Archive for December 7th, 2015

When Mexico city tried a plan similar to Delhi’s odd-even car rule..

December 7, 2015

Aditya K picks some insights from economics on the new Delhi ruling to allow odd-even cars. One must sound caution (even the author does) that this might not apply to Delhi. But nevertheless one must know of similar city experiences if they exist.

He picks insights from a research paper and in nutshell the outcomes are just opposite:

Public transport ridership fell and the total number of vehicles in circulation increased. The policy led to a relative increase in air pollution levels during weekends.

Unintended consequences again.

I don’t think any amount of govt intervention can help here. Govt can just wish but it is upto people to understand and act on these really critical issues. We need to realise and accept that we are really poor in being sensitive to environment related issues. I will not be surprised if things actually become worse in Delhi..

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The future of India: Private splendour and public squalor?

December 7, 2015

A good friend Alok Baadkar tipped me to this article by Mr. Ravi Venkatesan of Microsoft. He sums up the issue well. As private wealth grows so does the public squalor. Being from Bangalore, he surely knows the story rather well:

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Dynamic base rate will be dynamic when rates go up as well!

December 7, 2015

There is a lot of clamour over the upcoming new regime for setting interest rates in India. This will shift the basis of setting rates from average cost basis to marginal cost basis. So far banks were pricing their loans on average cost basis. As average costs take longer to change, it took that much more time to pass on changes to loan rates.  With marginal cost in play, things will be much  faster.

Let’s see how this will work using stylised balance sheets. A bank’s bal sheet looks like this:

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Chennai floods: markets working or failing?

December 7, 2015

Chennai floods has again exposed India’s growing urbanisation woes. It is a time bomb which keeps exploding once a while. There has been a lot of positive news about who people have rallied to help each other. This is where humanity triumphs over everything else. No amount of government organisation or funds can supersede the collective might and spirits of people. And not just Chennai but people have responded from all corners of the country. Though, the government could have avoided part propaganda  during this time. It was a very very inhumane thing to do at this hour. How mall thisuch time must have been wasted in all this branding?

Given this, there was some news over certain markets in the city. There was scarcity all around and as economics teaches you, prices should rise. This is what happened. Airline prices zoomed,  prices of essential commodities and milk jumped manifold. This is not new to Chennai. It happens all the time in any crisis. In all this rallying and support for humanity, the market forces still take over and create its own issues.

These are the days and times when philosophers find issues with relying on markets for all allocation decisions. They just don’t look good at all. Likes of Michael Sandel will use such cases to show why replying on markets is problematic. But then market supporters might argue that all this was eventually due to huge government intervention over the years. If markets were allowed to function, then all this random construction and lake filling might have never happened. So markets came back with a venom to show what happens when you do not allow them to function.

How should we think about markets in case of crisis like these? They do what they are expected to do but face a lot of flak from people..


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