflation and the consistent rise in the market rates over time. Rents at about 19,000 buildings were set at 1940 levels to prevent owners from charging excessive rates during a time of distress.

Rent Control bombay

In its initial years, the system served the purpose of creating affordable housing at stable rents but it failed in its purpose in the long run. It did help the tenants but it led to market distortion and negatively affected the interests of the landlords. The prolonged continuation of first generation rent control law led to various unintended consequences.

It led to a consistent degradation of housing stock because builders and developers had no incentive to generate more rental housing (as the rents were much lower than the prevailing market rates). Thus, almost all new housing being built was for ownership purposes (most of it for the upper-middle classes and above). Rent controlled buildings were often unkempt and dilapidated because the nominal rents did not motivate landlords to spend on maintenance.

An amendment to the Rent Control Act in 1999 allowed flats to be rented out, without rent control, on a leave-and-license basis for one year at a time. This lead to surge in the prices of uncontrolled rental properties due to market distortion created by the shortage of housing stock being built for rental purposes.

Rent controls gave rise to the informal pagdi (or pugri) system, where tenancy is transferred from one tenant to another at property rates a little below prevailing market rates and the landlord and tenants both have a share in it. As tenants held capital in the form of black money (share in pagri) the central government could not levy wealth tax and capital gain tax on it. Moreover municipal taxes were linked with rent, therefore, along with freezing of rent, income of municipality also got frozen and fixed. In order to make up for increasing service expenses, the municipality levied a tax as high as 142%, repair tax 402% (residential) and 755% (non-residential) for buildings repaired by the repair board. The pagdi amount being in black money led to increased investments in illegal trades and business. Even though landlords got tax free black money income on every transfer of tenants, they shuddered away their responsibility of repairing buildings on the plea of meager rent income.

Thousands of rent-controlled tenants are becoming millionaires as developers tear down crumbling colonial mansions to build luxury towers for the rich and pay huge sums to the tenants to vacate the apartments. In suburban areas, where old chawls were demolished by builders for new houses, old tenants of chawls were given free flats worth lakhs in the new building as alternate accommodation. A large section of the tenants got premises for residence and business at ridiculously low rates.

Tenancy rights continued even after the collapse of a 100 year old building. Old houses started collapsing for want of proper maintenance and repair. Instead of amending the Act, repair cess act was introduced under which landlords were exempted from liability to repair buildings and tenants paid repair cess upto 400 to 700%.

With rent control in place, people are lined up for housing, and therefore, the landlord can discriminate on the basis of who will take the most meager accommodations.

Price ceilings set below the equilibrium price arrived at through supply and demand, increase the demand for apartments. Landlords decide to withdraw from the market as they do not receive the full amount that they would be able to charge in a free market, for example by selling apartments and investing elsewhere. The supply of accommodation is therefore reduced leading to queues and waiting lists for apartments caused by the increase in demand. Some landlords may impose certain criteria on the tenants they accept, causing discrimination against certain categories of tenant.

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Thus, overall the rent control act was beneficial only in the short term for the economy. In the long term it prevented modernization and led to increase in black money at the cost of taxes that the government could have collected and used for other purposes. It led to market distortion by creating a mismatch in the supply and demand of houses. The benefits accrued by the tenants were way more than was desired or necessary, the loss to the economy in terms of taxes was huge and thus it was not a wise move by the government. The government should have modified the rent control law much before by learning from the experiences of other economies.

Tenancy rent controls (also known as second-generation rent controls) are much more common in the contemporary world. One important feature is the “vacancy decontrol” provision which frees landlords to set rents freely once a rental unit becomes vacant. The amount of rent increase a landlord can impose on a sitting tenant is also limited. It also regulates or prohibits the practice of collecting nonrefundable deposits, limits the ability of landlords to evict sitting tenants, and restricts the use of fixed-term contracts.

Shubham Paliwal is a part of the GCPP’13 cohort at the Takshashila Institute.

[This and the other three essays on Price Controls was submitted as part of the Economic Reasoning coursework. Students were asked to identify instances of price controls in the world; who the intended beneficiaries were; and what were the unintended consequences of the price control. The 4 best answers were picked. The other three were on Price Control on Prescription Drugs in Europe and Price Control on Milk Products in Vietnam, Price Control on Gasoline in the US].

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‘Inflation’ ला मराठीमधे काय म्हणाल?

Source: Flickr

Source: Flickr

महागाई चलनवाढ असे अनेक शब्द आपण रोजच्या वर्तमानपत्रात वाचत असतो. पण ह्यांचा नक्की अर्थ काय आहे? महागाईसाठी कोणाला दोष द्यायचा हे ठरवण्याआधी ती नक्की कशामुळे निर्माण होते ते पाहूया. महागाई दोन कारणांमुळे होऊ शकते. पहिलं अगदी सोपं आहे. एखादी गोष्ट बनवायला जो कच्चा माल लागतो तो जर महाग झाला तर त्या गोष्टीची किंमत पण आपसूकच वाढणार. जर आंतरराष्ट्रीय बाजारात तेलाची किंवा धातूंची किंमत वाढली तर प्लास्टिक स्टील इत्यादी गोष्टींची किंमत पण वाढणार. आपल्याला असे वाटते की आधी महागाई वाढते आणि मग आपला पगार वाढतो पण उत्पादनातला एक महत्वाचा घटक म्हणजे कामगार असतो. म्हणून पगारवाढ हे पण महागाईचं एक कारण असू शकतं. ह्याला अर्थाशात्रात ‘cost push inflation’ म्हणतात.

महागाईचं दुसरं कारण सहसा लक्षात न येणारं आहे. कुठल्याही गोष्टीची किंमत फक्त त्याच्या निर्मितीला लागलेल्या खर्चावर ठरत नाही. बहुतेकदा त्या गोष्टीची किती मागणी आहे आणि किती पुरवठा शक्य आहे ह्या वर त्याची किंमत ठरते. म्हणजे जरी ती गोष्ट बनवायला निश्चित खर्च आला असेल तरी त्याची विकण्याची किंमत अनिश्चित असू शकते. कांद्याचे भाव हे ह्याचं उत्तम उदाहरण आहे. कधी ते १० रुपये किलो असतात तर कधी १०० रुपये किलो. उत्पादनाची किंमत तर बदलत नाही मग काय बदलतं? कांदे अशी गोष्ट आहे की ज्याच्या मागणीत फारसा बदल होत नाही पण पुरवठ्यामधे खूप तफावत दिसते. पुरवठा जास्त झाला की किंमती पडतात आणि कमी झाला की किंमती वाढतात. ह्या उलट हॉटेलमधे राहण्याचा खर्च बघा. इथे पुरवठा बऱ्यापैकी स्थिर असतो पण मागणी वर खाली होत असते. म्हणून सुट्टीच्या दिवशी बुकिंग महाग पडते. ह्याला ‘demand pull inflation’ म्हणतात.

पण फक्त कांदे किंवा हॉटेल बुकिंग महाग झालं तर त्याला तुम्ही महागाई म्हणाल का? महागाई म्हणजे सरसकट सगळ्या गोष्टींची किंमत वाढणे. बरेच वेळा चलनवाढ हे महागाईचे कारण असू शकते. जेव्हा RBI जास्त नोटा छापते तेव्हा देशातला एकूण पैसा वाढतो. जर त्या प्रमाणात पुरवठा वाढला नाही तर आहेत त्याच गोष्टी जास्त किंमतीला विकल्या जाऊ लागतात आणि महागाई वाढते.

आता ह्या ‘Inflation’ ला चांगला मराठी शब्द सुचवा.

 

Siddarth Gore is a Research Scholar at the Takshashila Institution and he tweets @siddhya

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‘Information Asymmetry’ ला मराठीमधे काय म्हणाल?

सध्या फॅशनमधे असलेली टेराकोटाची कानातली बाजारात २५० च्या खाली मिळणार नाहीत. पण तुम्हाला हे माहिती आहे का की त्या कारागीराला ह्यामधले फक्त १० रुपये मिळतात? बिहारची प्रसिद्ध मधुबनी चित्र घ्यायला गेलात तर ३००० च्या खाली मिळणार नाहीत. पण त्या चित्रकाराला प्रति चित्र फक्त ८० ते १०० रुपये मिळतात. हि इतकी विषमता कशी निर्माण होते?

 

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आपल्याला सहसा लक्षात येत नाही पण बाजारात विकल्या जाणाऱ्या  प्रत्येक गोष्टीला ३ किंमती असतात. एक जी ग्राहकाच्या मनात असते , एक विक्रेत्याच्या मनातली आणि तिसरी म्हणजे ज्या किंमतीला सौदा पक्का होतो ती. आपण अगोदर पाहिले आहे की सौदा तेव्हाच शक्य असतो जेव्हा ग्राहकासाठीचं मूल्य (मनातली किंमत) हे विक्रेत्याच्या मूल्यापेक्षा जास्ती असतं. तुम्ही जेव्हा घासाघीस करता तेव्हा खरंतर तुम्ही एकमेकांच्या मनातली किंमत शोधायचा प्रयत्न करत असता. हे गिऱ्हाईक जास्तीतजास्त कितीला गटवता येईल हे विक्रेता शोधत असतो आणि किंमत कमीतकमी किती करता येईल हे गिऱ्हाईक हुडकत असतं. जो हि माहिती अचूक मिळवतो त्याला व्यवहार जास्त फायद्याचा ठरतो. ह्या माहितीच्या तफावतीला अर्थशास्त्रात ‘Information Asymmtery’ असं म्हणतात.

काही प्रकारच्या व्यवहारांमध्ये हि खूप बघायला मिळते. जसं की डॉक्टर आणि रुग्ण. रुग्णाला काय झालंय हे त्याच्यापेक्षा डॉक्टरला खूप जास्त कळत असतं. ठरवलं तर तो त्याचा गैरवापर करू शकतो. म्हणूनच तर आपण डॉक्टर रुग्ण संबंधात विश्वासाला खूप महत्व देतो. वर पाहिलेल्या उदाहरणात कारागीराला त्याच्या कलाकृतीच्या किंमतीचा (विकत घेणाऱ्याच्या मनातली) अंदाज नाही म्हणून त्याचा फायदा कमी होतो. जर ती माहिती त्याच्यापर्यंत पोहोचली तर हि विषमता नक्कीच कमी होऊ शकते.

आता ‘Information Asymmetry’ ला चांगला मराठी शब्द सुचवा.

Siddarth Gore is a Research Scholar at the Takshashila Institution and he tweets @siddhya

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India’s Pacific Ambition

In many ways India is not a traditional or a significant power in the Asia Pacific region, but today India is making a concerted effort to look eastwards. There is a divided opinion on India’s Pacific ambition, while some call it as an emerging aspiration, while others call it as a deficit action. However it would be a misnomer and premature to  decipher  India’s  geo-strategic and geo-economic interest as simply void. With US strategic pivot in East Asia, and with expanded US-Japan alliance system, India is drawn into this  power configuration partnership, probably an effort to counterweight  China.

 

India and east asia

There is a growing geo-strategic and geo-economic involvement of India in the region. Host of factors ranging from past history, economy, political and strategic has dominated India’s East and South East Asia dynamics.  Trying to connect the demands of the  post liberalisation era and to engage meaningfully in the region, India re-visited its Look East Policy. India’s engagement with ASEAN is yet another milestone of integrating into the global economy.

The United States as a part of its pivot strategy in Asia , is harnessing  India as an important player in the region.  This has resulted in India’s invitation for the East Asia Summit in 2005. There is a sense of  inclusion of India by Singapore, Indonesia, Thailand, Japan and South Korea despite China’s objection. Defence diplomacy is something that India is judiciously following and has conducted  joint naval exercises with South Korea. Thereafter there has been an greater political engagement with Seoul. There is a special strategic global partnership that is emerging between India and Japan,as both the countries remain very watchful of China.

There are several areas that India-Japan are networking together. The high speed railways between Ahmadabad and Mumbai is a very important initiative towards this effort. The cooperation on nuclear and defence between Japan and India is very significant imperative in Asia’s landscape. There is a crystallisation of trilateral partnership between India-Japan-United States. Maintaining Balance of Power  is extremely vital and the resultant factor is the changing countours in the strategic landscape of East Asia.The triangular relation is seen as a crucial geo-strategic alternative which could probably balance China.

Is the inclusion of India done on the pretext of a growing economy or as an intent to contain China.There is lot of uncertainty that prevails in the region, what is the position of Japan, China and United States over the future of East Asia. Can the emerging powers like India, Japan and Australia fit into the strategic gap as  a stabilising force in the region. There is an emerging power shift that is slowly unfolding , can India benefit from this strategic quadrangle is something that has to be carefully watched.

Priya Suresh is a Research Scholar with the Takshashila Institute. She tweets @priyamanassa.

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Narendra Modi’s One Year – A review of reviews

By Anupam Manur and Devika Kher

In one year, the PM has made incremental changes to the economy, government structure, and foreign policy but the lack of the game-changing reforms expected of him renders the year marginally above average.

One year on, Prime Minister Narendra Modi’s performance has been under severe scrutiny and though the assessment has been mostly positive and hopeful of the coming four years, there is an underlying recognition that much more needs to be done in order to justify the overwhelming mandate.

Economic Performance under Modi

As per New York Times’s article by Ellen Barry, “India is now seen as a bright spot, expected to pass China this year to become the world’s fastest-growing large economy.” Prime Minister Modi entered the office at one of the most exciting time that the Indian economy has seen till date.

To begin with, almost all the dailies commonly acknowledged Prime Minister’s ‘luck’ with the oil price fall and discounted his contribution to the financial condition of the country. The Live Mint’s editorial article remarked on lower commodity prices bringing down inflation, fiscal deficit and the current account deficit. However, Raghuram Rajan is quoted by Barry as appreciating the government’s steps to create an environment for investment.

India also saw liberalisation of sectors untouched for a long time; limits on foreign investment in defence and insurance were both raised to 49 percent. The PM also deregulated the prices for diesel, petroleum and cooking gas. Live Mint also appreciated the PM’s move to avoid lavish increases in minimum support prices and the successful auction of coal blocks and telecom spectrums.

The improvement in economic performance has largely been attributed to positive global factors rather than the present government’s interventions. There have been no revolutionary game-changing reforms and the government is struggling to implement its Goods and Services Tax and Land Acquisition Bill, even in a diluted form. Surjit Bhalla, in his Financial Express column, is particularly critical of the confused tax policy. The retrospective Minimum Alternate Tax (MAT) has led to Foreign Institutional Investment outflow and a loss of confidence in the Indian economy. The data on FDI for the popular ‘Make in India’ campaign does not match the brouhaha. The Urbanization agenda also scores rather poorly, with no real activity on the ‘100 smart cities’ project. The government’s track record on education and health is not impressive either, as argued by Tavleen Singh. Another article in the Hindustan Times also severely attacked the government for reducing the budget in areas like food subsidies, health, education, etc.

Social Policies

Subir Gokarn’s one year report card in Business Standard positively assessed the progress on three critical structural challenges: food, infrastructure and employment.

The PM has, however, been applauded for the announcement of various social schemes such as the Pradhan Mantri Jan-Dhan Yojana and the Atal Pension Yojana that will improve the financial inclusion of the people. However, G. Sampath has dubbed these financial inclusion schemes as Modi’s war on welfare as they have come at the cost of poverty alleviating ones. While the MGNREGA and the Food Security Act were rights-based social provisions, the Pradhan Mantri Yojanas “put the onus of social security on those who lack it the most — the poor themselves”.

PM Narendra Modi and President Obama

Foreign Policy 

An Open magazine article by Brahma Chellaney commented that pragmatism, zeal and showmanship were the trademarks of the PM’s foreign policy. He describes the PM as a ‘a realist who loves to play on the grand chessboard of geopolitics’ and postulates that the foreign policy strategy is to revitalise India’s economic and military security. He does appreciate the PM’s “non-doctrinaire foreign-policy approach powered by ideas”. In a Hindu article, Chellaney states that “for a politician who came to office with virtually no foreign-policy experience, Mr. Modi has demonstrated impressive diplomatic acumen”.

The Diplomat’s two part review of the PM’s one year by Rohan Joshi complimented the PM on his efforts ‘to correct the faltering trajectory of India’s relationship’ with the United States and China and described them as “a positive departure from the past”. Joshi also acknowledged the PM’s attempt to strengthen relations with “Asian Sates that share India’s anxieties over China’s aggressiveness in its neighbourhood.” He goes on to commend the PM’s indifference to Pakistan and his work to build relations with Bangladesh.

It is generally agreed that Narendra Modi has been the most active PM in India’s recent history with regard to foreign policy. However, critics have questioned the timing and number of Modi’s foreign visits as it has left Modi with little time for domestic affairs. Chellaney points out that the Sri Lanka visit could have been extended till after their domestic elections and that his visit to China within 8 months of Xi’s visit to India can be considered too soon.

The Autocratic ruler

The PM’s micro-managerial style has come under intense scrutiny. The Economist ran a cover story on “India’s one man band” where the PM was appreciated for his move to devolve powers to the states. According to The Economist, this would help in creating a manufacturing boom in the country. However, the magazine contends that Modi’s biggest mistake is to believe that he alone can transform India.

The PM is however, having an impact on the bureaucratic culture in India. One of his first reforms was to push for the self attestation of documents. The fastidious whip of the PM has made the bureaucratic staff more efficient and punctual. According to the New York Times article, the PM has ensured that all business deals by ministries are routed through his office to remove the “informal meetings that business leaders used to hold with ministry officials.” This opinion was also backed by Mint, which dubbed the PM an effective administrator.

Brahma Chellany also supported this view by pointing out that the PM has realised the negative impact that corruption would have on internal security and foreign- policy options, and is seeking to bring it under control.

However, not everyone is happy with Modi’s style of governance. The biggest criticism against Modi and his government is that it is hard to distinguish between the two. Santosh Tiwari, in his Financial Express column, contends that the fallout from PM Modi projecting himself as the sole panacea to all of India’s woes is that there is a genuine lack of second rung leadership in the party and the government. The result is that the PM is the final authority on all matters, which hampers the ability of other ministers/leaders to act competently and independently.

Mihir S Sharma, in his acutely critical article “Wasting 282” in the Business Standard, argues that Modi has wasted the enormous mandate presented to him in his first year and attributes this to the lack of direction of top officials.  Ministers and bureaucrats are confused and pulled in different directions because there are no clear set of guiding principles from the PM. The PM insists that “hands-on, case-by-case action such as he delivered in Gujarat, is enough”. This explains the piece meal reforms and lack of big sweeping reforms.

The final word:

Given the nature and enormity of expectations, PM Modi’s government was bound to fall short. As Rajiv Kumar puts it “surprisingly, thus, at the end of one year, Modi finds himself facing disquietude and impatience from the middle, neo-middle and business classes who were his star supporters during the campaign”.  In one year, the PM has made incremental changes to the economy, government structure, and foreign policy but the lack of the game-changing reforms expected of him renders the year marginally above average.

Anupam Manur is a policy analyst at Takshashila Institute and tweets @anupammanur

Devika Kher is a Research Associate at Takshashila Institution. Her twitter handle is @DevikaKher

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Information Asymmetry in the Information Age

Why the impact of new technologies on markets requires governments to revise their regulatory policies

In their interesting article, Alex Tabarrok and Tyer Cowen discuss the declining relevance of asymmetric information. Information asymmetry occurs when one party has more knowledge about the transaction than the other. Usually this grants that party an undue advantage in the transaction whereas the other faces a higher risk. Taborrok and Cowen explain how various new technologies have provided enough avenues to minimise information asymmetry within the economy. They go on to conclude that this change deserves a re-examination of regulatory policy as most of the theories relating to information asymmetry are now obsolete. This post shows how this conclusion is equally relevant in the Indian context through the following scenarios.

 The Ordeals of a Family Vacation

Till recently, a typical middle income family in India would spend lots of time, effort and money planning their itinerary for their yearly holiday. Better off families would opt for travel agents who could reduce the amount of time and effort required, i.e. the transaction cost. However, the monetary cost would probably increase considerably as travel agents often exploit their customers’ poor knowledge of ticket prices and regulations to increase their profits.

This entire set-up changed dramatically with the advent of online travel booking sites. The entry of sites such as Yatra, TravelGuru, and MakeMyTrip into the market reduced the transaction costs of travel as booking a ticket was now just a click away. Furthermore, these sites supplied travellers with data they could use to make more informed choices. Such data would range from information about weather conditions and popular tourist sites to customer reviews containing user-uploaded photos. The most important contribution of these sites was to reduce the information asymmetry by removing the middle men. By providing limitless options for travel and accommodation, and the option of online payment they enabled middle income families to plan their holidays in hours.

 The Maid Market in India

Information asymmetry can increase the risk of buyers making uneconomic decisions because it often leads to a decline in the quality of products offered in the market. This decline induces buyers to reduce the amount they are willing to pay for the product and can eventually force sellers of costlier and higher quality products out of the market. This creates a market which is dominated by sellers of low quality goods. In economics this is referred to as adverse selection; a good everyday example would be house maids.

With the rise in the incomes and aspirations of middle income India, a larger number of families have started looking for house maids who comply with their living standards. Such families are increasingly looking for maids who understand English, care for hygiene, can cook continental food, handle hi-tech home appliances and are neatly dressed. However, the market for house maids suffers from an asymmetry of information. Households are usually at the losing end of the bargain as each maid has more knowledge of her expertise than the house owner. House owners would try to reduce their risk by initially paying a low wage to the maids. This would price out higher quality maids who value their service at a higher rate and would leave only low quality maids in the market.

This problem has been solved by home maid agencies. These agencies recruit domestic workers or people interested in domestic work and train them according to changing demands within the market. These agencies help domestic workers in finding better opportunities by guaranteeing a higher quality of service provision to house owners.

 The GPS Tracking of Garbage

The principal-agent problem occurs when a person (the principal) hires someone (the agent) to perform certain tasks. However, in most cases the incentives of the agent differ significantly from the principal as the costs incurred are borne only by the principal. The textbook solution is to create incentives for the agent such that it is in his or her self interest to follow the principal’s directions. One such incentive is to share the risk. For example, companies like Infosys pay their CEOs with stock options as a compensation for relatively low salaries. Another method would be to increase the cost of disobedience by monitoring the agents more. An example of the latter method is the use of GPS fitted garbage trucks in Delhi.

Garbage trucks are owned by private garbage disposal services or by municipal corporations. These trucks collect garbage from all across the city and dump it at a particular location. However, the drivers of the trucks have various incentives that interfere with this role. These include profits from reselling the garbage or alternate uses of the truck. In 2013, the Delhi government fitted GPS devices to garbage trucks to track their movements and monitor their work performance. These monitoring systems reduced the information asymmetry between the drivers of garbage trucks and owner of the garbage disposal services.

 Uber: the Escrow Agent

Asymmetry of information can often create distrust between the parties to a transaction. In such cases, escrow agents act as a trusted third party that ensure that parties maintain the standards of performance set by the contract. A simple example of this would be Uber, an international company which operates a mobile app that allows customers to book taxis.

Uber’s legal page describes the company as an intermediary for taxi drivers and people interested in availing their services. This role allows Uber to guarantee that there will be no bargains over fares for customers as well as a regular stream of income for drivers. In doing this, Uber reduces the information asymmetry by providing details about the driver ranging from his current location to his basic profile. This has helped in reducing the transaction costs of cab rides and has empowered customers trying to narrow the information gap.

 In Conclusion

The advent of new technologies has mended multiple market failures by narrowing the information gaps in various economic exchanges. In doing so they have also changed the very fabric of transactions and have thus rendered many theories from the past obsolete. As many regulatory policies were designed on the basis of those theories the onus is on political systems to revise these regulations. When they do so, they must keep in mind the ways in which new technologies have affected information asymmetries. In order to maintain pace with innovations, these policies would have to be time bound and adaptable to the needs of the time.

Tabarrok and Cowen succinctly summarise the challenges of such reforms in their piece:

 These changes cast new light on the costs of a political system that produces many new regulations but repeals very few old ones.

Devika Kher is a Research Associate at Takshashila Institution. Her twitter handle is @DevikaKher

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Does a strong currency mean a strong economy?

by Anupam Manur & Varun Ramachandra

Exchange rates have negligible connection with the strength of an economy. Instead, it is determined by trade performance, capital inflows or an arbitrary number chosen by the central bank.

In their book The Dollar Crisis, Paul Simon and Ross Perot famously said that “A weak currency is the sign of a weak economy, and a weak economy leads to a weak nation”. The quote was mentioned in the larger context of American military and economic might, but the feelings espoused in the quote are shared by many. For instance, this article in the Economist describes the feeling of despair amongst the citizens of Hong Kong when the value of their currency (Hong Kong dollar) slipped below that of Mainland China (Yuan). Politicians, central bankers, economists, and policy makers often share the ‘blame’ for a weak currency. But is a ‘weak’ currency truly an indicator of a ‘weak’ economy? Consequently does a ‘strong’ currency necessarily imply a ‘strong’ economy? This post aims to answer these questions.

The strength of a currency, in economic terms, implies the price (or the exchange rate) of one currency in terms of another foreign currency; this is usually measured with respect to the US Dollar, which is considered as the world’s reserve currency. (We will discuss why the US dollar is the world’s reserve currency in our next post). An exchange rate higher than one implies that the currency is stronger than the dollar and an exchange rate lesser than one implies that it is weaker.

The strength of an economy is measured by various means and the most used measure is the value of its Gross Domestic Product (or GDP).  The GDP measures the level of economic activity within a country and is the final monetary value of all the finished goods and services produced. It is a comprehensive measure of economic strength of a country[1]. The table below illustrates the metrics discussed thus far.

ExchangeRateGDP

Source: GDP, GDP per capita and the ranks from IMF database. Exchange rate is obtained from IMF and XE.com

Note on exchange rate rank:  It is obtained by sorting, in ascending order, the dollar value of domestic currencies. This is a metric derived purely for understanding the ideas discussed in this post and is not a robust measure.

Note on US$, per unit: This number indicates the number of US dollars that can be bought using the domestic currency. Example, exchange rate of 0.0160 for India means that one Indian rupee can buy 0.016 US dollars.

It is clear from the table that China, India and Japan are the second, third and fourth largest economies in the world, but their currencies are relatively weak. In fact, the per-capita GDP and exchange rates are also not comparable variables.

EXCHANGE RATE DETERMINATION

According to economics textbooks, the exchange rate is determined by the demand and supply for a currency relative to another foreign currency. This exchange rate arises out of three major factors:

First, the demand for a currency comes from people acquiring more of a particular currency to pay for foreign goods that they wish to buy (imports). Therefore, the exchange rate is determined by the volume of exports and imports of a country. If a country exports more than it imports, the demand for the exporter country’s currency and its exchange rate rises. Generally, an exporting country would want all or some of its payments made to it in its local currency, which would increase the demand for its currency.

Second, the demand for currencies arises from the financial markets and interest rate regimes. London is the one of the biggest financial centres — measured in terms of the volume of foreign exchange turnover– in the world and hence there is high demand for the Pound Sterling, as is the case with Swiss Francs. Further, countries with higher interest rates normally tend to have stronger currencies, as investors hope to get higher returns on their investments. A high interest regime encourages conversion into these local currencies and helps attain larger returns.

Third, it is in the interest of certain countries to have a weaker currency. A weaker currency will make exports cheaper and imports expensive giving these countries a competitive edge in the world market. Thus, the central banks and governments of different countries deliberately try to have a weaker currency.

The three factors discussed are not comprehensive and do not possess equal weightage; the eventual exchange rate dynamics depends on several other parameters.

Market determination of exchange rate does completely explain the exchange rate determination. There are more exceptions to this than adherents. For example, the Bahamian Dollar is exactly on par with the US dollar, despite playing a negligible role in world trade. This is due to the fact that the central bank of Bahamas has artificially pegged its currency 1:1 with the US dollar. That is even an infinitesimal change in the US dollar is directly reflected in the Bahamian dollar. Currency pegging (either 1:1 or some other predetermined ratio) is done by many countries to maintain stability. For example, Nepal and Bhutan have pegged their currency to the Indian rupee.

In conclusion, it is flippant to estimate the strength of an economy solely through the value of a currency. The strength of an economy is dependent on several variables that exhibit multi-causal relationship amongst themselves. Exchange rate have negligible connection with the strength of an economy. Instead, it is determined by trade performance, capital inflows or an arbitrary number chosen by the central bank.

 

[1] For simplicity, this post considers the GDP as the measure of strength of economy; to eliminate large country/ population bias we must consider the per-capita GDP (total GDP divided by the population) to arrive at a precise figure. Countries like India rank high in terms of GDP but, thanks to its population, rank much lower in per-capita GDP. Kuwait, on the other hand, ranks high in terms of per-capita GDP.

Anupam Manur is a Policy Analyst at Takshashila Institution  and can be found on twitter @anupammanur

Varun Ramachandra is a Policy Analyst at Takshashila Institution and can be found on twitter  @_quale

 

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कुछ पाने के लिए कुछ खोना भी पड़ता है

यह कहावत न सिर्फ एक दार्शनिक सिद्धांत है, बल्कि एक आर्थिक तथ्य भी है।

by Pranay Kotasthane (@pranaykotas)

ऊपर लिखित कहावत का प्रयोग हमने असंख्य बार सुना है । लेकिन इस संकल्पना को अर्थशास्त्र में कैसे समझा जाता है,  आइये जाने—
इस ब्लॉग श्रृंखला के पिछले प्रकरण में हमने देखा था कि तंगी से निपटने का एक तरीका है चुनाव — अर्थात अपनी-अपनी ज़रुरत और हालात के आधार पर किया गया वह फैसला जो हमारी व्यक्तिगत पसंद का परिचायक होता है । इस चुनाव को अंग्रेज़ी में ट्रेड-ऑफ कहा जाता है ।

जब भी हम अपने एक सीमित संसाधन के बदले में किसी एक चीज़ का चुनाव करते हैं तो किसी दूसरी चीज़ को जाने-अनजाने त्याग देते हैं। उदाहरणार्थ, एक ग्रेजुएट युवक/युवती के लिए एक सीमित संसाधन होता है समय। मूल्यवान संसाधन इसलिए क्यूंकि इस अवस्था में ज़िम्मेदारियाँ अक्सर काम होती हैं । सीमित इसलिए क्यूंकि  बेपरवाह जीवन बनाये रखना हमेशा संभव नहीं होता। मान लीजिये,अब इस ग्रेजुएट के सामने अपने संसाधन का उपयोग करने के केवल दो तरीके हैं — एक, ग्रेजुएशन के बाद किसी अच्छी जगह कार्यरत होना और दूसरा, पोस्ट-ग्रेजुएट कोर्स करना।

विकल्प आप कोई भी चुनें, उससे जुडी लागत को व्यय करना पड़ता है और यह लागत सिर्फ मौद्रिक (monetary) नहीं होती । अगर आप पोस्ट-ग्रेजुएशन का मार्ग चुनते हैं तो आप कॉलेज की फीस, ऍप्लिकेशन इत्यादि की मौद्रिक लागत उठाते हैं। लेकिन लागत सिर्फ इतनी नहीं है — इस विकल्प को चुनते ही आप कुछ सालों के लिए एक फुल-टाइम तनख़्वाह कमाने का मौक़ा भी खो देते हैं और यह भी आपकी कुल आर्थिक लागत का हिस्सा है। उसी तरह आप अगर एक फुल-टाइम जॉब का विकल्प चुनते हैं तो मौद्रिक लागत के रूप में नए शहर में सेटल होने के लिए एक मौद्रिक लागत उठाते हैं । साथ ही आप एक मास्टर्स/डॉक्टर की उपाधि हासिल करने का मौका गवाते हैं, और यह भी आपकी लागत का एक अहम हिस्सा है । इस संकल्पना को जो हमारे खोये हुए मौक़े की लागत को दर्शाती है, अवसर लागत (Opportunity Cost) कहते हैं।

अत:, किसी भी ट्रेड-ऑफ की कुल आर्थिक लागत जाननी हो तो हमें अवसर लागत को भी कुछ इस तरह सम्मिलित करना पड़ेगा —

कुल आर्थिक लागत = मौद्रिक लागत + अवसर लागत

ध्यान रहे कि कई बार अवसर लागत को एक सटीक नंबर देना मुश्किल होता है, लेकिन इसका मतलब यह कतई नहीं हैं कि हम इसको अपने विश्लेषण से हटा दे। बल्कि हमें इस पर और ज़्यादा धान देना चाहिए, क्यूंकि एक विकल्प की मौद्रिक लागत कम होते हुए भी कुल लागत कई गुना हो सकती है अगर उसकी अवसर लागत बहुत अधिक हो।

अवसर लागत की संकल्पना हमें पब्लिक पॉलिसी में किस प्रकार मददगार होती है? इस प्रकार कि सरकार के पास संसाधन हैं सीमित और ज़िम्मेदारियाँ हैं हज़ार। सरकार की हर नीति से एक अवसर लागत जुडी है । इसीलिए अगर हमें एक पॉलिसी की गुणवत्ता का विश्लेषण करना हो तो ना सिर्फ उस पर ज़ाया खर्च और मिलने वाले फायदे को जानना होगा, बल्कि यह भी देखना कि इस विकल्प को चुनकर हमने क्या मौके खोये हैं । जिस नीति में अवसर लागत और मौद्रिक लागत, दोनों का कुल जोड़ कम हो, वही अधिक किफ़ायती होगी। अतः अगली बार अगर आप नरेगा, स्मार्ट सिटी या सर्व शिक्षा अभियान जैसी नीतियों की गुणवत्ता का विश्लेषण कर रहे हो तो पहले इस प्रश्न का उत्तर सोचिये — इस चक्कर में हमने क्या खोया और क्या पाया? और उसके बाद ही अपना मन बनाये कि यह नीति सफल थी या नहीं।

Pranay Kotasthane is a Research Fellow at The Takshashila Institution. He is on twitter @pranaykotas

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चाहतें बेशुमार, संसाधनों का तंग हाल

क्या दुर्लभ संसाधन फ्री होने चाहिए?

by Pranay Kotasthane (@pranaykotas)

कुछ दिन पहले दिल्ली सरकार ने पानी और बिजली के दाम घटा दिए। इस मामले को लेकर काफ़ी वाद-विवाद हुए । और हमेशा की तरह हम समाजवाद और पूंजीवाद जैसे बड़े-बड़े शब्दों की चपेट में आ गए। हमने यह तो पुछा ही नहीं कि किसी वस्तु की लागत के पीछे मूल कारण आख़िर है क्या?

आम तौर पर इस प्रश्न का उत्तर अर्थशास्त्र के मौलिक अभ्यास से हमें आसानी से मिल सकता है । किन्तु हमारे अर्थशास्त्र पाठ्यक्रम में हम इस प्रकार के प्रश्नों को नज़रअंदाज़ कर देते हैं । ग्यारहवीं-बारहवीं के पाठ्यक्रम में पहले हम भारत की पंचवर्षीय योजनाओं को रटते हैं । तत्पश्चात हम मार्क्स या फ्रीडमैन की विचारधाराओं को एक दुसरे के विरुद्ध भिडाकर अपने हाथ धो लेते हैं । अर्थ से जुड़े इतिहास को अर्थशास्त्र कहना सरासर ग़लत है । वास्तव में अर्थशास्त्र गणित और विज्ञान जैसा एक बुनियादी विषय है जिसका उद्देश्य है मानव या एक मानवजाति के व्यवहार का आंकलन करना । कुछ क्षणों के लिए अपने दृढसिद्धान्तो के सिंहासन को त्यागकर आइये देखें कि अर्थशास्त्र हमारे मुख्य प्रश्न के बारे में क्या कहता है ।

हमारा संसार तंगी का संसार है । कहने का तात्पर्य यह कि हमारी ज़रूरतें हमारे संसाधनो से ज़्यादा होती है। अर्ज़ किया है-

غرض کے دایرہ کا مسلسل کر اضافہ

کہتا ہیں وہ ک غریب میں بھی تو ہوں

(ग़रज़ के दायरे का मसल्सल कर इज़ाफ़ा,

कहता है वो कि ग़रीब मैं भी हूँ)

यह ज़रुरत और प्राप्यता का अंतर किसी भी महत्त्वाकांक्षी व्यक्ति का परिचायक है । जब यह महात्वाकांक्षी व्यक्ति एक समाज स्थापित करते हैं तो वह समाज भी महत्वाकांक्षी हो जाता है । ध्यान रहे कि यह कोई ‘मॉडर्न’ ज़माने का दोष नहीं हैं । यह अंतर समाज में प्राचीनतम काल से चला आ रहा है । पाषाण काल में भूख मिटाने के लिए शिकार बहुत थे लेकिन शिकार करने की क्षमता सिमित थी । जब इंसान खेती करने लगा तो पानी के स्त्रोत सिमित थे ।  जब इंसान मशीनें बनाने लगा तो मशीनों को बनाने के लिए दुसरे पुर्ज़े सिमित थे । इस प्रकार सिमित संसाधनो का विनिधान युगो-युगों से किसी भी अर्थव्यवस्था का केंद्रीय प्रश्न रहा है।

दुर्लभता की इस मौलिक चुनौती का जवाब समाज दो रूप से दे सकता है । पहला है नवीनीकरण। पहले शिकार को पकड़ने के लिए बहुत से लोगों की ज़रुरत होती थी यह सुनिश्चित करने के लिए कि कहीं शिकार शिकारी पर हावी न हो जाए। इस चुनौती का एक हल था — औज़ारों का ईजाद जिससे खाद्य संसाधनों का अभाव कुछ हद तक काम हुआ । इसी प्रकार खेती में पानी के अभाव को मिटाने के लिए सिंचाई के तरीकों का शोध हुआ। हालांकि नवीनीकरण का उपाय दुर्लभता को मिटा सकता है , यह प्रक्रिया अक़्सर धीमी होती है ।

तंगी से निपटने का दूसरा तरीका है चुनाव । अर्थात अपनी-अपनी ज़रुरत, हालात के आधार पर फैसला करना कि कौनसी वस्तु अधिक मूल्यवान है। इसे अंग्रेज़ी में ट्रेड-ऑफ कहा जाता है । उदाहरणार्थ परीक्षा के पहले समय सीमित होता है — जिसकी नज़र में अच्छे नंबर ज़रूरी है उसे अपने सिमित समय में फिल्म, खेल इत्यादि त्याग कर पढ़ाई पर ध्यान देना पड़ता है । इस प्रकार वह पढ़ाई को मनोरंजन के साथ ट्रेड-ऑफ करता है । जब हम इस संकल्पना को एक सामाजिक स्तर पर देखें तो पता चलता है कि हर इंसान अपने अपने विवेकानुसार संसाधनों को जुटाने के लिए जाने-अनजाने में असंख्य ट्रेड-ऑफ करते रहता है । इस प्रवृत्ति से प्रतिस्पर्धा की स्थिति उत्पन्न होती है — कई लोग कुछ संसाधानों को अर्जित करने की रेस का हिस्सा बन जाते है । अब फैसला यह करना है कि विनिधान किस प्रकार होगा? किसे कितना मिलेगा? किसी चीज़ की कीमत और कुछ नहीं बल्कि इसी होड़ का सिगनल है । ज़्यादा क़ीमत का मतलब है कि वह वस्तु ज़्यादा दुर्लभ है जबकि उसकी मांग कई गुना अधिक।

यह दो तरीकों के आधार पर अब हम अपने मुख्य प्रश्न की ओर लौटते हैं । स्वच्छ पानी एक दुर्लभ संसाधन है । अगर उसे मुफ्त में बाँट दिया जाए तो क्या होगा? एक, उस वस्तु की क़द्र नहीं होगी जिसके लिए बहुत छोटा ट्रेड-ऑफ करना पड़े, अर्थात लोग पहले से दुर्लभ संसाधन को व्यर्थ करने या अत्योपयोग करने के लिए प्रोत्साहित होते है । दूसरा, क्यूंकि हम पानी के अभाव पर एक झूठा पर्दा डाल देते है इसलिए भविष्य में नवीनीकरण के तरीकों का गला घोट देते हैं । इस उदाहरण में हम Rain Water Harvesting या पानी के रिसाव को रोकने इत्यादि की पहल को दबा देते हैं ।

कहने का अर्थ यह नहीं कि पानी की क़ीमत बढ़ाना ग़रीबों के ख़िलाफ़ है । ज़रूरतमंद वर्गों को सरकार और किसी रूप से सहायता कर सकती है । परन्तु क़ीमत को कृत्रिम रूप से घटाने से केवल उसका नाश होता है और उसकी गुणवत्ता भी घटती है ।

Pranay Kotasthane is a Research Fellow at The Takshashila Institution. He is on twitter @pranaykotas

 

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ಅಭಾವ – ಅರ್ಥಶಾಸ್ತ್ರದ ಮೊದಲ ಪಾಠ

The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

– Thomas Sowell

ಇತ್ತೀಚಿಗೆ ದೆಹಲಿ ಸರ್ಕಾರವು ೪೦೦ ಯುನಿಟ್ ವಿದ್ಯುತ್ ಹಾಗು ೨೦,೦೦೦ ಲೀಟರ್ ನೀರನ್ನು ಉಚಿತವಾಗಿ ನೀಡುವ ಘೋಷಣೆ ಮಾಡಿತು. ಇದು ಒಳ್ಳೆಯ ನೀತಿಯೋ ಅಲ್ಲವೋ? ನಾವು ದಿನನಿತ್ಯ ಈ ತರಹದ ಹಲವಾರು ಆರ್ಥಿಕ ಸುದ್ಧಿಗಳನ್ನ ಓದುತ್ತೇವೆ, ಈ ಸುದ್ಧಿಗಳ ಬಗ್ಗೆ ನಮ್ಮೆಲ್ಲರಿಗೂ ಏನಾದರೂ ಒಂದು ಅಭಿಪ್ರಾಯವೂ ಇರುತ್ತದೆ, ಆದರೆ ಈ ಅಭಿಪ್ರಾಯದ ಹಿಂದೆ ಧೃಢವಾದ ವಿದ್ವತ್ತು ಇರುವುದು ಬಹಳ ಕಡಿಮೆ.  ಕೇವಲ ಪ್ರೌಢ ಶಾಲೆಯವರೆಗೆ  ಓದು-ಬರಹ ಮಾಡಿದ್ದರೂ ಒಬ್ಬ ಕ್ರಿಕೆಟಿಗನ ಬ್ಯಾಟ್ಟಿಂಗ್ ಸರಾಸರಿಯನ್ನು(Average)  ನೋಡಿದರೆ ನಮಗೆ ಸಹಜವಾಗಿಯೇ ಅದರ(ಸರಾಸರಿಯ) ಅರ್ಥ ತಿಳಿಯುವುದು ಆದರೆ ಅರ್ಥಶಾಸ್ತ್ರ(Economics)ದ  ಬಗ್ಗೆ ನಮ್ಮ ಜ್ಞಾನವು ಅಷ್ಟು  ಸ್ಪುಟವಾಗಿಲ್ಲ.  ಇದಕ್ಕೆ ನಮ್ಮ ಶಾಲೆಗಳಲ್ಲಿ  ನಾವು ಅರ್ಥಶಾಸ್ತ್ರವನ್ನ ಕಡೆಗಣಿಸಿರುವುದೇ ಕಾರಣ. ಅರ್ಥಶಾಸ್ತ್ರವೆಂದೊಡನೆ ನಾವು ಮೊದಲ ಪಂಚವರ್ಷೀಯ ಯೋಜನೆ, ಎರಡನೆ ಪಂಚವರ್ಷೀಯ ಯೋಜನೆ ಇತ್ಯಾದಿಗಳಬಗ್ಗೆ ಓದುತ್ತೇವೆ.  ನಿಜಹೇಳಬೇಕೆಂದರೆ ಇದು ಅರ್ಥ ಶಾಸ್ತ್ರವಲ್ಲ, ಇದು ಅರ್ಥ ಶಾಸ್ತ್ರದ ಇತಿಹಾಸ (Economic History). ಅರ್ಥಶಾಸ್ತ್ರದ ಮೂಲಭೂತ ತತ್ವಗಳನ್ನು ಕ್ರಮವಾಗಿ ಓದುವುದು ಗಣಿತ, ವಿಜ್ಞಾನ ಹಾಗು ಭಾಷೆಗಳನ್ನು ಓದುವಷ್ಟೇ ಮುಖ್ಯ.

ಅರ್ಥಶಾಸ್ತ್ರದ ಮೊದಲ ಪಾಠ “ಅಭಾವ ”(Scarcity). ನಮ್ಮ ಜಗತ್ತಿನಲ್ಲಿ ಸಂಪನ್ಮೂಲಗಳ(resources) ಅಭಾವ  ಅನಾದಿಕಾಲದಿಂದಲೂ ಇದೆ. ಸಂಪನ್ಮೂಲಗಳ ಅಭಾವ  ಇದ್ದರೂ ನಮಗೆ ಅನಂತ ಬಯಕೆಗಳು(infinite wants).ಈ ಅಭಾವ -ಬಯಕೆಗಳ ಬಗ್ಗೆ ಯೋಚಿಸುವ ಗುಣ ಮಹತ್ವಾಕಾಂಕ್ಷೆಯುಳ್ಳ ಮನುಷ್ಯನ ಲಕ್ಷಣ. ಹೀಗಿರುವಾಗ, ಮನುಷ್ಯನು ಅಭಾವದ ಸಮಸ್ಯೆಯನ್ನು ಹೇಗೆ ಬಗೆಹರೆಸಿರುವನು? ನಮಗೆ ಅರಿವಿಲ್ಲದೆಯೇ ನಾವು ಈ ಸಮಸ್ಯೆಯನ್ನು ಪರಿಹರಿಸುತ್ತಿದ್ದೇವೆ, ಏನೋ ಒಂದು ವಸ್ತು ಬೇಕಾದರೆ ಅದಕ್ಕೆ ಪರ್ಯಾಯವಾಗಿ ಮತ್ತೊಂದು ವಸ್ತುವನ್ನು ತ್ಯಜಿಸುವೆವು. ಇದನ್ನೇ ಅರ್ಥಶಾಸ್ತ್ರಜ್ಞರು (economists) “trade-off” ಎಂದು ಕರೆಯುತ್ತಾರೆ.  ತ್ಯಜಿಸುವ ವಸ್ತು ಹಣವಿರಬಹುದು, ಸಮಯವಿರಬಹುದು ಅಥವ ನೈಜ ಸ್ವರೂಪದ ವಸ್ತುವೇ ಆಗಿರಬಹುದು. ಗಮನವಿರಲಿ ಇದು ಅಧುನಿಕ ಸಮಾಜದ ಕಥೆಯಲ್ಲ, ನಮಗೆ ಹಿಂದೆಯೂ ಸಂಪನ್ಮೂಲಗಳ ಅಭಾವ ಇತ್ತು ಮುಂದೆಯೂ ಇರುತ್ತದೆ.

ಅಭಾವವು ವ್ಯಾಪಕವಾಗಿ ಹರಡಿರುವ ಕಾರಣದಿಂದಲೇ ನಮ್ಮಲ್ಲಿ ಸ್ಪರ್ಧಾತ್ಮಕಭಾವನೆಯೂ ಬಂದಿರುವುದು. ನಮಗೆ ಬೇಕಾದುದನ್ನು ನಾವು ಪಡೆಯಬೇಕೆಂದರೆ ಇನ್ನು ಹಲವಾರು ಜನರನ್ನ ಮೀರಿಸಿಯೇ ಪಡೆಯಬೇಕು, ಇದು ಪ್ರಕೃತಿಯ ನಿಯಮ.    ಈ ಸ್ಪರ್ಧಾತ್ಮಕಭಾವವು ಕಠೊರವೆನಿಸಬಹುದು, ಆದರೆ ನಾವು ನಮ್ಮ ಸುತ್ತಮುತ್ತಲ ಜನರನ್ನ ಹಾಗು ಅವರ ನಡೆಯನ್ನ  ಗಮನಿಸಿದರೆ ಇದರ ಬಹಳಷ್ಟು ಉದಾಹರಣೆಗಳು ಗೋಚರವಾಗುವುದು.  ಈ ನಿಟ್ಟಿನಲ್ಲೇ ನಾವು innovation ಕಡೆ ಸದಾ ಗಮನ ವಹಿಸುತ್ತೇವೆ. ಸಣ್ಣಪುಟ್ಟ ಸುಧಾರಣೆಗಳನ್ನ ನಮ್ಮ ಜೀವನದಲ್ಲಿ ಅಳವಡಿಸಿಕೊಳ್ಳುತ್ತೇವೆ. ನಡೆಯಲು ಕಷ್ಟವೆಂದು ಗಾಲಿಯನ್ನು(wheel) ಕಂಡುಹಿಡಿದೆವು , ಗಾಲಿಯಿಂದ ಸೈಕಲ್, ಸೈಕಲಿನಿಂದ ಮೋಟರ್ ಸೈಕಲ್ ಹೀಗೆಯೇ ಮಂಗಳ ಗೃಹವನ್ನೇ ತಲುಪುವಷ್ಟು ಮುಂದುವರೆದಿದ್ದೇವೆ.

ಹೀಗೆ  tradeoff ಹಾಗು innovation ಅಭಾವದ ಸಮಸ್ಯೆಗೆ  ಹಿಂದೆಯೂ ಸಹಾಯ ನೀಡಿದೆ, ಮುಂದೆಯೂ ನೀಡುತ್ತದೆ

Footnote – tradeoff ಹಾಗು innovation ಬಗ್ಗೆ ಮತ್ತೊಂದು ಉದಾಹರಣೆ : ಸುಮಾರು ೨೦ ವರ್ಷಗಳ ಹಿಂದೆ ಯಾವುದಾದರು ಪುಸ್ತಕ ಅಥವಾ ವ್ಯಕ್ತಿಯ ಬಗ್ಗೆ ತಿಳಿಯಬೇಕಿದ್ದರೆ ಗ್ರಂಥಾಲಯಕ್ಕೆ ಹೋಗಿ ಹುಡುಕಿ ನಂತರ ಓದಬೇಕಿತ್ತು(ಇಲ್ಲಿ ನಾವು ಜ್ಞಾನಕ್ಕೆ, ಸಮಯದ trade-off ಮಾಡುತ್ತಿದ್ದೆವು) ಆದರೆ ಈಗ ತಂತ್ರಜ್ಞಾನವು ಎಷ್ಟು ಮುಂದುವರೆದಿದೆಯೆಂದರೆ ವಿಕಿಪೀಡಿಯ ಮೂಲಕ ನಿಮಿಷಗಳಲ್ಲಿ ನಮಗೆ ಬೇಕಾದ ಮಾಹಿತಿಯನ್ನು ಪಡೆಯಬಹುದು. ಈಗ ಮಾಹಿತಿಯು ಸುಲಭವಾಗಿ ದೊರೆಯುತ್ತದೆ, ಆದರೆ ಮಾಹಿತಿಯ ಮಿತಿ ಎಷ್ಟರ ಮಟ್ಟಕ್ಕೆ(information overload) ಬೆಳೆದಿದೆಯೆಂದರೆ ನಮಗೆ ಮಾಹಿತಿಯನ್ನು ಗೃಹಿಸಲು ಕಷ್ಟವಾಗುತ್ತಿದೆ.

ವರುಣ ರಾಮಚಂದ್ರ ತಕ್ಷಶಿಲಾ ಸಂಸ್ಥಾನದಲ್ಲಿ ನೀತಿ ವಿಶ್ಲೇಷಕ. Twitterನಲ್ಲಿ  @_quale

 

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