Archive for October 18th, 2010

Reliance Communications is nudging!

October 18, 2010

I just got an email from Reliance Communications. It plans to activate e-bill facility where e-bills would be sent to customer’s emails free of charge.

And the nudge is it has opted the subscriber into the plan. So the default is opt-in and in case you don’t want this facility, you need to reply and opt out of the facility!

For your billing convenience, we would e mail your bills on your e mail id available with us. In addition to the hard copy that you receive monthly, you will also receive an eBill.  Please also note that this facility is being activated on your account free of charge.

In case you do not wish to activate this facility, please write to us mentioning “Opt Out” in the subject line.

Great stuff!! Reliance uses nudge to great use. It may not be knowing that it is nudging but that is the broad idea behind the book as well. Many policies etc are nudges,  so why not design them for maximum benefit.

It could have added that subscribers could also choose just to receive a softcopy. So those who have email ids can just get a softcopy and rest can continue to receive a hardcopy. I think it could be the next step after seeing the feedback on this facility. It could just send an email to those receiving bills as soft-copies saying it plans to discontinue sending hard-copies to these people. So in case you still prefer to receive hard copy, opt-out of this scheme.

This could be applied by many corporates to cut down paper usage.

Exciting to see nudges being applied in real world!!+

Why are recessions good for your health?

October 18, 2010

This is the  title of this article in St. Louis Fed publication – The regional economist. At first look it looks how can it be? How can recessions lead to better health? After all you might lose your job, if you manage to keep your job pay hikes are ruled out etc.

As per Rubén Hernández-Murillo and Christopher J. Martinek, recessions end up being good for health as people  now have more time to take care of their health. So as long as recessions are not long, it could actually be beneficial to certain people:

Conventional wisdom suggests that health improves during good economic times and worsens during tough economic times. When the economy is in recession, stress arising from negative economic outcomes—such as potential job loss, stagnating wages and falling home values—can lead to harmful health outcomes. Similarly, health can be expected to improve when incomes rise and social and psychological hardships diminish. Despite this intuition, recent economic studies suggest the opposite—a recession, as long as it’s not too deep or too long, may be good for your health.

Economist Christopher J. Ruhm analyzed the relationship between unemployment and mortality rates in the United States over the past few decades. His research shows that when unemployment rates increase, total mortality rates decrease. The effect is economically significant: An increase of one percentage point in the unemployment rate reduces annual fatalities by about 11,000. Why does mortality fall? Ruhm argues that the main reason is that individuals opt for healthier lifestyles during temporary downturns because the cost of leisure time decreases. For example, individuals have more time to prepare healthier meals at home, to engage in physical activity and to visit the doctor. Alcohol and tobacco use is reduced, too, because individuals reduce discretionary spending in periods of unemployment.

On the flip side, fatalities during expansions can increase because of not only lifestyle changes but factors outside of individual behavior. In particular, Ruhm argues that work-related accidents are more likely to occur during periods of expansion, as individuals work longer hours, and that more-hazardous conditions, such as increased stress, may be more prevalent. Finally, motor vehicle accidents may also  be more common during an economic upturn because improved economic conditions may lead to more traffic on highways  and to higher alcohol consumption.

Wow!! Did not know of this line of reasoning. The authors then work on Ruhm’s idea and find lower morality is not because of lifestyle changes but because of fewer accidents taking place in recession.

Plus, you find similar negative relationship between recession and health in other countries as well:

In any case, the strong negative correlation between unemployment and the mortality rate is not in dispute. This phenomenon is not unique to the United States. A similar association has been found in Spain, Germany and other developed countries.

Though again, this is only in case of recessions which are short. A long recession like 2007-09 will not show the same relation. May be 2001 recession does show this relationship.

Recent research shows that people’s medicine usage actually declined in this crisis:

In contrast to Ruhm’s predictions about increasing routine visits to the doctor because of time availability during recessions, another line of research suggests that during the recent economic crisis the effect from the reduced value of time may have been offset by the severe decline in wealth that was observed around the world. Economists Annamaria Lusardi, Daniel Schneider and Peter Tufano document a reduction in individuals’ use of routine medical care during the recent crisis in a group of five developed countries: the United States, Great Britain, Canada, France and Germany. They found that the declines were proportional to the out-of-pocket costs that individuals had to bear.Lusardi, Schneider and Tufano found that the ranking of countries in terms of privately borne costs for routine care matched the ranking of observed reductions in the use of care. These observations suggest that tighter financial constraints during the recent crisis were the main factor behind the decline in use of medical care.

Well…economists never cease to surprise with their appetite for research.

Comparing the WPI 1993-94 series with 2004-05 series

October 18, 2010

Though, RBI ED Deepak Mohanty does a super job explaining the two series, there is always scope for improvement.

RBI’s Oct-10 Bulletin has  an excellent primer on the topic. It has a nice discussion on Choice of base year:


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