Hmmm


“By late afternoon the light that washed over the garden turned it into
a lake of gold, with islands of shadow; the blown lilies, the long
tendrils of roses and the anemious grasses streamed like plants that
grow in water.”

Edith Pope; River in the Wind; Scribner; 1954.

Dispatch


The web has had a lot of interesting stuff floating around this week- or maybe its just that I have had more time to sit up and take notice lately.

Web Worker daily has a fascinating post about a positive web presence and getting a good job. Green technology just got a thumbs up with Tesla Roadster, a 100-percent electric car inspired by PC technology that is clean, green and the ultra-cool machine.

More exciting stuff on the PC front- Yahoo is doling out unlimited e-mail storage to its mail users— one could now consider forgiving them for the awful YahooMail Beta interface. PC Mag has a nice article on Web 3.0 and an even nicer one on customizing Vista if you’ve made the Vista transition.

CSE (although I disagree with most of what it says most times) has some interesting analysis of social sector spending in the union budget. It is also offering an opportunity to work with NREGA evaluation, if anyone is looking for voluntary work in the summer. The CSE controversy on pesticides has also reached a resolution of sorts- read about it here.

Happy reading!

Stern Stuff, eh?


Chennai is all set to host Sir Nicholas Stern and his team for a discussion on what is what is known (in)famously in the climate change circles as the Stern Review.

The Stern Review (for the uninitiated) is a 700 page long document on climate change, global warming and the like. Released on October 30th 2006 (the October Revolution, which was neither in October nor much more than a Bolshevik coup), the Stern Review was undertaken for the British government by former World Bank chief economist.

The Stern Review discusses at length the impact of global warming and climate change on the world economy. A leading member of the Stern Review will speak at the Clive Dupleix Hall, Taj Coromandel from ten in the morning on Friday, the 23rd.

The report suggests in its conclusion (the only human- readable part) that a 1% of the world GDP would be required in investment every year to tackle carbon emissions failing which the loss in pure GDP terms would be somewhere between 15-20% of the global GDP. Upfront I guess, this is great news for environmentalists, there is much evidence though that the Stern Review is really nothing much more than an alarmist publicity stunt.

The Stern Review has received much praise and criticism (rightly so). A more momentous environmental milestone though that most people don’t talk about also took place on the 30th of October, 2006. The Copenhagen Consensus Centre headed by Bjorn Lomborg ( a statistician by profession and of Skeptical Environmentalist fame, a book I highly recommend to anyone who seriously intends to do anything about the environment) held a session with United Nations ambassadors from twenty four nations “representing fifty four percent of the world’s population”. These nations, were both developed and developing, large and small.

Lomborg asked them a single question, “If you had an extra $50 billion to be put to good use, what problems should be solved first?” The question was meant to reflect national priorities. Unhappily, for the blissfully unaware Sir Stern, mitigating climate change was nowhere close to the top five or even the top ten national priorities. I could easily suggest that this was because climate change by definition is something that requires international and transnational cooperation. And yet, you and I both know that this argument is flawed. If climate change was really bothering people, action would be happening.

The ambassadors in question unanimously agreed that “diseases, sanitation and water, malnutrition and education,” ought to be addressed first. Most ambassadors agreed that getting this baseline right also meant that mankind at large would be better equipped to deal with climate change at a later stage.

The Stern Review is problematic on several fronts which I will eventually discuss, what is more upsetting though is how this so called ‘green-agenda’ is being pushed forward aggressively and lapped by the media at that. I study and work with Public Policy, the vast majority of my teachers unfortunately derive their opinions from newspapers. And why not? Newspapers supposedly report facts, the opinions are therefore theirs, right? Not so.

Of the several classes I attend, one has to do with ‘Environmental Policy’. This class is taught by a beautiful woman who has an empty mind. She started out as a student of Economics, moved on to what she undoubtedly thinks is Philosophy (her lectures abound in references to a return to Wilderness, Deep Ecology, feeling for the Earth and of course Buddhist Ethics), then went to America and joined the Audubon Society dancing around camp fires with indigenous Americans.

My problem is not with Deep Ecologists, the Audubon Society or indeed with American Indians. My problem is with the perception of environmentalism. My problem is that all these collectives represent but one side of the story. For every developed and so called overtly consumerist nation there has also been an environmentally disastrous and state regulated USSR, China and so on. The point is that while Deep Ecology addresses an environmental gap in the more affluent nations where perhaps ‘returning to the land’ is a culturally important value, this is not global. In India for example, environmental problems are livelihood and human rights problems first. At any rate, this is a discussion for another day.

This particular woman, has been, like several other environmentalists brainwashed into guilt. She persistently talks about equity and believes that economic growth is evil. She will only talk about redistributions, but doesn’t see the argument about increasing the size of the economic pie. Don’t get me wrong, I’m not anti ‘green’; as a matter of fact I think the environment is a vector of several very valuable and scarce resources.

I’m merely suggesting that perhaps E.F Schumacher’s most valuable contribution did not lie in his questioning why mankind cannot live within a GNP many times in size now than it was for older civilizations, but instead in how to live within our means– through appropriate technology, something only an economist or otherwise solution driven mind could arrive at.

The value of Buddhist ethics similarly lies in their ethic of environmental conservation not in ‘connections with the soil’, and the value of the Sierra Club in its land acquisitions for environmental preservation. These are valuable lessons, and they are about strategy and method not about feelings, though I concede that feelings are a powerful means to action which brings me back to the Stern Review.

Among the many things wrong with the Stern Review, let me begin with the global GDP and the 1% figure which made the headlines. Current estimates of the global GDP stand at about $45 trillion. One percent of that figure is some $450 billion every year. Mind you, we’re talking about catastrophically bad weather at the very least a century away. The Stern Review suggests that at this cost Green House Gas (GHG) emissions could be stabilized. One way to look at this, or at least the Stern way to look at this figure is to say that four hundred and fifty billion dollars isn’t very much for the world. I disagree.

Any investment is undertaken at some cost, this cost is popularly known as opportunity cost. What could the opportunity cost of four hundred and fifty billion dollars be? Health, poverty, peace? The operating principle which prompts the hideous suggestion of spending this money on a phenomenon that doesn’t have any scientific consensus at all is what is popularly called the precautionary principle. You and I call this erring on the side of caution. What I want to know is this, should governments actually decide policy on a precautionary basis? Should our governments spend billions on developing anti-alien defense systems, because we suspect an inter-galactic attack?

Like all climate scientists, the Stern Review scientists based their report on climate projections and models. Much of climate prediction is itself circumspect. Weather and climate are complex, non-linear systems that do not conform. Predicting their patterns beyond a few months with any degree of accuracy is a mathematical joke. Our meteorological departments can’t get fishing weather forecasts right beyond a couple of hours let alone predict climate change and its effects a century down the line. The fault does not lie in the system, or in the maths–but in the fundamental understanding of chaos theory, unpredictability and in assuming variables to be static when they really are quite the opposite!

To understand this better; the Stern Review combines worst case climate model predictions with worst case economic model predictions, which is whence the predictable disaster arrives. The economic analysis is based upon what is called the A2 storyline. The IPCC Special Report on Emissions Scenarios describes a series of plausible ‘worlds’ of which A2 is one.

The A2 storyline is a world wherein relatively slow economic growth dominates, IPCC puts the figure around 2%. The world is a pretty dismal place with global economic self sufficiency (economic self sufficiency is suicide), continued population growth, and close to no technological growth. Call it a Malthusian nightmare. From this picture, we are to expect that by 2100 global per-capita GDP would rise by a paltry sum of $ 16,000 making the global GDP $243 trillion dollars. The population would be close to 15 billion and income would be inequitably distributed.

This is one scenario, and I might add rather improbable, if one were to remember Paul Ehrlich’s bet or indeed wonder why what Malthus predicted never came to pass. There are other ‘worlds’, the A1 scenario of the IPCC which is far more happy and indeed plausible discusses strong economic growth, trade in a globalised world, the population stabilizing and indeed outstanding technological progress which we have seen in the last century.

Contrast the A1 scenario GDP with the dismal picture, the projected GDP stands at $550 billion with a per capita income of $80,000 for the same time span. I am often amused in the class I discussed above– because I have to tackle an activist who takes every shot to call me ‘anti-people’, only ‘growth-oriented’, ‘right-wing’ and indeed everything short of evil, as though my horns are visible!

I’m assuming though that any reasonable person would want to avoid the A2 scenario and therefore would logically realize that the best way to deal with climate change and a shrinking natural resource base is to create greater capacity for future generations. In that vein, it is surely obvious that best policies are those that encourage economic growth. Here’s another weltanschauung– with wealth future generations can make and use better technology to deal with climate change, if it happens! I’m suggesting, that it makes for good policy to move from slow growth to high growth even if you are green, red, blue or indeed any other political color!

Economists concerned with the environment like Sir Nicholas Stern consistently talk about the poor in South Asia, especially Bangladesh. Its funny how the only thing in recent times to have made a difference to the average poor Bangladeshi is entrepreneurship and the availability of credit capital through from micro-finance, but I will let that pass. Let’s assume that Sir Stern gets to raise energy prices through a carbon tax, what is the immediate impact? An economic growth slowdown, by a trifle let’s say about 1%. How would a 1% fall in the growth rate of a third world nation like Bangladesh matter?

Bangladesh’s growth rate is about 6% per year, so if this were to become 5% for say the next half century till carbon levels stabilize what would the GDP growth difference be? The math is really easy. At 5%, after fifty years Bangladesh’s economy will grow by $575 billion, at 6% it would be close to a $1 trillion. Its the trivial little 1% that makes the huge difference. Now let me ask you, what are Bangladesh’s or indeed any third world country’s most pressing problems? Is it really how “a warming world will cause rising sea levels to flood much of that country”? If the concern is really over flooding, I wonder how a whole host of Scandinavian countries including the Dutch actually manage to keep their low lying countries out of flooding with a GDP of just 500 billion dollars!

Actually, maybe I’m being a tad unfair. Sir Stern is a very competent economist and has pointed out several times in the Stern Review that raising the price of energy produced from fossil fuels could very well produce net economic benefits. Look at this as some form of competition, new technology and a huge market demand for low carbon alternatives. The point is that, here too the idea of opportunity cost still stands. As I write (and in some sense the very fact that the Stern Review ever took place implies that), there is a gradual progression to cleaner fuel.

Therefore choosing to make energy costlier through taxes doesn’t change much except maybe saving some time. In the mean time- human beings everywhere are losing money they could’ve otherwise spent on food, water, sanitation, education, housing etc. In other words we’d be taking away social primary goods and subsistence provisions for climate change a hundred years down the line! The Rockefeller University here, has an excellent write-up on energy and de-carbonisation that discusses some of the issues surrounding energy consumption, much more eloquently and on much firmer ground than I can.

Pondering upon Bangladesh, improving people’s lives involves boosting economic productivity and that definitely does not include a 1% growth rate sacrifice for climate change! The Stern Review is insane on several other counts, and not just unethical. Amongst other things —

1. Stern wants the world to pay close to four hundred and fifty billion dollars every year to mitigate climate change on the basis of a phenomenon which has no scientific consensus concerning its causes. Contrast that with the Kyoto commitment of a hundred and fifty billion dollars per year which is failing.

2. The Stern Review suggests that unless something is done about it, global warming will destroy anywhere between 5% to 20% of the world’s economy. Incidentally, economical losses we can blame on “climate change” in the present are equal to zero within acceptable error margins.

3. The Stern Review advocates among other things a form of pigouvian taxation. The important thing about a pigouvian tax is to remember that it is not a the levying of a punitive tax to make people change their behavior. It precludes incentives, although in the long run it might serve as an disincentive.

All that a pigouvian tax does is insist that the costs currently external to the price and market are included within them. The problem is that green taxes on driving and flying have a marginal impact, which is the point. Pigouvian taxation is not meant to stop people doing something or to price them out of an activity. It is simply to make them pay the full costs of what they do.

It is undiluted nonsense then to talk about raising taxes or prices to stop people from flying, for example. No such thing happens, all that happens is that the carbon costs of a flight is exactly what determines the tax rate. There are lots of practical problems with this sort of taxation, the most obvious one is also the hardest to overcome. How is a government supposed to set correct figures for carbon based taxation? Recall what Hayek said, it is impossible for a government to possess such vast amounts of symmetrical information.

One part of this problem is to use estimated costs of Co2 emissions, and these do exist. Eminent environmental economist and incidentally one of the loudest critics of the Stern Review Nordhaus estimates one tonne of Co2 at $2.50, the Stern Review estimate stands at a whopping $85!

At Nordhaus’s estimate incidentally in every country airline passenger duty is already too high. At the Stern Review’s estimate, it’s about half what it should be. There are all sorts of problems with the Stern number, to begin with it is larger by leaps and bounds when compared to similar estimates of the same tonne of carbon emissions.

Now, if people were to be taxed purely upon the CO2 externalities (for fuel, for instance) prices should drop. Of course, we are not taxed purely and solely on that one externality. Theoretically a green tax would also include additional charges for, particulates, congestion, noise and so on.

I’m however, still willing to bet that a pure green tax will be lower than present rates of taxation at least on fuel and transportation. Here’s why, when you pay a flight surcharge, you pay for what the airline gets charged by the government for operating in license costs, regulation, land and so on… you also pay for the service. A pure green tax is, therefore, cheaper but impossible. So much for prices changing behavior.

The assumption behind the green tax idea is simply that we tax the rich more. The rich fly, so airline taxes are huge. Take a look at Indian airports, throughout the city parking rates for cars are either nominal or nil.

At the airport you can choose to pay 120 Rs, for an hour of premium parking or 60 Rs for regular parking. Now that is a hefty user charge. User charges are good things, but not when differentially implemented to tax the rich. It doesn’t work. Consider this, almost every passenger, budget airline or not, carries luggage in India and so comes to the airport in a car or a taxi. All equity is lost.

4. Let’s go back to the IPCC scenarios for a bit. Why is it that the projected savings from a 15 billion people and a global GDP of $ 243 trillion plus a savings rate of 20% is a better idea than other worlds? Something makes me think the reason is simple. The Stern Review chose the lowest future wealth because the discounting make current expenditure look good. To understand what I mean, we need to look at the discounting debate on the Stern Review.

I can’t really explain discounting, the Wikipedia link should be able to do that just fine. Either way the basic idea is that one adjudicates if investments are worthwhile depending upon the discount rate used to evaluate them. It is generally accepted that if the opportunity cost of the investment is its consumption then the appropriate discount rate is what is called the social rate of time preference, if you don’t understand this you can take a look at this.

Now, this depends on a bunch of things;

1. Should society prefer current consumption to deferred consumption because current consumption is now? Several economists argue that this element ought to be set at 0. This is somewhat technical, anyhow what it implies is that Rs 100 of consumption is worth Rs 100 whenever it occurs regardless of time.

2. The other important question concerns the uncertainty about whether future generations will actually gain from the judicious use of resources now. Now this is a question of judgment. Personally I believe this is negligible, because better technology will ensure higher returns to future generations from lesser physical amounts of natural resource. Stern puts this element at 0.1, which by all estimates is rather high.

3. Then there is the question of who gets the Rs 100 to consume. I believe, Rs. 100 is worth more to someone who is poor rather than to someone who is rich. Either way, a parameter to express this value judgment is required. This parameter, which can vary, is then used to project the likely growth of consumption over time. The point of this entire exercise is to see whether an increase in consumption in the future is worth giving up consumption now for, even if those future people are richer, which I believe will necessarily be so.

At this point, there are two things we should remember about discount rates. Future generations will consume at a higher rate and states will plausibly become more welfareist and want to discriminate in the favor of the poor. Either will mean a higher discount rate.

Now, if one were to actually apply this notion to climate change and global warming it suggests that if (and I do) we believe in redistribution, we should definitely give to the poor now than redistribute the rich of future generations! In his brilliant paper, Sir Partha Dasgupta, argues precisely this: The Stern value of the parameter in question implies that we should redistribute from the presently poor sections to those who will be undoubtedly richer in the future, at the very least in relative terms.

If you ask me, I cannot think of a more unethical stance to take!

So what then you can ask me, at the end of this long tirade, can be done about climate change? Well, if you ask me, perhaps the best thing we can do about climate change and global warming is nothing at all. The Stern Review says that baseline economic growth will be twelve times as high by 2200 and I think that is enough. If we’re really concerned about equity, which is the sustainable development tune these days, there is nothing much to do except to make sure that the poor get a bigger slice of the pie, which will happen only when the size of the pie grows. Let capitalism reign, extend globalization and let there be enough and more capacity to generate wealth for everyone.

What makes me uncomfortable and keeps me up well past mid-night writing this is the fact that the climate change debate is no longer a discussion between the global warming skeptics and global warming scientists. It is between an honest reading of data and between alarmists who are all too clearly driven by a political if not economic agenda. I’ll end with this: The Stern Review is a “misguided” and “alarming” piece of research that has “no foundations in either science or economics”- OPEC.

PS. Download and watch The Great Global Warming Swindle, from YouTube or Google Video, amazing watch. There’s a torrent available here too, good quality video- from TorrentSpy so make sure you use an anti-virus after you download.

The documentary is fun, some factual errors but makes for a fantastic intro, especially for a virgin climate change skeptic !! ūüėÄ Happy Watching, pip pip!

For more on Global Warming read NCPA’s policy digest here.

 

Environmental-ism


Sometime ago, I wrote a post entitled ‘Praying to Trees‘, the point I was trying to make then was about turning environmental protection into a religion. Environmental fanaticism is neither new nor pretty, in fact sometimes its clearly off-putting, even for those who are inherently sympathetic to the green cause. Take a look at PC Format’s report on Antony Lewis.

For those of you, who don’t know Antony Lewis is the architect of the rather brilliant and extraordinarily useful freeware utility- WordWeb.¬† I’ve used WordWeb for a long time and quite happily. Perhaps that is why the attempt to sing the green tune by its maker is painful.

Lewis in an interview says, “Climate change is an international crisis. By linking prices to customers’ carbon footprint we can provide an incentive for people to cut down. WordWeb is used worldwide, including in many countries such as India with rapidly expanding economies where awareness of climate change is growing only slowly. Software developers and Internet companies can reach an international audience consisting precisely of those people who are most likely to have unsustainable lifestyles. We hope the new licensing model will increase awareness of the high environmental cost of air travel and encourage people to fly less.”

Sigh. I have several questions, of which the pertinent ones are these: How on Earth are frequent fliers going to be told apart from other users? Unless of course you intend to illegally monitor surfing habits and draw correlation, in which case I would rather unhappily call WordWeb Spyware now. 

I’m all for green incentives, but this really¬†is not one of them! Now if Microsoft were to do something about dirty manufacturing I would understand–but targeting Indian’s who have just about started off with low-cost airlines is a bit much! Here’s the problem, the idea of free software is a commitment to free as in freedom and not a space to push ideology that not all people necessarily buy!

More importantly, daft things like this takes away from the seriousness of environmental movements, that have in the third world much more to do with marginalised communities and subsistence livelihoods as opposed to over-consumption. Skewed incentives, is what it is. Sigh.

Agronomic Afflictions


The budget was out a couple of days ago, most people are excited by the steady increase in the growth rate which now stands at a 9.2%. By all counts, this is a good reason to be optimistic. From a 2% growth just-post independence to a 9.2% is an impressive achievement, especially considering inflation has not been galloping away either.

Despite the reasons for optimism, I believe we still ought to be concerned about Indian agriculture a tad more. The reason statistically is¬†rather straightforward–¬†¬†The agricultural sector¬†still employs 2/3rds of the population, its contribution to total income (GDP) is 1/5th though–¬†roughly about 18%. Contrast this with the contribution of the industrial sector¬†at 27% and ¬†the much celebrated services sector at about 54%.

The contribution of agriculture to India’s GDP has declined from 39% to 22% from 1979 to 2004 and has continued to fall ever since. There are two ways to look at this, the first is to understand that the agricultural sector contributes only so much to the GDP, the second way is to recognise that it also only earns so much!

The reason that this distinction is vital is because, ordinarily if a bigger economic pie was all that mattered, then who contributes how much to a GDP growing at 9.2% is an irrelevant question.

Unfortunately, the size of the pie is not all that matters– in this case it means that 2/3rds of the Indian population earns only 1/5th of the GDP which is the amount of income available to them. Far too little to support 1/5th of a billion plus people!

One of the most important microeconomic principles is; Ceteris Paribus, if you increase a factor of production, output will rise at a declining rate till such time until it absolutely declines. Put that lesson along with the idea that¬†wage rate is equal to¬†the marginal productivity of labour and you’ll see why¬†the Indian agricultural ¬†scenario is a complicated task that needs looking at.

To understandlook at the IT sector in India as against the agriculural sector. Relative to other sectors, capital is abundant in the IT sector, labour on the other hand is scarce. The marginal productivity of labour is therefore high and hence highly paid too. This example holds for all sectors of the economy.

Obviously the marginal productivity of labour in the IT sector is also a reflection and the result of highly skilled labour. The connection between skilled labour and higher wage rates is something that cannot be over-emphasized. The agricultural sector on the other hand suffers from a relative over-abundance of labour.

Indian economic analysis traditionally chooses to ignore two important factors of production- entrepreneurship and land. Agricultural entrepreneurship, unfortunately in India is neither encouraged nor allowed by circumstances. Land is considered fixed in supply. Despite this, one can point out that India has vast amounts of un-arable land, much of which is arable given sufficient capital investment and agricultural R&D.

Assuming that the argument about the relative over-abundance of labour in agriculture holds, one must discuss removing surplus labour from agriculture. To do so one must ponder upon two questions viz. why is there excess labour in the agricultural sector and to where can we relocate this labour?

Neither question is easy to answer. One answer to the causal question is readily provided by the un-skilled labour argument. Moving excess labour to the service sector, where labour is relatively scare and demand for labour is high is impossible- at least till we manage to get universal primary education going and can convert a large pool of unskilled labour to minimally skilled labour.

The answer in the meantime is to perhaps shift excess labour from agriculture to the manufacturing sector that employs semi-skilled labour. What kind of manufacturing sector industry? Certainly not steel and allied industries that require at the very minimum a polytechnic diploma. One industry that meets the requirement for un-skilled and semi-skilled labour is food processing and agricultural products.

The demand for semi-processed and processed foods like ready-made idli and dosai mava, heat-only rotis, pre-cooked pulao and rajmas is increasing. The advantages of the food processing industry are many; the first being that it solves the excessive employment problem in agriculture, it addresses a growing urbane goods demand and most importantly achieves all of this without requiring relocation of agricultural labour from rural areas.

The foremost problem of the farmer is the perishability of his products, food processing addresses this too. Consider this; for any other good a producer can typically wait for the right buyer willing to pay the right price. A farmer however cannot afford to wait for the right price, food processing increases the shelf-life of agricultural products by reducing perishability thus giving the farmer more of a time margin and the ability to bargain price.

Anyone who has ever bothered to investigate the difference between market prices and wholesale prices knows that the differences are huge. The benefits of this difference normally accrues to middle-men operating in the warehousing and storing of agricultural products. By getting agricultural labour to become a part of food processing-the benefits are likely to shift to the farmer.

Having said all this, all is not hunky-dory with food processing. Those of us who argue constantly about the roll-back of the state recognise that in some cases market failure takes place. One such instance is when the private provision of a public good or a service is unlikely. Typically, such goods are roads and other such public utilities whose costs are private and benefits are public.

In this context, setting up food processing industries in rural India and transporting them to their market-urban areas involves a substantial cost. One which the private sector will not willingly undertake. The role of the government then is to then actively encourage such industry and more vitally concentrate on marketing such products.

Eventually the market will take over thanks to the economies of scale. The presence of the government till such a transition takes place is essential, just as Modern Bread was in the bread market until not so very long ago. Perhaps one of the best things that the UPA government has done then is to concentrate on food processing with upto 30% subsidies available along with incentives to set-up food processing industries. I doubt, however, if this is enough.

One way to find out is to understand the role of credit in the agricultural sector. The role of credit is to ease out the difference between periods of income and consumption. This is particularly true of agricultural income, which is available in spurts while consumption is a constant and regular feature.

This fact is better understood in the light of agricultural seasons. All farmers plant in the same season and harvest in the same season. At that particular point in time, supply of agricultural products is high, demand pretty much is what it was (since agricultural products are relatively demand inelastic and necessary goods) which implies that prices fall.

With electricity, the same analogy applies. The supply of electricity is continuous, the demand however fluctuates during the day. With electricity, as is the case with agriculture there is a storage problem. The solution too in this case is to create capacities for greater power supply in times of high demand. To cover this cyclical phenomenon, rural agricultural credit becomes an important issue to tackle.

Now, if the income of farmers rise the benefits will accrue first to corporates in the form of an increased demand for goods and services. Think of this as Engel’s law in practice, with higher incomes the proportion of spending on necessary goods comes down.

The point then is to create such industries that can employ unskilled labour, this is a direct result of the fact that a negative marginal productivity of labour can only mean a rise in productivity in the agricultural sector sans excess labour.

From the capital point of view, if productivity goes up the farmer will borrow and invest in the credit market. This will happen if and only if there is a functional credit market in place.  Historically, money lenders have filled the need for a credit market in rural areas. A money lender though is only the second best alternative to a functional credit market, they represent for the farmer a whole host of  problems not just obscenely high interest rates. Hence, the importance of micro-credit in rural areas.

Spreading out risks between people i.e. insurance is equally important for farmers. The budget now includes new schemes for farmers insurance and rural insurance. Insurance for the farmer is literally a way to avoid debt-traps. A farmer may have had five whole years of good crops and yet be destroyed by one year of poor crop thanks to the lack of access to a credit market and any form of savings. The problem is so critical, that it is a question of survival not just making a living.

Consider the deadly mix that Indian agriculture stands at now; variable rains, no insurance, no credit, fixed land supply, perishable goods and so on. The time is ripe, it appears to me to ensure a sort of safety-net for farmers.

One way to to do all of the above (and perhaps the most efficient since the government does not appear to want to seriously do anything about agriculture) is to corporatise agriculture.

Invite private players to take over agricultural production. Farmers will still be employed by the MNC and farmers can lease their land. The advantages are clear- there is no problem of lack of credit, insurance or marketing that clearly the state faces.

One could ask of course, what about the marginal farmer, the subsistence farmer? My answer is, what is the situtation of the marginal or subsistence farmer now? The state does not care about them in any case, because they do not contribute the GDP in any case. Under an corporatised system, the productivity of a famer might actually be the bridge between subsistence and low profits.

From an ethical perspective, it is completely unfair for 2/3rds of the population to be always left behind in a 9.2% growth. Let the government stand counter-guarantor to land leases. The point is not to replace a public monopoly with a private monopoly or to allow for a cartel to develop and dictate prices– which is why rule of law and a regulatory framework is vital.

One only has to look at why FDI in retailing is opposed in India. The argument is that small business holders will lose out, these are Kinara shops. Let me ask, what percentage of the population are small business holders anyway? There is evidence that Walmart (when it entered new markets) caused prices to drop by whopping 15 to 20% in places, this is a significant benefit to everyone not just the upper-middle class!

Ultimately it all boils down to the Kaldor-Hicks criteria, which says that an outcome is more efficient if those that are made better off could (in theory) compensate those that are made worse off and lead to a Pareto optimal outcome. All public policy benefits one section over another. The art and science lies in juggling the relative priorities. Efficiency as a criterion for social justice suggests that though some may suffer a bit, progress is still progress.

The Indian story of a country with billion strong population, facing severe under-employment in some sectors and over employment in another, is the story of a paradox like no other. How is that for a theory of agricultural justice?  

Animal Egress


I find it difficult to explain why I find nature fascinating. What could be so beautiful about a lobster with a poisonous tail, an armadillo which¬†is a strange shape or the platypus which could be called God’s idea of a practical joke.

I can’t explain adequately why sand and sun are ‘warmer’ than the stuff that cyber-punks live on. The joy of watching an animated ‘sloth’ bear, the sun-sinking over clouds or the spotting the Himalayas after days of waiting for it. These are tranquil excitements (if there is such a thing) and I would only ruin it if I were to attempt to describe them.¬†

One such ‘natural’ phenomena¬†that¬†I find thrilling, though,¬†are mass animal migrations. The Red Crab migration and¬†Wildebeest migration are two such.

Red Crabs are¬†Christmas Island’s most conspicuous residents thanks to their orange-scarlet colour and the fact that are by far the largest of¬†fourteen crab species on the island, each over a 116mm across. Interestingly, Red Crabs like flowers! As is the case with most migrations, red crabs too migrate to breed and they migrate to the sea.

Around October Red Crabs begin a spectacular migration. Like all crabs (and Cancerians) they have a loony tinge to them.  Migration is closely linked to the phases of the moon and the high tide. Take a look at these pictures of the Red Crab migration:

The other incredible migration is an African phenomen. Easily a great spectacle, close to two million zebra and Wildebeest migrate across the Serengiti (grassy plains) into Masai Mara which is now a game preserve. The Wildebeest also called the Gnu (remember fairy-tales?) is basically an antelope of sorts.

 

Its grunts for most part make it sound like a large croaking frog– the migration involves more than eight hundred miles of travel mostly by one particular kind of Wildebeest which sports a great long white beard. A marathon of old men, eh!

Wild


My mother describes me to those fortunate friends of hers who don't know me from her memory of my exploits at thirteen. One such exploit was when I returned from junior school one afternoon with bulging pockets, a stray dog following me that I had christened Wolfy, my left hand grasping a bunch of 'fresh' unidentified green leaves to feed the two turtles that I was holding in my right hand in a bowl of water.

My pockets were bulging with worms. Earth worms that kids squashed mercilessly during the rainy season. They are quite harmless. The turtles were a weekend responsibility from school's nature club. I remember howling when mom dumped the whole pocketful of worms outside. I liked them, I still do.
Then there were times, when exasperated teachers threatened me with dire disciplinarian action if I did not stop scrambling up the Jamun trees in the school's back field. Long afternoons in the lazy winter sun, spent staring at two goldfish swimming around in circles in the school pond that I had just cleaned.

Now I live largely in front of a computer screen, my mind occupied by irrelevant metaphysical queries. It was a my college farewell the other day, some nice bunch of juniors decided they would present me a Croton (I think, I was awful at Botany) as a parting gift. I water my plant everyday. It is beautiful, with zagged edges and green and purple leaves.

A friend of mind told me, that this is what I should be doing. Cleaning out ponds and disappearing amongst large green fronds. I agree. There is so much innocence out there. Really. Take a look at this Wombat for instance, trusting– sometimes more than a baby.

This is for you– the Wombat that is. You know don't you?

Read of the day


For some time now I have talked about market solutions to the ‘environmental problem’– read Kipchoge Spencer’s (of Xtracycle and Worldbike) interview at Grist, discussing a real world for-the-environment and for-profit approach. The Rocky Mountain Institute is also an interesting read.PS: I apparently had been nominated for the Indibloggies….Check out the other blogs on the list, they make lovely reading. By the way, I didn’t know I have a popular tagline! ūüėÄ

PPS: I should probably say a couple of lines on my tagline. So here goes: “Ubi Dubium Ibi Libertas”- mean where there is doubt there is freedom. The bit that says ‘Welcome to the world of the skeptic’ is an addition courtesy moi.

The idea of doubt and freedom goes back to Descartes and ‘Cogito Erogo Sum ‘or I think therefore I am. As you have probably garnered by now I love philosophy (and study it), contrary to the tagline– I am not merely a skeptic, but yes as a contrarian I am very skeptical about most things. ūüėÄ

By the way thanks to Debashish for the bloggies which are a great idea.

Cheers!

Varna