Economics,Berkeley and India

Someone shared an article from Business Insider which was about a graduation speech given at Berkeley by Noble Prize winner in 2007.So what was so great about it ? Well it was very crisp 12 point speech with lot of economics into it like incentive,cost,taxes etc but I found it quite relevant in context of my country I.e. India.

Few points which just made me think are below:

1. Many things that are desirable are not feasible.

This point is more philosophical than the rest but it has deep message in my opinion.World tour,Ambitious career goal,hefty pay check,great home etc etc are desirable but not feasible for me.Perfect.What about you ?

3. Other people have more information about their abilities, their efforts, and their preferences than you do.

This line is more in context of people who thinks who are saviours in context of a project /politics .Especially I could relate it with my Consulting domain where people thinks they have more information about clients in just one or two good meetings. well, that’s not true. Similarly all those agencies including political parties who thinks they have true understanding of people in given geography.But it is not always true.

Common point of view is that community is poor as they don’t know what they really need and how to fix it.But my field work and job has taught me exactly same what this point sums up.Other people have more information about their abilities,their efforts, resources more than us.

4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.

So here is a challenge to common theory that NREGS,SGSY and all social incentive schemes are great for poor people in villages.Actually it is not.In villages almost many social incentive schemes are extended to poor like free food,free house, free education,free health care,assured job, assured pension, assured loan waiver etc etc.Few are justified like education and health care but giving unemployment assistance or assured job is bogus and detrimental to labor market of our nation as eventually skills are ignored.Our country don’t have any Vocational framework yet, huge unemployment statistics are screaming but still Congress takes proud ownership of extending social incentive system to poor so that they stay poor.

5. There are tradeoffs between equality and efficiency.
Reservations for backward classes or minority is the context here.Reservations in private sector would be another blow to all equality and efficiency. I have read the Govt resolution about performance appraisal of Govt employees belonging to certain classes. It clearly states that no bad feed back should be given to employee otherwise it would attract action against such officer.How could you expect efficiency from them ?

7. In the future, you too will respond to incentives. That is why there are some promises that you’d like to make but can’t. No one will believe those promises because they know that later it will not be in your interest to deliver. The lesson here is this: before you make a promise, think about whether you will want to keep it if and when your circumstances change. This is how you earn a reputation.

This is self explanatory

8. Governments and voters respond to incentives too. That is why governments sometimes default on loans and other promises that they have made.

Voters especially poor voters responds to incentives which are as petty as 2000 bucks or alcohol.Many political party or it’s representative knows this that’s why they lure them with incentives during elections.Dont expect any such government to fulfil all their promises as “Jaise Praja waisa Raja” i.e. Citizens only deserve kings like them only.

10. When a government spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation.

That’s why CAG is very important today ,why we must take every corruption scam seriously as eventually it’s taxpayer who pay it from his hard earned money. this become more cruel in country like India where only nearly 4 percent citizens are paying taxes to run the country.I feel so frightened when I see taxes every where on from salary slip to restaurant bills.Service Tax, Education cess, higher education cess etc etc.What about remaining 90 percent of population and strangely no one is asking these difficult questions today.

11. Most people want other people to pay for public goods and government transfers (especially transfers to themselves).

Why rich are getting richer and why poor are getting poorer.

12. Because market prices aggregate traders’ information, it is difficult to forecast stock prices and interest rates and exchange rates.
Great message to all my young stock Turks who have beliefs that they would fathom the market and make money in quick time.No boss it is just like gambling don’t amuse us by using financial jargons.

Complete article is available at following link:
http://readbi.in/rymGea

Tschusss

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