The Mental Gymnastics of Malnutrition

Apparently the government of India is sitting on 6 million tons, or about $1.5 Billion worth of rotting grain. See if you can follow the twisted logic that stops them from taking action. 

1. The government of India guarantees grain farmers a fix buying price for grain nearly 50% higher than the market price. (Some people might call this a subsidy, but not them)
2. Farmers drop other crops in favor of grain which has a guaranteed return 50% greater than market price, leading to massive over production. 
3. Instead of simply having an open subsidy and paying the farmers the balance between market price and subsidized price, the Indian government literally buys the grain from the farmers - putting them simultaneously in the crops storage, crop distribution, and commodities speculation business. All things, I'm sure you would assume, they are expert at. Because the original subsidy to farmers was not acknowledged: This grain is carried on the books as an asset at the price they paid for it!
4. Because the original subsidy to farmers was not acknowledged, the government proceeds under the twisted logic that to sell the grain they just bough at 150% of market value for less than 150% of market value would be subsidy for the buyer!! Leading officials to actually say things like, "we can't sell the grain at market price to (insert country or people who need the grain and can pay for it). Why should the Indian government be in business of subsidizing them? " 
5. You might say, fine, lets at least give it to the poor! But remember - Because the original subsidy to farmers was not acknowledged: This grain is carried on the books as an asset at the price they paid for it! The budget is strained, so they can't just give the grain to the Poor, it would rec the balance sheet!
6. They can't sell it, it would be a subsidy! They can't give it away, its an asset! So grain does what grain does. Much of it over 5 years old now, it rots. It turns black with fungus, It serves as a cornucopia for rats. It's already so disgusting the Poor don't bother stealing it. When the local officials near the storage facilities do decide to hand some out, they have to mix it with fresh grain to trick the starvation line poor into eating it. 

We should all weep at the absurd tragedy of the government of a poor nation spending nearly $2.25 Billion to buy $1.5 billion worth of grain so that they can watch it rot next to the starving poor they bribed to elect them. We might also ask if the similar, much larger scale, but harder to see effects of corn subsidies a half a world away are any less tragic because the poor are further away. 

http://uk.reuters.com/article/2012/07/01/uk-india-wheat-idUKBRE8600KB20120701 

Trisco

To Those Who Failed, Kudos for Daring!

I wrote another poem. It was part inspired by Wall Street Journal's coverage of Jerry Yang's departure from Yahoo. It was the undertone of the article as though he has fallen from great heights. And he might have...but point being, he got there dammit! You (=the author) didn't invent an industry - he did. Its also part inspired by the advice on mediocrity I keep having to listen to from senior management.

It might come off as sad but its meant to inspire. Hope you keep on dreaming. And dream big. There are no guarantees for people who think big but we know exactly what the alternatives are.

Hope you like the poem. When you read this, think of a hero who's just failed at a massive undertaking.



To Those Who Failed, Kudos for Daring!



They say we are a product of our experiences
Then why do I feel so empty inside
I’ve been on rich, daring and scary ventures
So why am I so hollow inside

I keep banging my head on the same mossy wall
Hoping an echo would pass through
I know she is there inside
But why is it so hard to get through

They say I’m wasting away my life
But I’m just living as I used to
It made them gasp & awe before
And now its just a wasteful sorrow

I could have had your life, you know
Would take me all of tomorrow
But if I dare not to dream a sight
The world would remain strait & narrow

The chances are great that I’ll waste away
But if these were my fears then home I’d have stayed
Kudos for daring to those that stray
Remain true & strong of that bright morrow

Federal Income Tax - ???!!!jflakdjfloiuw!lakdjk!!!!!???

On Liberatarian Paternalism 2 - Response to Trisco

Here are my comments on Trisco's "On Libertarian Paternalism" , which were too long to fit in the comments box. It just meant to be casual musings in reply to Trisco's question about economists and is in no way meant to be a serious post.

Nice reaction, Trisco! Good point about the apparent contradiction. I'll like to know more as well.

My thoughts on economists being closer to politicians than scientists: Could economists be “scientists" (I had to put quotes, sorry), who are biased to the extreme? It’s no secret in academia that *most* scientists aren't really interested in the nature of reality...if the nature observed is not the nature they *set out* to observe. i.e., a result is probably not worth pursuing in full glory if it doesn't agree with what they wanted to observe. Perhaps you will agree that this is more significant in industry research, but I digress. What is interesting is what happens when the effect observed is the effect proposed. Then even scientists in the fundamental sciences are extremely prone to *advocate* and *advertise* the effect - "e.g., trapped photons must behave similar to trapped electrons, so let us look for the effect there". Well, economists are scientists with extremely real-world problems with real world implications, and unfortunately, with their only true laboratory being the real world. Therefore, I imagine the tendency to advocate and push their models on the real world (hoping their proposed effect would happen) is amplified much more than in scientists in fundamental sciences: a. that’s the only way they can test it, and b. their theory might just save the world. Note that most scientists, regardless of how what they propose in their grants, understand the evolutionary, as opposed to the revolutionary, nature of their research; perhaps this is not so true in economics, thereby moving them closer to politicians?

Disclaimer: This is a very general statement trying to explain overall trends in behavior among scientists in different fields. So it is served with a grain of salt, please take it as such.

On Libertarian Paternalism

I'd like you to do me a favor. Read the following article by Richard Thaler, one of the authors of Nudge. It is a response to an academic colleague, Professor Whitman and Rizzo. The article is labeled a Reaction Essay, presumable because its a response to Whitman and Rizzo, but I had quite a reaction to it myself. Since Behavioral finance is part psychology, I almost wonder if he is referring to the reaction in readers. I'd like to hear about others reactions to this article. I've given mine below, but make sure to read the article before being contaminated by mine.

My Reaction
------------------------------------------------------------------
I have to say, the ratio of insults to rational arguments is quite high here. This supposed reply might make Thaler feel better, but its not going to convince anyone who doesn’t agree with him. I don’t know what the rest of this discussion between thaler and whitman looks like, but this is certainly not the dispassionate rational discourse one would hope for between academics. Like the referee who seems to only see the retaliation, I might be laying blame on one side, when it belongs on both. Indeed, coming from a hard sciences background, I find it a bit disturbing. Thaler sounds more like a politician than a scientist…. Come to think of it, many noted economists sound more like politicians then scientists. I wonder why that is? (for some reason when I read this question it sounds rhetorical, but I mean it. Why do famous economists seem to view themselves, and behave more like politicians, than like scientists trying to explain the economic world?)

In fact his main claim, that “we call a policy paternalistic “if it tries to influence choices in a way that makes choosers better off, as judged by themselves.” (The emphasis is in the original.) ” is not only completely unsupported, but directly contradicted in his discussion of health care where he says there is no other choice, but for the choice architect to choose what SHE thinks is best for everyone. This is not surprising as its hard to imagine how a central authority/choice architect would be able to solve two apparently unsolvable problems and both read the minds of each individual and then nudge each individual in the direction they themselves would like to go.

I'd also like to point out that this definition is in contradiction to what I think most people would regard as the definition of good parenting. A parent make decisions that they think are best for their child, because the child does not know enough to make their own decisions yet. Later say in teenage years, a parent might guide instead of decide, but they guide towards what experience has taught them their kids will wish they had wanted ten years from now, not what they actually want now. (Hmm you know you'll meet just as many girls at college as you will on tour with your garage band...) I think why I and others react so strongly to the idea of libertarian paternalism, is that it implies that yet never comes. We are never really able to make our own decisions and we need help from our betters. How are those betters defined... Who get to do the nudging...

I find it hard to imagine how Thaler could so blatantly ignore what is supposedly the central point of the article. This is why I'm curious if I'm reading through colored glasses. Did I miss some support for this definition? If so, or if not, can someone even explain how it is possible to nudge each person to what they themselves want without a) mind reading and b) the number of necessary nudges being proportional to the number or people?

Dr. Trisco :P

By the way I came across the above article through the fabulous Simoleon Sense. A great content aggregater for behavioral finance and investing that links and previews more great articles and videos then one could possible read. Though somehow, I suppose Miguel, the man behind the site actually does.

The power of words : The Hamilton Rap

Speaking as someone struggling in the deep dark dunes of Dissertation District (sorry but couldn't help the alliteration - been starved for some creative release since thesis writing is anything but) , I have been newly reminded of the power of words. This has been in the back of my mind for this entire DAY (in caps to indicate that I have lost all sense of time ...Dissertation District is dispairing oblivious to the diurnal doings of our precious planet - no apologies this time: you seem to know what you have gotten yourself into - but the past "earth month" has shrunk into the "Dissertation Day "). Now see, thesis writing would be so much more fun, if I can entertain random distractions in thought like in a blog (wanna go ride bikes? Gah, don't listen to me - I am all jacked up on mountain dew [ref: Talledega Nights: The Ballad of Ricky Bobby, Journal: Hollywood, Year: 2006]. Woo Hoo.

Back to what I was actually blogging about - the power of words. A picture's worth thousand words, I am told. Being the 21st century (hopefully it still is or Dessertation Day has been temporally dilating faster than my simulations) lets up the game and post a video on the amazing power of words. Check it. Be Blown Away.



ps: Thanks to Guy Tal for passing this along !
pps: You know you are truly out of touch with your life when you take a minute to remember your own (blog) pen name. Ouch. Can't wait to get back to reality.

Keynes Vs Hayek: Fear the Boom and Bust

I will try to fill in this post with a short explanation of the Austrian business cycle theory as some point. For now just enjoy this sweet rap video that explains it all better then I could anyway :P




PS: Here is a link to the people that made the video. Their cite contains some good background on these two economic giants including pod casts.

Hardly Rational

One would assume that individuals would endeavor to be rational and logical when making decisions, especially when the lives and fates of others lie in the balance. However, surprise surprise, this is not the case. Now you might be saying, "obviously Komma, this is nothing new, emotion tinges our decision making process!" and you would be right -- but there is more.

I am in the process of reading this article by Dan Simon and I just had to post. The idea is this: when making a decision humans do not (necessarily) follow the unidirectional flow of logical processes, from premises to conclusions etc; instead the process is *bidirectional* "premises and facts both determine conclusions and are affected by them in return".

Lets look at an example. In one experiment individuals were presented with 12 vignettes and a statement or two that could be inferred with the vignette. After reading the vignettes, the participants were asked to rate how well they agree with the 12 inferences.

Next, the participants were asked to play the role of a judge in a court case. They were then presented with 12 arguments, 6 from the prosecution and 6 from the defense -- the rub is, the vignettes and the arguments were _virtually_ identical. The facts of the case are complex, and strong arguments could be made for both the prosecution and the defense. After deciding a verdict, the participants were asked to rate how well they agreed with the arguments from each side.

Now logically, you would expect that the individuals would rate the arguments the same way they rated the vignettes -- however they didn't! There was a statistically significant difference in how a participant rated the same vignette/story from before/after the decision making process! For instance, if a participant judged for the prosecution, then the arguments for the prosecution would be rated higher than arguments for the defense, even though both vignettes would be rated about the same before hand.

Even more fun -- when participants were asked to recall their original ratings they incorrectly recalled ratings that matched their post-decision ratings. In all cases, deciding for the prosecution or the defense, the participants were highly confident of their decisions.

To make a long story short, Simon argues that for decision to be made "effectively and comfortably", individual must possess a "coherent" mental model -- one which there is strong support for the decision and weak support for the opposite decision. And when this isn't in the case, us humans go about and make it so :).

Now this paper is focused on legal decision making, but its clear to me that these types of effects seem to appear in all areas of society. I've always wondered why nearly every issue quickly becomes polarized (democrats vs. republicans, pro vs. anti abortion, pro vs. anti war; etc) and perhaps a coherence based theory of decision making can account for some of this tendency. As we make decisions, we start reducing our belief in the opposite's arguments, naturally leading us to a polarized state.

I don't know how to stop this, although Simon claims to have some ideas in mind for rectifying this situation in the context of juries, and perhaps we can't. Maybe we will just have to survive with a polarized society.

Liberty - Why Don't People Get It?

For a really really long time, I have been baffled as to why people don't believe in freedom - whether it is economic or social. It often seems like I'm speaking in a different language and people give me looks like I'm talking about a "utopia" that is not practical.

Since his op-ed in the WSJ on health care (thanks Rug!) I've been reading up on John Mackey. (This guy ROCKS! He is really the Ayn Rand Hero of today.) For the first time, I'm starting to see why more people don't believe in freedom or the type of freedom advocated by libertarians. In this transcript of a speech he gave in 2004, he identifies why the Freedom Movement is struggling. In hindsight, I really should have realized this on my own.

Here are a couple of excerpts from the article that got me thinking:

"Let's start with the critique. How many of you have read Ayn Rand? How many of you have been influenced by her? "Atlas Shrugged" remains one of the five greatest novels I have ever read. Who can ever forget characters like Dagny Taggart, Hank Rearden, Francisco d'Anconia, from "Atlas Shrugged," as well as Howard Roark in "The Fountainhead"? These characters all demonstrated tremendous passions and drive, backed by high self-esteem. Each one inspired this young entrepreneur. I wanted to be just like those heroic characters in "Atlas Shrugged."

However, despite her literary greatness and many positive contributions to the freedom movement, I believe that Rand has also harmed the movement. How? She was overly provocative. The "virtue of selfishness" is an oxymoron. Selfishness is not a virtue. Now, I understand all the arguments — I've read all the books. I know that self-interest channeled to the social good, as expressed through Adam Smith's "invisible hand," is the single most brilliant insight about social organization ever made in history. That being said, selfishness (as opposed to self-interest) is still not a virtue. It is something to be discouraged, and not something to be supported."

"When I was a naive (some people in the audience by this time probably think I'm still naive) and idealistic young man, I migrated to the Left for my value system. Why did I do that? Because the Left provided an idealistic vision of the way the world could be. However, the reality of the Left's vision proved to be terribly flawed. Its socialist economic system not only didn't work very well, but in its communist manifestation it justified monstrous governments directly responsible for the murders of over 100 million people in the 20th century. Despite the horrible track record of leftist ideology, millions of young Americans continue to migrate to an intellectually bankrupt Left because the Left still seems to be idealistic, and idealism is magnetic to the young. Idealism will always be magnetic to the intelligent and sensitive young people of the world.

How sad that the freedom movement often refuses to be idealistic. We usually don't even attempt to compete. We simply forfeit the field to the Left because we pride ourselves on our "realism" and "tough-mindedness." We talk about freedom and prosperity — and that is about it. We have no real theory of either the good life or the good society except the fundamental belief that if people have sufficient personal and economic liberties (as in Friedrich Hayek's spontaneous order) we will create a prosperous society.

Freedom and prosperity are important goals, but they must be only the beginning goals for us. If we are to win the allegiance of the young people of America then we must dare to be more idealistic. We must create a vision of the good life and the good society that is irresistible to the young."

On glory that’s past and the danger that’s now....and on movies

Warning: This post ended up longer than intended. But if you stick with it till the end there are two poems – one’s a Hindi/ Urdu classic and the other’s a never-before published original by yours truly.

I am not really a movie buff. Never been. Too impatient for the 3-hr Bollywood kind (forwarding through songs, fights, comedy and romance doesn’t help because there is little left) and too psychic for Hollywood (Kevin Spacey is the killer, Darth Vader is Luke’s dad, Bruce Willis is the ghost) – thanks to Bollywood for the foresight. I do have some favorites (thanks to Quentin Tarantino), but for the most part movies for me are an ordeal.

So the other day, as I lay sulking in my usual physics-grad-studentish misery looking everywhere and anywhere for a pick-me-upper, I chanced upon Rang De Basanti to watch during my ritual morning cardio. I had seen this movie before, at the theater even (a rare treat in midwestern Champaign) and I knew I liked it. But my pensive mood revealed layers and brought forth a powerful reaction that I had somehow previously missed. Let me explain. No spoilers here, so no worries.

Rang de basanti, for the uninitiated, is a Bollywood blockbuster unlike any other. Lets start with the title - the literal title translation is “Color it Saffron” – saffron (basanti) is a deep orange color and is of profound significance in India. It’s a holy color for one and also symbolizes blood. In fact, it’s even featured in the Indian flag – as the first of the three stripes, saffron symbolizes the sacrifice (bloodshed) needed for India to win its independence. There is a less well-known meaning as well, Rang De Basanti was a popular anti-British cry during India’s struggle to break free from the British (damn the British – their accents, their tea, their language and all!). The slogan has its roots in a patriotic song written by Bhagat Singh, a heroic revolutionary freedom fighter. Bhagat Singh in his poem mera rang de basanti chola called for people to dye their robes the color of Spring (spring, the season that symbolizes change is “Basant” in hindi), for times are about to change – the time has come to sacrifice lives if that’s what it takes to get freedom. Thus, Rang de basanti is actually a powerful call to change the status quo. (Obama would have loved it, he needs some Bollywood researches on his campaign)

Just from the depth of the title you are probably beginning to see why this might be a good movie. But the homage to Bhagat Singh (and other Indian revolutionaries) doesn’t end there. The movie is set in contemporary India and draws parallels between revolutionaries of Bhagat Singh's era and modern Indian youth. It’s an ingenious commentary on what it cost our ancestors to fight for our freedom, what we have done with it and how nonchalantly we treat it today. A bloody freedom struggle (from less than 80 years ago) is juxtaposed against our (or more generally the Indian youth’s) irresponsibility to the corrupt Indian political system that is typically cooly attributed to “we-are-like-this-only”. Then it calls for action. To Do something. Anything.

It’s a brilliant movie. Very inspiring. Even the sound track uses patriotic lyrics set to modern tunes. Specifically, they featured one particular old revolutionary poem popularized during the freedom struggle that really made clear the glory of a lost era. To see why, here’s my favorite part (I’ve translated it here –the verse is much more beautiful in Hindi / Urdu and the video is below):

Title: Sarfaroshi ki Tamanna: The desire to sacrifice

There sits the enemy, armed and ready to fire
Ready too are we - to thrust our hearts out to them
With blood we shall play Holi, for our home and country is in trouble -
the desire to sacrifice is now etched within our hearts.

No sword can sever hands that carry the throes of passion,
Heads that have risen won't easily bow when challenged.
It'll flare up even more, the flame struck within our hearts
- the desire to sacrifice is now etched within our hearts.

You can really get a sense for the movie from the this clip featuring the poem:



The first thing that struck me was – no one talks like that anymore. About anything. The words, the values, the passion simply doesn’t exist in contemporary lexicon. Even if they do, they sure as hell don’t carry the same meaning. Don’t we stand for anything anymore? Don't we as a nation, a generation have any cause? Maybe we do. But I was in a coffee shop on campus as I was pondering the movie later in the day and the difference was stark. No, it's not just a cultural thing - and its not specific to India. America has a similar rich history. Our current values or lack-there-of is reflected in everything we do- contemporary art is a joke, a la mode literature is unreadable or depressing at best, and philosophy is out of style. With nothing left to do, I took out my disappointment on pop-culture in an outdated form of expression - verse. Here goes:

Pop goes the Culture

A lost voice a lost cause
Here we rock on without a pause
What we move to- undefined
Synched to the values of our times.

Of our roots, few remain
Best forgotten, coz of the pain?
For it’s a sanguine history that we share
Of freedom-fighters and folk who dared
To stand up for what they breathed-
liberty, justice and to be left in peace.
To arms they took or were beat to death
For the hopes and dreams in unison shared
Of a free world where people walked
Without any fear to mock or talk.

Well, here we are, few suns bygone,
Sheep we are, with no sense of wrong.
Moving to the tunes of time,
Orchestrated by the media chime.

Now we know not what we want,
A pandemonium in faculty, we flaunt.
Like the name, pop it’ll go -
A culture fashioned with mindless woes.

- Rug

Now for the happy ending - The movie did strike a chord. The entire nation rose to salute it. Blogs crept up everywhere urging for action. It was discussed in cafés, shopping malls and classrooms. I’m not sure if anything concrete came out of it. But it sent a message to a whole nation. And I now have a contemporary Bollywood movie I highly recommend. After all, it inspired me to write my second poem. Simply put, this movie is so good that had this been a Hollywood movie, George Clooney would have been proud.