The Annual Magazine of Economics Department, Kirori Mal College - Delhi University
Its 32nd edition seeks to transcend new boundaries in Economics, connecting it to not just business and money but also various other disciplines of life.
3. • History of Economics -Timeline 1
• Are We Really Free? Neoliberalism And College Life 2
• Endowment For Centuries 4
• Why It Is High Time India Adopts And Starts
Practicing Gender Equality 5
• The Social Experiment of JOKER – Batman: The Dark Knight 7
• Hegemony Within The People Of Marginalised Sexual Orientations 8
and The Infiltration Of Heterosexual Males On LGBT Dating Platforms
• Black Bamba 10
• African Socialism 11
• Behavioral Economics and Rationality 12
• Book Review: The Art of Thinking Clearly; Exit West 14
• Sociological View of Economic Development 15
• Being Rational - (An analysis from the first chapter of the
book “Freakonomics” by Steven D. Levitt and Stephen J. Dubner) 17
• The Godfather Tactics: 6 Persuasion Techniques to Make Them
an Offer That They Cannot Refuse 18
• It’s Raining Scams and Swindles 20
• An Interview with Mr. Dhananjay Sinha 21
• Nationalism - Through Different Lenses 23
• Movie Review: Hidden Figures 25
• Careers 26
Contents
5. Are We Really Free? Neoliberalism And College Life
By Saubhagya Raizada
Economics and KiroriMal together create an extremely fulfilling experience. Beyond the exams, the
curriculum, classes and our peers make the journey extremely rewarding. At the same time, we never
question how we landed up here and what we plan to do after. The students who treat the B.A. (Hons)
Economics degree as a bridge course to an MA/MBA, as “the only option” they had apart from BCom, or
an extra set of years to prepare for a competitive exam seem to miss the bigger picture. Do we ever
question how we make decisions, and who influences those decisions and how we behave?
Neoliberalism is a term that all of us come across in some discourse at some point of time. Our first
formal introduction to the term was in our course ‘Political Economy - I’ when Saumyajit Sir explained the
reach of capitalism via the route of globalisation. It was then when we understood both the word and its
etymology. Neo and liberal, individually, seem to have a certain degree of positivity associated with them
yet there exists a darker side.
Dani Rodrik, in Rescuing Economics from Neoliberalism, explains that “In broad terms, it (neoliberalism)
denotes a preference for markets over the government, economic incentives over cultural norms, and
private entrepreneurship over collective action.” It’s the new version of economic liberalism (“laissez
faire”) of the 19th century without the free flow of labor, and increased protectionist policies.
George Monbiot in his article in The Guardian states, “Neoliberalism’s anonymity is both a symptom and
cause of its power” and “So pervasive has neoliberalism become that we seldom even recognise it as an
ideology…..But the philosophy arose as a conscious attempt to reshape human life and shift the locus of
power.”
As if the revelation of hidden change in the world’s political and economic scenario was not enough, our
PolEco course, and rightly so, introduced us to a reading on the “Role of State” by Robert Heilbroner. The
notion that neoliberalism reduces state involvement also turned out to be false; as major crises including
the 2008 Financial crisis & the European debt crisis had the state involved in avoidable (to say the least)
actions. This intersection of the political scenario of the West, India, and neoliberalism was an interesting
area to further examine and study.
The view that large corporate houses, with turnovers of a significant percentage of India’s GDP, influence
direction of state policy and fund large, mainstream political parties is not a new one. Since ‘91, whether
in the time of previous or current government, there is a growing willingness of the state to emulate the
West. Under this fascination, the state has facilitated suggestions of the corporate sector under the mask
of “inclusive” policies. A trend analysis over the past 60 years of the interaction of PMs, in hours, with
CEOs of large companies should be enough to validate the hypothesis that the importance companies,
including multinationals, and their heads have today is significant enough for us to be concerned. The
power of “corporate confidence” to influence and rather, shape this country’s future is extremely high.
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6. “Society influences how we behave and act” is obvious but we never really think a lot about it. Since the
onset of neoliberalism and consumerism, certain economies and companies have together influenced the
society which further influences how you behave. Let us go back to 2015 when carriers in the US did not
charge a fee per SMS. Exactly three years ago, when we wrote our board exams, we never imagined
sending an SMS for free or texting to compete with WhatsApp. Within a span of three years, WhatsApp
and the face of the internet have considerably changed, and now occupy a pivotal role in our daily lives.
Today, from the status of a class to the invitation to write for Oikos, all is communicated through
WhatsApp. Fests, societies, ‘plans’ are all coordinated over it and a college student cannot imagine his or
her life without it. This penetration is not just limited to a single app but reflects a small yet growing
change in the urban culture in developing nations, including India.
At the main gate of KMC, we don’t think twice before taking a cab and rejecting the line of rickshaw-
pullers who wait for hours for that one student. Uber is the new means for the middle class to get a
chauffeur driven taxi experience while probably driving rickshaw drivers out of business. Tinder is
defining how young Indians approach and understand relationships. The introduction of CBCS and
requesting colleges to not depend on state funding are steps to make Indian education more aligned to
‘global’ standards. Large packages of foreign investment banks and consulting companies are considered
as the only “placements” worth fighting for. Political opinions are now being shaped by Facebook and
there is a growing facade of choice that consumers (of entertainment, of commodities, of education)
have a lot to choose from. Large conglomerates are changing the nation, its policies and its youth in ways
we can’t even imagine.
Delhi University, especially Kirori Mal College, provides an academic sanctuary for these three years. We
have classmates aspiring to be civil servants because they really want to change the system; professors
not scared to share their political opinions in class; courses, unlike their US counterparts, showing both
sides of the coin and students from the most humble of backgrounds with the biggest of dreams. This
dream is not the American dream being sold via Netflix but the dream to uplift their families and villages.
This realisation of DU’s uniqueness is the key to make the most of our time here.
However, awareness about whatsApp forward forming the basis of how our country votes; owners of
media deciding the ‘news’ you read; and that the careers we or our parents want for us are being
influenced by not just the section of society we’re in but also by corporations with agendas, is
important.” So for every decision that is made in college - from the choice of our GE to the competitive
exam we ‘choose’ to give - we should ask ourselves, are we really free?
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For No reason at all: Paradox Theory – lipstick effect
The lipstick effect says that during an economic crisis, less costly luxury goods are bought more by
consumers.For example, people will buy an expensive lipstick, instead of buying expensive fur coats.
It was rumoured that lipstick sales rose in the United States after the 9/11 attacks.
The assumption taken into consideration is that people tend to buy luxury goods even during a crisis;
they will thus shift to products that have a lesser impact on their funds. Other than cosmetics, people
could be tempted by less costly gadgets or expensive beer.
Another interesting insight takes economics over to evolutionary psychology. This research throws
light upon the relationship between women’s mating psychology and consumer behaviour. It
suggests that women’s spending on beauty products might be the third indicator of economic
recessions—an indicator that may be rooted in our ancestral psychology.
7. Endowment For Centuries
By Manik Aggarwal
Remembering the Russian Revolution can be equivalent to endorsing its outcomes but barring the
sentimental approach to history, there is no denying that the revolution in Russia was pivotal. Its legacy
has been both horrific and cordial, for both Russia and the rest of the world.
The vacuum created by the death of Lenin was taken advantage of by Josef Stalin to assume power. Apart
from the establishment of labor camps under his regime, being different from that of Nazis only in the
way that Hitler had reserved a place also for the communists in his, the free press was disbanded and the
opposition was obliterated. Upon Stalin’s orders, grain was shipped out of their country to the rest of the
Soviet Union, causing famine and deaths. It may be said that some of Stalin’s actions were no different
from those of the European regimes in their colonies, for instance, Churchill sucked grain out of Bengal
thus tipping it into famine. The much-needed reform period was underway after the death of Stalin. The
former Soviet Union went through two rounds of reforms. The first was under Khrushchev and the other
under Gorbachev. The second round of reforms contributed much to the geography of Soviet Union than
its political structure. Most of its republics went their own way but the political climate in what remains
of its core, namely Russia, did not change.
During the seven decades and more of its existence, the Soviet Union altered world history by providing
great momentum to national liberation movements throughout the world. It converted a backward
country like Russia into a highly industrialized economy in barely a decade, showing that socialism is
practicable and can provide social welfare, equal opportunity and a fast pace of economic development.
The collapse of socialism was not brought about by any fundamental defect in the socialist system as
such. This is shown by the continuous contraction of production and employment after the fall of
socialism in the former socialist countries.
It was the Russian Revolution that brought home to the ruling classes of Europe the urgency of giving
concessions to workers. These took the form of the public provision of health, education, and housing.
They acknowledged the Marxian construction that all value is created by labor, entitling them to a larger
share of the surplus than a nominal wage rate. There was another consequence of the Russian Revolution
was for Europe’s colonies.
Although Stalin never took a real interest in ending colonialism, the early communist movement had a
global ambition aimed at the liberty of the masses.
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For No reason at all: Paradox Theory – Khazzoom Brookes Postulate
Economists Daniel Khazzoom and Leonard Brookes argued that increase in energy efficiency leads to
increased energy consumption. The argument gets validated in three ways: First, the use of energy
becomes relatively cheaper as the efficiency of energy increases. Secondary, economic growth
increases with the increase in efficiency which pulls up its use and lastly, all the technologies,
products and services being restrained by the resource also tend to be multiplied in use with the
increase in the efficiency of the resource.
8. Why It Is High Time India Adopts And Starts Practicing Gender Equality
By Tishya Mahajan
“Equality is not just the right thing to do. It’s smart economics. How can an economy achieve full
potential if it ignores, sidelines, or fails to invest in half its population?” – Robert Zoellick
My mother received her doctorate degree in 1999 after 3 years of dedicated efforts. Since this coincided
with the birth of her first child (me), she was told to leave her job as a Professor because the university
“could not afford to sanction the leave” which she needed to take care of her newborn daughter. With no
institutional provisions to accommodate her role as a mother on a professional front and the disapproval
of her in-laws regarding her work, she was left with little choice. She had no other option, but to give up
28 years of investment in education and an admirable career in the making. This is, but one case amongst
a thousand if not a million similar ones, which highlight the deeply ingrained gender disparities in India.
What happens when half of the population of a nation is at a clear disadvantage due to a rigid patriarchal
culture, stereotypical belief systems, and social stigma? This section of the population is excluded from
the fabric of socio-economic development and growth. If we look at indicators like GDP growth rate, India
has seen an upward trend over the past 10 years with a recent GDP growth rate of 6.6% in 2017.
Unfortunately, there exists an acute under-representation of women in the Indian economy which
reflects societal norms instead of the potential they can offer. Women’s contribution to GDP in India is a
mere 17% which is much lower than the global average of 37%, making it the lowest among all regions in
the world. (“The Power of Parity: Advancing Women’s equality in India”, a report by the McKinsey Global
Institute)
Why should we be worried?
The Female Labor Force Participation (FLFP) rate in India hit a new low of 27.2% in 2017 compared to
35% in 1990 as per the International Labor Organization STAT database. India ranked 108th out of 144
countries on the Global Gender Gap Index in 2017 which considers four critical dimensions when
measuring the gaps between women and men’s access to resources and opportunities: economic
participation, education, health and politics. (Global Gender Gap Report, 2017).
Even though India has succeeded in closing the gender gap in primary and secondary education, female
participation in its workforce has dropped alarmingly. India still lags in bringing a fundamental change in
belief systems to empower females with employment opportunities.
“Gender inequality holds back the growth of individuals, the development of countries and the
evolution of societies, to the disadvantage of both men and women.” – State of World Population
Report
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9. To make economic participation more gender inclusive, policymakers need to consider the specific
constraints that face most women. A woman working outside the house is traditionally looked at as a
“helping hand” for the male earning member(s) in the family. Often, she must seek permission from the
male members of her family or the Panchayat (in the case of rural areas) to work, even if she has
acquired the necessary skills. Women tend to seek employment when there is a definitive need for
additional income, say, in a situation of financial crisis.
The individuality and inherent dignity attached to a woman’s career is often sidelined as a waste of time
with the belief that she has “caretaking and homemaking” tasks to tend to. Till date, women lack the
agency to take decisions independently, be it decisions related to childbearing, child-rearing or being
career-oriented. This results in a lack of economic independence, self-confidence and decision-making
powers as a member of the household.
If a woman fails to manage both her professional work and household duties, she must bear the brunt of
guilt incited by gender stereotypes. In addition, with the rise in household incomes, women tend to quit
paid work and their participation in the economy is substantially reduced. If the decision to just stay at
home stems from compulsion or lack of alternatives instead of choice, it is problematic and something
that needs to be addressed. The ability of women in controlling resources and influencing decision-
making is essential to achieve gender equality.
What is the required course of action?
“The key for economic growth is the promotion of women’s economic rights which entails promoting a
range of women’s rights: their sexual and reproductive rights and rights to education, to mobility, to
voice, to ownership, and to live free from violence.” (Women’s role in economic development:
Overcoming the constraints)
Policymakers need to adopt a comprehensive approach towards enabling women to have a greater role
in India’s economy. Labor market outcomes can be improved for women if provided with access to higher
education and training programs to equip them with a wider range of skills. Facilitating and encouraging
entrepreneurship, providing maternity care and health facilities, increasing infrastructural support for
childcare at workplaces and establishing a safer transport network for better mobility are some of the
ways to bring and sustain women in the workforce. By doing so, women can participate in paid work as
much as men and India’s annual GDP can increase up to 16%.
On the social front, there needs to be a paradigm shift in mindsets about the role of women and their
rights. The traditional understanding of gender roles needs to be challenged through the medium of
education and awareness creation. Social campaigns at the grassroot level will play a crucial role in
achieving this seemingly herculean task. Prioritizing gender parity and women empowerment is a
critical developmental issue and will remain pivotal in shaping India’s socio-economic growth in the
future.
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For No reason at all: Paradox Theory – Pigou Effect
Sometimes during deflation, there can be an increase in GDP. In economics, Pigou effect is the
stimulation of output and employment caused by increasing consumption due to rise in real balances
of wealth. Pigou suggested that when there is an unemployment problem, the price of the product in
the country will decrease, which causes deflation. This will lead to an increase in the actual value of
the wealth owned by consumers. This provides an incentive for them to consume more. It will boost
the demand for production and the firms and industries will produce more goods to satisfy the
demand. The increasing production will create more job opportunities for the economy which can
reach a new equilibrium at full employment. This effect will eventually make the economy rejuvenate
and result in the growth of the GDP of the country.
10. The Social Experiment of JOKER – Batman: The Dark Knight
By Pratyush Shah
A person comes across various games every day without recognizing it as a game. Critics of economics
think that various theories of economics are too mathematical or statistical to actually implement in real
life, one of these is game theory. Economists call game theory what psychologists call the theory of social
situations. In mere layman term, game theory is the game of chess in situations where two or more
individuals have to make decisions which simultaneously affect each other – each individual face a
situation like (he knows that I know that he knows that I know) × “n” what he’ll do next.
Some movies are not every day typical movies and one such movie is Batman – The dark knight,
everyone’s favourite. The Dark Knight went beyond the comic book super-hero film. The movie gives an
intense experience which takes the viewers through a wide range of emotions. One such part of the
movie was a very cleverly arranged situation which Joker claims it to be his “Social Experiment”. The
situation was basically a game similar to what is explained above.
The Game
In this scene, Joker manages to get two cruise ships, one with citizens trapped and one with criminals.
Both the groups have a detonator each connected to TNT placed at other’s ship. If both the groups fail to
press the button in the given time period, joker will blow both the ships. Each group has to make a choice
– kill or be killed.
Each group has two options - to press or not to press the detonator
button. But, the resultant benefit or loss varies with not only one
group’s decision but also with the other group’s decision. The same
can be evaluated as: If both of them fail to press, then both die and
0 is the benefit.
But if citizens fail to press and criminals press, then the citizens are at a greater loss than just death. Also,
if the opposite happens, then the citizens are at a benefit of living in guilt but in a criminal free city. On
the other side, if criminals press and citizens don’t, then they’ll live and won’t be into guilt, and if they fail
to press and citizens press then, they’ll not only die but lose a chance of living even though they were at a
better position to press. Solving this game is pretty easy and both the groups detonating would be a
dominant strategy. Thus, taking various aspects into consideration both the ships must be destroyed
before time.
However, this exactly opposite happens in the movie nor it is easy to say whether, in an actual situation, a
strategy like that will be chosen because human behaviour is a lot more complicated. Even with such
complication, since in this context, two groups are involved - detonation by both the groups is much more
meaningful and practical which is also initially depicted by the movie. In the citizen ship, the decision by
voting is carried out and results into detonation with two times more votes than not to press the button.
While, in the criminal ship, the decision is more decentralized and anyone can execute his/her strategy.
Thus, blowing off both the ships is very much sound.
Decision
Despite, the rational and survival instincts, Nolan or the writer decides to show that both the groups fail
to detonate and Batman saves both the ships by killing Joker. The movie tries to depict that despite all
the darkness, there still is humanity left, and even in the war of opposites i.e. innocent and criminals,
both the groups choose a cooperative and optimal decision.
Nolan very carefully infiltrates the idea of a different climax, this is when Joker says, “It’s a funny world
we live in; you (Batman) won’t kill me out of some misplaced sense of self-righteousness”. But that’s
what humans are. So, even if we take morality into consideration and form a game, we’ll still get the
answer as detonate.
“The scene in the movie is critical to the moment as it shows the humanitarian bond which still makes
Gotham a place to live in and thus, cannot be attached to practicality or rationality at the moment.”
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11. Hegemony Within The People Of Marginalised Sexual Orientations And The Infiltration Of
Heterosexual Males On LGBT Dating Platforms
By Anshul
In the article below, I’ll be discussing the hegemony within the people of marginalised sexuality. The
discussion would take into account the personal experiences I read while researching for this article and
the other readings related to the topic. I’ll try to point out the hypocrisies at work within the LGBT
community and how some people who identify as Gay, Lesbian and Bisexual can be outcasted or fringed
within the community, as it succumbs to a hierarchal structure. I’ll discuss the apprehensions of the
outcasted for the hierarchy within and also the diverse views on the sexual choreography. Then I’ll
explain the toxic environment on the modern platforms of homosexual interaction and how
heteronormativity has found its way to infect it.
While the widely known distinction between the top and
bottom is taken as the only reality of gay men, it becomes
essential to put forth that sexual orientation of gay men
isn’t just black and white. Surveys carried out by various
dating apps claim that majority of gay people identify as
versatile— who could play the role of both the penetrator
and the penetrated. I use these terms brutally in order to
reflect the stigmatisation of bottoms within the gay
community by gay tops. Gay bottoms are often mocked at
or are considered inferior by their top partners as they play
a role which corresponds to the position of a female in a
heteronormative structure. They’re mocked for their
effeminate behaviour by both heterosexuals and
homosexuals. I realise that the act of discussing the sexual
roles played by gay men feeds into the homophobic
discourse by continually highlighting their sexual
preferences and restricting their identity to sexual needs,
but we also need to realise that it is crucial to address the
power politics formed within gay community on the basis
of their sexual preferences. Many a time the act of
claiming to be a versatile or a top has to do away with the
identity of a bottom and hence maintaining a ‘clean’ stand
in the eyes of the gay community which still buys the
heteronormative argument of the impenetrability of
normative masculinity.
It’s important to explain why Phallus is often linked with power and is seen as this oppressive structure. It
has to do with the association of Phallus with maleness, for the apparent reason that it’s a male body
organ and males have been on the top of the social structure. It is often understood as a symbol of power
(social, political or reproductive). Apart from the cultural context, the biological work assigned to a
phallus is that of penetration. When you combine the cultural and the biological aspect that it has been
linked to, it lays bare violent imagery of every bloody and offensive thing it has been a part of—by the
abuse of power, and the opposite sex it has violated. Keeping this in mind, think about the toxicity a
bottom gay man would face if homosexual men emulated the same power structure.
Moving on to the fragmented sensibilities of the lesbian groups and the majority’s negligence towards
them, while lesbian pornography has the most extensive audience base in the world, it is also a truth that
their cause gathers lesser attention than gays. Gay rights are not only more talked about, but they have
their representatives at the position of power as they’re still men and somewhat privileged when
compared to homosexual women. Lesbians are doubly subjugated and are reduced to titillating bodies
due to their depiction in lesbian pornography. Think about the already overtly sexualised female bodies—
where male nipples are regular and female nipples are sexualised; in addition to this, the thought of
putting two sexualised bodies together drives the male world crazy. When the next time someone goes
and watch lesbian porn, just think about how they're unknowingly feeding into toxic masculine thinking.
Many lesbians have addressed the toxicity and hierarchy within the doubly marginalized lesbian group—
they talk about the sexual act where the ‘dominant’ woman resorts to an artificial phallus and succumbs
to the norm of penetration. One can argue that the act of undergoing penetration does not make you
recessive; you can still hold power and be dominant. But the other lesbian couples who’re against this
normative behaviour have talked of deriving pleasure without employing heteronormative choreography
in their homosexual interaction. They tend to claim that not only are they different from heterosexuals
but also from gays whose corporeality ask them to employ traditional ways. They argue that lesbians
should consciously avoid ingrained sexual choreography sold by the more massive male narrative.
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12. We have addressed the power dynamics within both Gays and Lesbians; let’s move forward to address
the plight of bisexuals in the queer community. They are sometimes not queer enough to be accepted.
While writing this article, I came across multiple items which talked about instances of segregation of
bisexuals. One of them was of a Pride Parade where the queer community booed a bisexual woman for
kissing her boyfriend while being a part of that parade; the other instance was of a homosexual girl who
was subtly given a choice between her visibility and cisibility(a term coined by her). As these hierarchies
exist among the marginalised, it is also a well-known fact that the word ‘gay’ itself is loosely used for all
homosexuals by the heterosexual people, this is not only neglecting the representation of other
homosexual people who aren’t gays, but it is also equivalent to marginalising within the marginalised.
These arguments are not just theories; they have a very prominent presence in the real world. Dating app
like Planet Romeo is made exclusively for gay men. Although now we have dating apps representing
other queer communities as well, the initial attention on gay men was not just an act of neglecting other
LGBT groups but was also going on to emulate the normative way of prioritising the male world even in
the case of homosexuals. But the worry doesn't end here, these only gay apps or other apps for LGBT
people are infiltrated by the toxic vibe of straight men, who are sexually desperate freaks ready to slip
into the role of a ‘top’ as long as they get a hole to enter. An article in The Telegraph talks about the
infiltration of gay men in lesbian dating apps.
Heterosexual men coming on platforms which are specially designed for homosexual relationships can be
a way of dodging the commercial exchange that operates within heteronormative sexual practices. Many
economists have analysed the ‘exchange’ within heteronormative relations and have termed sex as a
female resource— where males are buyers of sex and females are providers(as according to them,
there’s a higher risk involved—pregnancy, loss of virginity and other societal judgments). When we talk
about this infiltration, it becomes essential to segregate it from ‘experimentation in sex’ as it’s not only
maligning the gay community by restricting them to a hole but it also springs from homophobia where
the heterosexual man takes the gay dating app as a platform for free ‘prostitution’. The sexually charged
vibe is a matter of concern for many people who are there for relationships. The hyper-sexualised
environment on these apps not only caters to the already established bogus stigma about homosexuals
being sexually perverted, but it also makes it impossible for other homosexuals to sustain in a toxic
environment. While the over-sexualised environment can be due to the prolonged suppression of one’s
sexual identity in a conservative society, it still doesn’t justify the toxicity. The anonymity which these
websites provide is very dangerous. Regarding the identity of the users, these apps should look into some
official verification as it’d prevent unwanted tragedies. Although in a country like India where
homosexuality is still a taboo, the work these apps do to bring people to the point of confrontation is
commendable. The apps have become a platform for free hookups. The fact that homosexuals have
either been repressed or closeted has probably made sexual gratification a currency of exchange
between both the parties. Having said that, I wouldn’t deny that there isn’t paid sex involved, but there
are other needs to fulfill before entirely advancing towards normalcy of paid sex.
LGBT society has to look within to ensure that they don’t emulate the similar hierarchical structure as the
heteronormative society. Speaking particularly of India, where homosexuality has been re-legalized
recently, “queer people here need to make sure that they don’t succumb to the same structure which
segregates them” and is capable of infiltrating into their modern ways of interaction only to propagate
the already existing dogmas.
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13. Black Bamba
By Bhargavi Thakur
Illustration courtesy: Komal Gupta
Economics is based on the assumption that
individuals behave and make choices in a rational
manner. All economic theories and models are
primarily based on the assumption that people
make choices rationally. We study economic
preferences, optimal behavior wherein producers,
firms, consumers and markets function always try
to maximize their profits and try to reduce all their
costs in whichever possible manner they can.
Analysing the above situation, we see that the
concepts of rationality and profit maximization fail.
Firstly , by providing an alternative drink, the cost
of the café doubles and the revenue earned is for
only one drink. (Cost is not being minimized and
neither the profits are being maximized)? Why
does the café waiter & owner allow for such a
scenario?
Secondly, the consumers have benefitted from the
extra drink. They too want to minimize the price
they shall pay. The above scenario in all terms
makes them better off. Then why do the
consumers pay a tip to the waiter, when they
could have saved the money given as a tip and be
better off again?
From the perspective of the café, the café is trying
to expand the customer satisfaction and thus,
sacrifices its profits. Social, psychological and
behavioral aspects overpower rationality.
However, we can also see that in a way the café is
trying to maximize its profits in the long run, by
winning few devoted and permanent customers
and also new customers, as the two friends might
end up telling other friends about the alternative
drink that the café provided them.
From the perspective of the consumer, the
consumers act totally irrationally and are purely
triggered by the psychological situation in which
they are led by emotions more than rational or
logical thinking. They are in a situation where they
are happy about their drink being changed without
paying extra for it. Apart from happiness, they are
also filled with gratitude and thankfulness for the
waiter and the owner which makes them leave a
tip.
The above analysis gives us an understanding that in the practical world, rationality does not always
work. People are led by emotions, sentiments and alter their behavior according to different
situations.”
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14. African Socialism
By Vrinda Sharma
Africa, for many years, has been the “exhibit A” for everything wrong that colonial rule could do to a
continent. Even though the British left no stone unturned in impoverishing their colonies like India, they
and the other Imperialist out stepped themselves when it came to destroying cultures and economies of
their subjects in Africa. Therefore, when independence finally came to these African states, the need to
reestablish an identity and build the basic foundations of the new countries was the top priority of new
African leaders.
Against this background, the idea of African Socialism was born which wasn’t only an economic model but
the very first step towards establishing an African identity different not only from their previous
colonizers but also from American capitalism and the Soviet communism. The leaders from the
independent African states met in Dakar, Senegal, in 1962, because they believed that sharing resources
with the community and equitable distribution of resources were the core tenants of the tribes of the
past and therefore it was only logical to begin consolidating the news ideals of the continent from their
shared history. Although they understood the importance of each nation owns cultural history, it was
believed that a new identity for the African continent was important to move away from the ghosts of its
Imperial pasts.
African Socialism shares certain basic characteristics with the general definition of socialism. It aims for
equitable distribution, wants to uplift the poor and believes in the collaborative functioning of the
societies towards a shared goal of economic equality, but the implementation of these in various African
countries largely differed. The torch bearers of this brand of socialism, Léopold Senghor and Mamadou
Dia of Senegal, Sékou Touré of Guinea, Kwame Nkrumah of Ghana, Tom Mboya of Kenya, and Julius
Nyerere of Tanzania, all had differing views on what the best way for its implementation was. They
generally agreed, however, that pre-colonial Africa’s communal values and the relative absence of classes
and class struggle should form the basis of an African path of development. African identity formation,
economic development, class formation and social control were, however, a part of every leader's larger
goal.
Kwame Nkumrah of Ghana aimed to achieve the objectives by establishing large scale energy industries,
which would later lead to Ghana gaining exorbitant debts. Most other leaders, however, had a more
rural-oriented approach towards the actualization of the same. As the Tanzanian leader, Nyerere
promoted the idea of “Ujamaa” which translates to family-hood, in which the extended family is the
building block of African development. It stressed on self-reliance, and austerity as the key planks of
African socialism. Nyerere launched a program of villagisation—the forced relocation of rural people into
collective and cooperative villages—as the basis for economic development.
However, African socialism couldn’t achieve what it set out due to the political instability in the newly
independent states. Nkumrah, who declared himself president for life, was overthrown and his indebting
policies rejected. Nyerere initiatives too proved politically unpopular, economically nonviable and were
therefore largely opposed by the peasants. Most of the leaders also banned all opposition to their rules
and policies thereby threatening the equitable structure that they wanted to reestablish.
In all, African socialism set out for some fundamental goals in the African re-imagination, to reconcile its
ancient identity with its post-colonial sovereignty but failed because of the personal agendas of the
leaders who promoted it. In many states, there wasn’t a large enough educated class, also a repercussion
of discriminatory imperialist policy, to enhance and strategies something of this magnitude.
However, fundamentally, this socialism still runs in the interiors of Africa, were tribes, incognizant of
Marx and other philosophers, still uphold the ideals of equal distribution and fight their own wars
against the neo-colonial bourgeoisie.”
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15. Behavioral Economics and Rationality
By Shivam Bhatnagar
Research on behavioral economics is repeatedly featured in top academic journals of both economics and
the cognitive sciences. It has a high profile on social media, and journalists commonly write about the
new books and research emerging in the field. Governments and policy-makers, from all over the world,
are implanting insights from behavioral economics into their policy designs. Even mainstream economists
are incorporating research insights from the same, into their models.
What is behavioral economics and why so much interest in it?
Behavioral economics encompasses economic principles by
postulating that our decisions are affected by social and
psychological influences, as well as a rational calculation of costs
and benefits. It also broadens economics, making it more
accessible to a larger audience. Indisputably, economics is a
critically important subject because it’s all about our welfare—
individually, nationally and internationally, and for the future
generations. But it is also perceived by many to be an esoteric,
technocratic subject. On the contrary, Behavioral Economics strikes
many as being much more interesting.
It provides a more intuitive and less mathematical account of decision-making processes. It is also
interesting because of the pluralism and diversity of its underlying principles. Behavioral economists
combine insights from a wide range of other disciplines apart from economics, for example, psychology
(especially social psychology), sociology, neuroscience, and evolutionary biology. Using this
multidisciplinary approach, behavioral economists enrich our understanding of economic and financial
behavior, without necessarily abandoning the analytical nature of conventional economics.
Most economists describe people as mathematical calculators— i.e. having the ability to easily and
accurately add up the money costs and benefits of their choices in rupees and paise, dollars and cents—
and without worrying about what others around them are doing. Most economists start with the
presumption that economic problems emerge, not because people as individuals are fallible, but because
of failures in markets and their supporting institutions. Barriers stop small firms from entering markets
and allow large, rich monopolies to dominate markets, elevate prices, and constrain production.
Information may be distorted. There may be missing markets—for example, there are no natural markets
for cigarette smoke and pollution, so prices do not fully capture the balance of benefits and costs of
smoking or pollution.
Rationality in Behavioral Economics
While conventional economists direct their attention away from limits to rationality, behavioral
economists do not assume that people are super-rational beings. Instead, they focus on some limits to
rational decision-making. Many behavioral economists draw on some ideas from Herbert Simon who was
a psychologist, a computer scientist and a Nobel Laureate in economics. His concept of bounded
rationality captures the idea that we are limited and bounded by various constraints when we are making
decisions. Cognitive constraints may limit our ability to choose the best strategies. Limits on memory or
numerical processing ability mean that sometimes we are forced to choose a particular option because
we do not have the information, cognitive processing time or power to consider other options. This
contrasts with the typical assumption in economic models that human beings are perfectly rational and
can choose what’s best for them at ease.
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16. Behavioral economists develop other conceptions of rationality too. The Nobel Laureate Vernon L. Smith
hypothesizes that rationality is malleable because it is determined by the contexts and circumstances in
which we find ourselves. Similarly, many argue that we are driven by a practical rationality— in the real
world we must decide quickly and ‘frugally’— we do not have time to collect too much information, or to
apply complex decision-making rules. We decide quickly and simply. Often this works well, but other
times it leads us to systemic behavioral biases. Another interesting economic theory related to this is the
concept of selective rationality. We choose when to be super-rational and take full account of all
available information. At other times, however, we may decide to stick with the status quo and remain
restrained and indrawn. This makes our choices ‘sticky’. We do not always adapt our behaviors effectively
to new circumstances. When our behavior is sticky there are two explanations: either we have decided
that the costs of changing choices are too high, or, in other cases, we are just too lazy and apathetic to
change.
Considering such salient theories, we can infer that behavioral economics has a complex range of views
about what it means to be rational. Mostly, these theories allow that our rationality be variable and
dependent on our circumstances. One of the major lessons that behavioral economics teaches us is that
we make decisions as a function of the environment that we are in.
When we do not have access to good information, when we are in a hurry, when we are facing
cognitive constraints or social influences— then we might be led into decisions that, in a perfect world
with plenty of time and information, we could improve.”
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For No reason at all: Paradox Theory – Giffen's Paradox
In early 19th century, Sir Robert Giffen observed that when the price of bread increased, then the low
paid British wage-earners bought more of bread, and not less. These wage earners lived mainly on
diet of bread. With the rise in its price, they were forced to cut down their consumption of meat and
other expensive food items. To maintain their intake of food, they bought more of bread at higher
prices. This phenomenon was referred to as Giffen's paradox. The paradox is very critical for
economics literates because it defies the law of demand which says that price and demand of a good
are inversely related.
17. Book Review: The Art of Thinking Clearly (By Tishya Mahajan)
“My wish is quite simple: if we could learn to recognize and evade the
biggest errors in thinking – in our private lives, at work or in government-
we might experience a leap in prosperity. We need no extra cunning, no
unnecessary gadgets, no frantic hyperactivity – all we need is less
irrationality.”
Rolf Dobelli’s intensive research-based masterpiece will leave you
pondering over questions that you never thought could exist. The book
spans over an astounding 99 chapters and covers a unique “cognitive
error” or “decision-making bias” in every chapter. Dobelli uses scholarly
evidence from research in the field of behavioral sciences to explain simple
errors that we make in our day-to-day thinking.
Every chapter provides detailed insight into a bias, followed by a simple solution to avoid it and take
better decisions. From the Action Bias to Coincidences, and the Planning Fallacy to Procrastination, the
book provides a fresh and witty perspective on cognitive structures. For instance, In the chapter “Don’t
Cling to things – Endowment Effect”, Dobelli discusses Richard Thaler’s classroom experiment to measure
the endowment effect where he distributed coffee mugs to half of the class and gave them a choice to
either take the mug home or sell it for a price that they deem fit. The other half of the class was asked to
quote a price at which they would be willing to purchase the mug. As per one’s expectation, one would
say that around 50% of the students would be willing to trade but surprisingly, the result was way lower.
“The average owner would not sell below $5.25 and the average buyer would not pay more than $2.25
for a mug.” Dobelli concludes that therefore people are better at collecting things (read ‘junk’) than at
throwing or giving them away. In fact, he gives us a lesson on why one should not cling to things and
much more. A must-read for students of economics to debate and discuss the seemingly obvious!
Book Review: Exit West (By Avani Ojha)
What if you wake up one day to witness your home city crumbling down, along with your dreams and
aspirations? What if your own city pushes you everyday to cross the border and become a part of the
community that is not recognised, a community which is looked down upon, a community of refugees,
homeless, stateless people?
The novel “exit west” dwells on a story which begins “in a city swollen by
refugees but still mostly at peace, or at least not yet openly at war.” Islamic
fundamentalism, terrorism, refugee crisis all brought together under one
umbrella of war, love and fear. Talking about magical doors, Hamid
questions why these doors are closed for refugees and how the plight of
refugees will make them take any door to get away from the incessant
brutal reality. In the backdrop of the book a link is drawn between the west
and the east, and their connections, the result of globalization and
colonization.
The book traces the story of two simple characters, Saeed and Nadia who are left rooted to their
histories, something they can never escape and how a simple black robe turns into getaway for the girl
who aspires to lead an independent life.
Hamid makes the reader step into the shoes of the characters, leaving the reader wondering how his or
her life would change suddenly by the circumstances created and upended by war.
The story eventually takes an optimistic turn from the dystopian portrait to unfold a mutually acceptable
living situation between the natives and strangers accepting each other and an attempt to forge a new
society. The idea of an interconnected world stays with us cutting through the shackles of time and
boundaries in our so called ‘globalized world’.
Through a mixture of realistic scenarios and fairy tale magic, the book deals with the desperate
circumstances underlying the headlines of this digital world. Hamid throws light on the pressing
problems of the modern world by writing about ‘the wars’ that leave people trapped between two
cities masked in growing tensions of political and religious crisis.”
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Book Review
18. Sociological View of Economic Development
By Avani Ojha
Cutting across the boundary of disciplines, theories of development address some fundamental questions
revolving around the ideas, that for whom and at what cost can the homeostatic and multi dependency
relationship between nature and culture be sacrificed.
Labels like economic development, modernisation, redistribution with growth, dependent development,
and more recently neoliberal development only add credibility to the fact that development as a concept
is constantly evolving and is widely contested. In a country where the perception of modernization varies
from community to community, where each and every individual interprets modernisation, globalisation
in their own way, and where the communities remain connected to their roots, industrialization is
accepted according to everyone’s own willingness. Development in India, holding in view only the
conventional meaning does not take into consideration the underlying hidden sociological issues that
arise due to the displacement of thousands caused in the name of development.
Viewing economic policies from the society’s perspective, many sociologists came up with different views
to explain development. Liberal sociologists like Max Weber looked at development as a means of
rationalizing social life. Marx on the other hand, saw development as - A capitalist design to maximise the
volume of production to benefit a few at the cost of impoverishing the masses. Yet another, dependency
approach conceives development as a colonialist way of exploiting resources and a neo-imperialist model
of capital and human exploitation to make rich nations richer and poor countries poorer. While the latest,
postmodern theory believes that modernity and development have produced “aesthetically inspired
anarchism” and chaos in society. The Orthodox idea of development stands on the assumption that
industrialization coupled with advanced technology is the root source of development. Unfortunately for
India, its planners failed to see that unlike the west, India is a labor-intensive country, where the western
model of development has always hit hard the socially and economically marginalized groups in general
and tribal communities in particular. Sociologists argue that development is a conscious neocolonialist
design of a capitalist state that tries to destroy the holistic linkage between nature and culture,
destroying the very existence of collective indigenous identities.
Today, communities are being broken up in the name of development and national interest. They are
stripped off their culture, their values and their very identity through well- planned policies of integration
and assimilating them into the national mainstream. This phenomenon of dispossession takes place both
directly-through deprivation of their land and indirectly through the denial of the benefits of
development. Sociology proposes that displacement leading to dispossession comes in three stages- Land
Alienation, Industrialization and finally Urbanization.
First, these communities are alienated from the very land they originally owned and then increasing
industrialization conveys them the message that being technologically unskilled, they aren’t capable
enough to take control of their land, while urbanization forces them to accept a lifestyle that they never
experienced earlier.
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19. Development is no longer just a geographical question but holds a larger socio-psychic connotation. The
beneficiaries of development stand distinctively opposite to the victims of the process. The problem of
displacement is often compensated in terms of alternate land, but people’s livelihoods cannot be re-
designed in alternate space. The ecosystem of the new space may not positively respond to an existent
form of specialization and known technologies resulting in de-capitalization and pauperization of
displaced people. All of this, then often leads to marginalisation, a state when communities lose their
economic independence and are forced to experience downward economic mobility. The political
leadership also tends to define their marginalization as a ‘sacrifice for the noble cause of the
development of their country”, while for those thrown out to the very peripheries of society,
displacement carries with itself the feeling of humiliation, injustice, vulnerability, and hopelessness.
If development is a national necessity then perhaps its human cost should not be so mounting. The policy
of rehabilitation must be scientifically drawn and physic and socio-cultural dimension to development
must be appropriately evaluated. The developmental policy should not aim at offering cash flow to state
treasury or profit for the industrial house. The displaced people must have a right to employment in the
project for which they have lost their culture, property, and identity.
It is high time that we start to draw a parallelism between the two disciplines, economics and
sociology, rooted in the very concept of development.”
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For No reason at all: Paradox Theory – Paradox of Plenty
The paradox of Plenty refers to the paradox that countries with an abundance of natural resources
tend to have less economic growth, weaker democracy, and worse development outcomes than
countries with fewer natural resources.
After benefiting from the largest transfer of wealth ever to occur without war, why have most oil-
exporting developing countries suffered from economic deterioration and political decay? Amid two
massive booms that seemed to create the opportunity for "politics without limits," why did different
oil-exporting governments operating in distinctive contexts choose common development paths,
sustain similar trajectories, and produce generally perverse outcomes? Countries as dissimilar in their
regime types, social structures, geostrategic locations, cultures, and sizes as Venezuela, Iran, Nigeria,
Algeria, and Indonesia should demonstrate a strikingly similar conjuncture suggests some form of
overarching determinism. The experience of these countries provides evidence that a common
condition reduces the range of decision-making, rewards some decisions and forms of behavior more
than others, and shapes the preferences of officials in a manner that is not conducive to successful
development.
It is believed that paradox of plenty is not universal or inevitable but affects certain types of countries
or regions under certain conditions.
20. Being Rational - (An analysis from the first chapter of the book “Freakonomics” by Steven D.
Levitt and Stephen J. Dubner)
By Manik Aggarwal
All economic agents learn to respond to incentives from a young age, such as rewards for studying hard
and getting good grades, and punishments for bad behavior. There are mainly three forms of incentives
at work- economic incentives like monetary and material rewards or punishments, social incentives like
the thought of positive or negative judgments by others and moral incentives, and there is a continuous
friction between all of them. All the three forms of incentives work as an extremely powerful motivator
and drive economic agents to make decisions daily.
Economics postulates that a rational person will always seek to maximize utility. By cheating, a person
may be able to gain more while putting in less work, thereby maximizing his/her total utility. A study
conducted in the Chicago public school shows that schoolteachers are incentivized to allow their students
to cheat for economic reasons: they do not want to be fired or demoted due to of low scores of their
students. In another study on the Japanese sport of Sumo Wrestling, it was shown that the Sumo
wrestlers with an 8-6 record may be incentivized to cheat because the 7-7 wrestler has given them a
monetary bribe or because they are close friends with him (Rankings of the sumo wrestlers are
determined by their performance in the elite tournaments held six times yearly, where they fight in
fifteen bouts per tournament. If they have eight victories or better, their ranking rises, but if not, their
ranking falls). There was another interesting observation of spike in people's honesty and the overall pay
rate in the USA, perhaps because of increase in empathy and patriotism after the 9/11 terrorists attack.
If there are incentives to cheat then some incentives can also be provided to not cheat because if the
economy could work untouched, then it is likely that rational consumers and competitors would continue
to cheat unchecked, since there is an incentive to do so. This becomes a plausible explanation for the role
of the state to set up required military, police, defense, and legal structures and functions to secure
private property rights and to guarantee, the proper functioning of markets, as claimed by the neoliberal
school of thought.
Government regulations moderate the playing field and make sure that cheating remains at a
minimum.”
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For No reason at all: Paradox Theory – Paradox of Value
Also known as the Diamond-Water Paradox, the paradox of value is an apparent contradiction that
water, which so essential for survival has a lower market price than diamonds. Value can be seen to
have two different meanings, first being “value in use” and the second “value in exchange”. The
things having the greatest value in use tend to have little value in terms of exchange and the things
with the greatest exchange value usually have less value in use. Ironically, Water cannot be
exchanged for anything precious even though it's extremely important. Diamond, on the other hand,
can be exchanged for a greater quantity of goods.
The subjective theory of value says that the labour exerted in production or the product's usefulness
as a whole, don't determine the price value of the product. Rather, marginal utility determines its
price, which is measured by the importance it holds in a person’s life. In case of the diamond-water
paradox, it's argued that the price is not determined just by the total use of diamonds and water but
by their per unit use. Evidently, the total utility of water is higher but due to its large supply, it's
marginal utility is lower, while diamonds have a low supply which makes the usefulness of one
additional unit of diamonds greater.
21. The Godfather Tactics: 6 Persuasion Techniques to Make Them an Offer That They Cannot
Refuse
By Tishya Mahajan
In today’s world of consumerist lifestyles, persuasion can be a difficult task. Be it your words, goods or
services, the ability to convince others to comply with your request or to buy your idea is a prerequisite
skill for the professional world. Social Psychologists have identified numerous techniques which have been
found effective in subconsciously persuading the other person. Let’s look at some of these compliance
strategies and how they are most commonly used.
Foot in the Door Technique
The foot in the door principle quite literally means to stop the door from closing shut by placing your foot
in the gap. In more technical terms, it means to begin by making a smaller request which the other
person is less likely to refuse. Once the individual agrees to it, go ahead and make the bigger request.
Since she has already agreed once, she becomes committed to the idea of fulfilling your requests and
may feel the need to behave in a consistent altruistic manner and as a result, doesn’t refuse the second
request.
Let’s take an example. Say, you missed a class and are left at the mercy of your friend’s notes to study but
are feeling uncomfortable about straightaway asking for all the notes. You ask him for the notes of one
class and when he agrees to that, you push forth your request to take all his notes. Since you first ask for
a small favor, you increase your chances of getting all his notes.
Door in the Face Technique
As harsh as it may sound, this principle literally implies a person shutting a door in your face. (ouch!)
Technically, this technique is just the opposite of the previously stated technique. First, you make a
request or ask for a favor that the other person is most likely to refuse (and shuts the door in your face,
metaphorically). But now, you knock on her door again and make the actual request which is drastically
easier for her to agree to and helps her relieve herself of the guilt from the previous refusal.
Let’s again talk about that friend whose notes are the best in the class. Since you’re aware that she’s not
an easy person to ask favors from, you start with a heavier proposition. You ask her to teach you
important topics for the upcoming Econometrics exam. Being a diligent student who’s facing a paucity of
time, she refuses to help you. You then make the smart move and ask her to “at least” be kind enough to
lend you her notes. Bull’s eye! Your work’s done and she happily agrees.
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22. Anchoring
This is a cognitive bias that we are subjected to in our day to day decision-making. It refers to the
common human tendency to accept and heavily rely on the first piece of information offered (the
"anchor") when making decisions. If used properly, this can be a powerful persuasion technique.
The most common application of Anchoring can be found in the field of sales and marketing. Say, you
wish to purchase a new car and find a reasonable deal of 5 Lakh rupees. You bargain with the salesman
and manage to lower it to 4 lakhs. You sleep satisfied that night, taking pride in your bargaining skills.
However, you stay unaware that the actual value of the car was even lower than what you paid! The
initial price of the car acts as an anchor and sets the tone for your subsequent decisions and you perceive
everything that is lower than the anchor as a “good deal”.
Social Proof
Have you noticed how a Facebook post that already has many likes garners greater attention than a post
with zero likes? Even you would feel more convinced by a tweet that has been retweeted numerous
times than one with no shares at all. This is the principle of “Social Proof”. The idea that if “Everyone
agrees with this or believes in it then it must be true/the right thing.”
It’s highly likely that a friend would accompany you on a trip if you tell him/her that “all our friends are
going” instead of saying “I’m going too”. In most social groups there is a high level of groupthink.
Someone mentions an idea, and even if everyone disagrees with it, they choose to go along. When
deciding, people look at what their peers do and act in a similar fashion.
Scarcity/ The Deadline Technique
You must have observed the consumer frenzy surrounding the “sale season”. Anything available for a
“limited time”, “on a heavy discount” or “last in the stock” is more attractive than a regular product. An
individual is more likely to want something that they perceive to be scarce or available under a deadline
condition. Digital Marketers use this strategy to make people “hurry” to make the purchase so that they
don’t miss the rare opportunity.
Reciprocity Principle
It is a social norm which says that people have a tendency of repaying altruistic gestures and expect
others to do the same. This sense of moral obligation to reciprocate is a powerful driving force behind
one’s actions. Having someone feel indebted to you raises your chances of receiving something that you
want. Almost like sharing your notes with your friend first in anticipation of getting a similar request
fulfilled in the future.
Let’s say you receive a bunch of beautifully designed cards in your mail from an orphanage which is
raising money to help the orphans find a new home. As a recipient of the “free” cards, you feel obliged to
return the favor by donating some amount of money to the orphanage which is essentially what they
need.
So, the next time you make a request, make a smart one!
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23. It’s Raining Scams and Swindles
By Parika Gupta
Mornings are characterised by steaming cups of hot sweet tea and ripe
new newspaper with flashy headlines. But what can be fouler than it being
flooded with scams, frauds, cases of money launderings and lots more?
With the king of good times, Vijay Mallya evading the country after being
evicted by the EB, to the still-to-be-nailed Rafale deal, the policy makers
have their pockets full of cases. The very recent addition in this league is
the much hyped, talk-of-the-town, Punjab National Bank Fraud with
celebrity Jewellery Designer Nirav Modi and former MD of Geetanjali
Gems, Mehul Choksi in the limelight.
By defaulting more than $1.77 billion together, the uncle-nephew duo has become the kingpin of one the
largest banking scams in the history of India. PNB smelled a rat on 14 February in its Brady House branch
in Mumbai, but by then Mr Modi had already fled the country and is still on the run. Even after the
Enforcement Directorate launched countrywide raids in all of his frequent haunts, it was unable to sniff
glitter. Similarly, Choksi’s dazzling outlets are soon to be sealed and nearly 5000 employees of the golden
empire have been given the pink slip.
No sooner had this happened that the CBI got the whiff of another multi-million racket just around the
block. But this time it was the flamboyant promoter of Rotomac pens, Vikram Kothari under the scanner
who had allegedly bamboozled INR 3700 cr. since 2008. The case came in the open when Bank of Baroda
lodged FIR just days after the PNB scam. Again, the same procedure started, with raids being conducted
in and around Kanpur, the official residence of the Rotomac Family and the accused justifying his
disdainful acts with sugar coated words. Though not on the run, still the swashbuckling businessman is
under the strict scanner of the investigation agencies through all calls and emails have been devotedly
ignored. With the fire still blazing, Karti Chidambaram and his INX controversy was added to the list. With
these numerous, cases added in a trice, the country is in a dilemma regarding the bumpy economic road
ahead already reeling under the after effect of demonetisation and GST bill.
This sudden surge in scams can be attributed to the limited number of laws and check systems and
favouritism on the part of bureaucrats and banks in extending loans and the situation can be reverted, if
and only if some concrete measures are devotedly adopted. They are vigilance on the part of banking
officials while extending loans to “apparently, financially sound” companies and individuals by doing a
thorough background check, preventing upfront payment for a promise, a regular firing spree for “fishy
officials” and strengthening the risk-management system. Moreover, the government should begin with
its long-due- concentration on non-performing assets and the real costs on a bank-bailout, and should
seriously reconsider PRIVATISATION, the only universal solution to the problem. Also, ‘Prevention of
Money Laundering Act’ and ‘The Insolvency and Bankruptcy Code’ should be nourished.
However, coming back to the present, two burning questions prevailing are - what would be now left of
the banking system, turned-turtle by these mighty blows and lighter by around 1.2 lakh crore, and if the
days of dazzling of these buoyant magnates and entrepreneurs will ever get over. However, all is not
finished yet as there are still other accused on the run, to be caught, whistle-blowers sneaking behind the
curtains, trials to take place, guilty confessions to come out, strings to be tied and everything to be
wrapped once and for all!
We can only hope that these tasks don’t cost the exchequer anymore!
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24. An interview with Mr. Dhananjay Sinha
Dhananjay Sinha, Head of Research, Economist & Strategist, Institutional
Equities at Emkay Global Financial Services Ltd is an alumnus of Economics
Department, Kirori Mal College. He has been the Head of Research at
Infosys, Knowledge Services and Chief Economist at ICICI Bank.
Interviewers: Manik Aggarwal & Bhargavi Thakur
Editorial: What will be the impact of the Trade War between USA and China on India?
Mr. Sinha:
The trade war between China and USA has its origins way back in 2006 and 2007 when the USA was
pressurizing or alleging China for keeping a very low current account balance. The whole idea was to
reduce Current Account Deficit in the USA and this is where the trade war originated.
Post-2008 crisis, trade conflicts has been rising and it is a development from the past. Multiple
protectionist measures have been taken by the US against China. Many other countries have also been
following protectionist measures. If we look at G-20 countries, most of them are following trade
restrictive practices. Recently, these are progressing into tariff actions. Overall trade openness across the
world has reduced.
The US-China Trade War can be seen as an opportunity for India, however, one needs to understand that
the US has been imposing restrictions on India as well. Looking at data, since 2008 India has been
following strict restrictive practices. Since 2008, the number of restrictive actions taken has been fairly
high. On a flow basis, India is at the topmost in terms of restrictive trade practices. The increase of tariff
on iron and steel in India, consumer items, and many more items suggest that trade openness in terms of
both goods and services has reduced. In the context of the restrictive trade regime, which has persisted
for long, India including China hasn't grown much in terms of savings, investment, job opportunities.
Editorial: What are some of the measures apart from MSP that can help farmers in the long run, as
higher MSP may spur inflation?
Mr. Sinha:
Since 2012 the terms of trade for the farm sector has decreased by almost 6-7%, almost 1.5% of that has
happened post demonetization which impacted the farm sector very adversely. The distress of the farm
sector has grown since 2012-13 and has intensified recently due to demonetization because the farm
sector is significantly reliant on cash economy especially the perishable items like vegetables and fruits.
There are multiple channels of supply that are cash dependent because of lack of storage facilities and
poor supply infrastructure. Moreover, the distress was multiplied because of the inability of farmers to
pay back loans. The fundamental problem here is that the farm sector cannot grow more than 2.5-3%
because consumption of food items is not going up too much as the population is growing at 1.4% and
cereal consumption is falling. Apart from increasing the MSP, a lot of emphases has to be paid to help out
farmers with their loans, increase the value addition in the farm sector, and improve storage
infrastructures like cold storages and warehouses. There has to be a good chain of food storages and
combination of public and private sector participation. Moreover, a lot of emphases should also be given
to food processing so that the value addition doesn't necessarily be dependent upon inflation. A better
realization of value addition can be done across segments including poultry, dairy etc. Technological
intervention can spur value addition in the farm sector. Export opportunities should be exploited and
greater emphasis has to be paid to the industrialization of the rural sector. So, all in all, there has to be a
very comprehensive approach towards the farm sector.
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Alumnus Talks
25. Editorial: What is your take on the recent banking crises?
Mr. Sinha:
The NPAs has increased almost ten times over the last eight years. Government is paying a lot of
emphasis on the capital concerns of the banks. Corruption cases like Nirav Modi reflect systemic flaws in
the banking structure. Private lenders are relatively in a better position than the public sector banks in
their functioning and structure. The banking crisis has evolved as a problem due to very high expansion in
investments. After 2008, the global trade has not been very supportive; the protectionism that is
emerging has a spillover effect on banking sector viability. The debt burden on banks has not decreased
because the stock of loans that banks have accumulated is far higher than the operating profits that the
borrowers are making. Very radical adjustments are required to improve productivity and profitability of
capital employed. More regressive banking sector reforms like recapitalization etc. are required to help
out the banks.
Editorial: How was your experience as a student at Kirori Mal College?
Mr. Sinha:
KMC was my first place of exposure of outside world as I came from a small place called Bokaro.
Students came here from all across the country and KMC provided a wonderful culture. The faculty was
really good, they were very friendly and ensured that we had good interest in the subject. A lot of social
activities took place, like plays, various kind of shows and concerts during the annual fest of the college,
Renaissance. The library was a major attraction for all of us. Some of my classmates included KK and
Gurpal Singh. I had a really good experience at KMC.
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For No reason at all: Paradox Theory – Paradox of Choice
Barry Schwartz defined the paradox of choice as the fact that in western developed societies a large
amount of choice is commonly associated with welfare and freedom but too much choice causes the
feeling of less happiness, less satisfaction and can even lead to paralysis. When people have no
choice, life is almost unbearable but as the number of available choices increases, our consumer
culture brings positivity due to the autonomy, control, and liberation. But as the number of choices
keeps growing, negative aspects of having a multitude of options begin to appear. As the number of
choices grows further, the negatives escalate until we become overloaded. At this point, choice no
longer liberates but debilitates. It might even be said to tyrannize.
26. Nationalism - Through Different Lenses
By Bhargavi Thakur
Nationalism has been a driving force in bringing about social, political and economic changes. The rise of
political nationalism has caused major revolutions and uprisings to overthrow anarchies and strengthen
the public and nations. The other two aspects of nationalism social and economic have far-reaching
consequences and effects societies and economies across the world.
After World War II most countries aimed for liberalization of their economies by adopting free trade and
globalization. This had an impact on the developing nations during that time which experienced growth
leading to rapid convergence. However, the rich and developed nations were hit due to the convergence
process which led to a change in the trend of free trade. Since the global financial crisis, the world has
seen more protectionist measures leading to an atmosphere of rising ‘Economic Nationalism’. Recent
examples include Brexit, notions of ‘America First’ which has major sub-policies targeting world
economies, such as restrictions on H-1B visas, import tariffs on steel and aluminum, etc and Chinese
imposition of tariffs on imports from the USA. In relation to this, social protectionism has also been on
the rise wherein restrictions have been imposed on immigrants and refugees. Refugees from Syria, Iraq,
and Iran have been facing restrictions and troubles in entering/staying in the USA and European Nations.
Similarly, the Rohingya Community has been left homeless by Myanmar, India, and Bangladesh.
Behind the Scene
Although we can easily examine what trend are countries following, the bigger question, however, is why
is economic and nationalism on the rise? It is largely stated and believed by many politicians and leaders
that the huge no of immigrants and refugees from other countries take away both skilled and unskilled
jobs leaving the domestic people unemployed. The immigrants and refugees also pose threat to domestic
peace and harmony, stated as one of the major reasons of Brexit when large Syrian immigrants entered
Britain via Germany.
Imposition of higher tariffs on imported goods comes in view of protecting domestic industries, giving a
boost to domestic production resulting in both employment opportunities and reducing trade deficits.
Such situations are leading to an anticipated world trade war.
Do the protectionist policies come out from strong economic planning and strategies and keeping the
interests of economy and society? Politicians are humans who have the sole motive of winning elections,
retaining power and portraying themselves as world leaders. Such protectionist measures often turn out
to be populist than strategic. This conclusion can be proven by the fact that due to restrictions imposed
on immigrants, the US economy is believed to face problems of skilled labor and thus, lower productivity
affecting output. Not only this, the imposition of tariffs on important materials like Steel and Aluminum
which are used as raw materials for a huge number of industries shall be facing a rise in costs, facing
setbacks. Also, most European nations have benefited from the refugees and migrants who provide
cheap and young labor force against their own aging population. This clearly shows that such policies
haven’t been well thought off.
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27. Protectionism and Terrorism
Although the two terms seem alien to each other and to have no connection, the causes of terrorism
somewhere lie in the protectionist attitude of countries worldwide. To understand the link, it is important
to first look into the background. In the last decade, revolutions like the Arab Spring which started off
from Tunisia to overthrow dictatorial rulers spread across many neighboring countries. By the time it
reached Syria this nationalism against the Bashar Al- Assad regime got converted into a civil war, a battle
of ideologies, ‘game of thrones’ both literally and metaphorically and a strife between religious and
cultural sentiments. Syria gave rise to the most threatening terrorist group the Islamic State of Iraq and
the Levant or the ISIS. Syria became a point of the cold war between the US and Russia leaving the
country in confusion and turmoil.
The countries that were until now protecting the country from ISIS have left Syria, again due to a
protectionist attitude. Syria, along with most Arab Spring countries has become the topmost source of
migrants and refugees to most African and European countries. The people from such countries are
unable to sustain their lives in their own home countries due to social and political disorder. As
mentioned earlier due to the rise of restriction and protectionism against migrants and refugees, they are
left with no source of livelihood.
This leads to two major consequences, one agitation of the immigrants and refugees against the rich and
developed countries and two, the frustration and vulnerability of finding jobs or alternative sources of
livelihood and sustaining life.
Through surveys, it has been seen that the root economic causes of terrorism have been poverty and
unsatisfactory governance. The terrorist groups gather public support by providing ‘club goods’ in a way
better than the government. The economic nationalism of the powerful economies leads to nationalistic
aspirations amongst the jobless and poor against the former.
Amidst the lust of power and supremacy, people and economies are put at stake. Politicized and selfish
policies by governments and leaders not only affect economies and growth but also people and their
aspirations, leaving them helpless. They end up revolting, some through protests while some by
spreading terror. “
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For No reason at all: Paradox Theory – Easterlin Paradox
The Easterlin Paradox concerns whether we are happier and more contented as our living standards
improve. Richard Easterlin drew attention to studies that showed that, although successive
generations are usually more affluent than their parents or grandparents, people seemed to be no
happier with their lives! It is an interesting paradox to study when you are measuring economic
welfare and the standard of living. Within a society, rich people tend to be much happier than poor
people but, rich societies tend not to be happier than poor societies (or not by much). Also, countries
get richer but do not get happier.
Easterlin argued that life satisfaction does rise with average incomes but only up to a point. Beyond
that, the marginal gain in happiness declines. One of Easterlin’s conclusions was that relative income
can weigh heavily on people’s minds. Say, you were faced with a similar choice. You get Rs 6,000 and
a friend gets Rs 4,000 or You get Rs 20,000 and a friend gets Rs 30,000. What would you choose?
28. Movie Review- Hidden Figures
By Vrinda Sharma
Let’s look back to the United States of America of the 1960’s, both socially and politically. The civil rights
movement hasn’t succeeded yet; there is still racial discrimination and segregation at all levels. The
society is still largely patriarchal. Politically, USA is fighting the battle for world domination with the USSR.
Yuri Gagarin of USSR has reached space, and now NASA is on its toes to make sure they are the first ones
to send a man to the moon.
Set against this background, Hidden Figures is a story of the struggle, will
power and genius of three African American women who work for the
‘colored human computer’ department of NASA. Katherin is a
mathematical genius, brilliant at analytical geometry and has a solution to
every mathematical problem. Mary is a brilliant mathematician, but better
at understanding machines than the number and hence wishes to be an
engineer; something a woman, let alone a black one, can only dream of.
Dorothy is the acting supervisor of the department and has a niche for
understanding new things.
The movie is a gripping account of how three ambitious women fight circumstances where all odds are
against them. Katherin, who runs a mile from her desk every day just to use the “black washroom”
dreams of authoring her own papers in the NASA space research. Mary wishes to fight segregation in the
local school so that she can take classes to become an Engineer and help in the rocket design of the space
program. Dorothy, in the fear of losing her job to the electronic computers, must learn coding languages
that no one yet has.
What’s brilliant about the movie is its sheer simplicity. The problems are real and so are the people.
There is no antagonist, only humans with their own apprehensions and insecurities. The script, though
largely about Katherine, keeps you invested in the life of all the three women. The characters have
distinct personalities and the audience is able to see themselves in them. The movie flows beautifully and
the end doesn’t disappoint. This movie is for anyone looking for inspiration or just feeling let down by the
society. In fact, this movie is for each one of us. With astounding performances by all actors, Hidden
Figures is easily one of the best movies of this decade.
As quoted by The Telegraph, “Hidden Figures isn’t pushing the cinematic boat out in any new directions,
but it steers its prescribed course nimbly and nicely.”
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For No reason at all: Paradox Theory – Paradox of thrift
The paradox suggests that while it may be wise for an individual to save money when income is low
and job prospects are precarious, it could be collectively disastrous if everyone is thrifty together.
Individuals try to save more during an economic recession, which essentially leads to a fall in
aggregate demand and hence in economic growth. Such a situation is harmful to everyone as
investments give lower returns than normal.
Movie Review
29. Confused about what to do after completing your under graduation in Economics? Well, you are not
alone in this. A whole lot of students go through this confusion every year. But there are many fascinating
career options that open up for you. Economics is truly a core of various branches.
We can't make your choices but we can show you the choices.
Masters:
Masters in Economics – It is pretty obvious that one can opt for further studies in economics but one can
do masters in economics in different specific fields and some of them are:
Integrated Master's degree course – In India, few institutions offer an integrated five-year Master's
degree course in economics. The distinctive feature of this programme is that it allows students to choose
their disciplines after giving them a wide exposure to humanities and social sciences.
MBA – Though MBA is suggested to be pursued after the experience, many premium colleges in India
take undergrads. Students who want to surely go into corporates can surely have MBA as an option.
Masters in Finance – There’s a long debate on Masters in Finance vs. MBA. This course, in general, entails
core and technical finance.
Law - If Corporate Law is intriguing to you, then it is not too late if you have an economics degree. A
Bachelor in Economics followed by an LLB can take you places.
Professional Courses:
Actuarial Science - Actuaries are business professional who works in the insurance company. These
professionals specialize in various fields such as health, life, medical, casualty, pension, etc.
CFA - The CFA is a globally-recognized graduate-level curriculum that provides a strong foundation for
real-world investment analysis and portfolio management skills combined with the practical knowledge
that you will need in today’s investment industry.
FRM – FRM refers to a financial designation issued by the Global Association of Risk Professionals (GARP).
It is suitable for individuals who want specialized knowledge in assessing risk on behalf of
banks, insurance companies, accounting firms, regulatory agencies and asset management firms.
Job Options:
• Masters in Applied Economics
• Masters in Economics-Public Policy
• Masters in Financial Economics
• Masters in Econometrics
• Masters in Economic Development
• Masters in International Economics
• Masters in Development Economics
• Masters in Agricultural Economics
• Masters in health economics
• Masters in business economics
• Masters in labor economics
• Masters in rural economics
• Masters in industrial economics
• Masters in World Economics
• Masters in Sustainable Economic Development
• Masters in Quantitative Economics
• Masters in Philosophy in Economics
• Masters in Political Economy
• Masters in Behavioural Economics
• Master in Statistics and Economic Modelling
• Banking Firms and Financial
Institutions
• Data Analysis
• Insurance and Accounting Firms
• Stock markets or share broking
• Journalism / Economic Journalism
• Professor
• Financial risk or investment analysis
• Management/Economic consultant
• Government Jobs – varying from UPSC
to IES and positions in the Reserve
Bank of India
• Research firms and Think Tanks
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Careers
