Waamax

Last week my friend Kunal (second year MBA student) recommended this book: Freakonomics. With the economics on the tag and me being not particularly fan of the subject, was skeptical at first. He eased my hesitation by simply focusing on the name. Freakonomics.

Well I gave it a shot.From the introduction alone I was immediately comfortable as this book has nothing to deal with the hard core economics.

Freakonomics
A rogue economist explores the hidden side of everything
Steven D. Levitt and Stephen J.Dubner

The authors confess at the very beginning that the book has no central theme. After going through each of the chapters you couldn’t agree more. If there is even a central idea in this book then it could be taken as: If morality represents how people would like the world to work, then economics shows how it actually does work.

The book explores the funny side of life trying to answer some questions that might have interesting and even surprising answers.
The book in super summary from the authors:

1. what do school teachers and sumo wrestlers have in common?

In which we explore the beauty of incentives, as well as their dark side – cheating. who cheats? just about everyone. how cheaters cheat, and how to catch them. stories from an israeli day care center. the sudden disappearance of seven million american children.. cheating school teachers in Chicago.. why cheating to lose is worse than cheating to win.. could sumo wrestling, the national sport of japan, be corrupt? what the Begal man saw: mankind may be more honest than we think.

2. How is the Ku klux Klan like a group of Real Estate Agent?

In which it is argued that nothing is more powerful than information, especially when its power is abused.
Going undercover in the Ku Klux klan.. Why experts of every kind are in the perfect position to exploit you.. The antidote to information abuse:the internet..Why a new car is suddenly worth so much less the moment it leaves the lot… Breaking the real-estate agent code: what “well maintained” really means.. Is Trent Lott more racist than the average weakest link contestant?.. what do online dates lie about?

3. Why do drug dealers still live with their Moms?

In which the conventional wisdom is often found to be a web of fabrication, self interest, and convenience. Why experts routinely make up statistics; the invention of chronic halitosis.. How to ask a
good question.. Sudhir Venkatesh’s long, strange trip into the crack den.. Life is a tournament.. Why prostitutes earn more than architects.. What a drug dealer, a high school quarter back, and an editorial
assistant have in common.. How the invention of crack cocaine mirrored the invention of nylon stockings.. Was crack the worst thing to hit black Americans since Jim Crow?

4. Where have all the criminals gone?

In which the facts of crime are sorted out from the fictions. What Nicolae Ceau? escu learned – the hard way-about abortion.. why the 1960s were a great time to be a criminal.. think the roaring 1990s economy put a crimp on crime?.. Think again.. why capital punishment doesn’t deter criminals.. do police actually lower crime rates?.. prisons, prisons, everywhere.. seeing through the new york city police
“miracle”.. what is a gun really?.. why early crack dealers were like microsoft millionaires and the later crack dealers were like pets.com.. The super predator versus the senior citizen.. Jane Roe, crime stopper: how the legalization of abortion changed everything.

5. What makes a perfect parent?

In which we ask, from a variety of angles, a pressing question: do parents really matter? The conversion of parenting from an art of science.. why parenting experts like to scare parents to death.. which is more dangerous: a gun or a swimming pool?.. the economics of fear.. obsessive parents and the nature-nurture quagmire.. why a good school isn’t as good as you might think.. the black white test gap and “acting white” .. eight things that make a child do better in school and eight that don’t

6. Perfect parenting part II or Would a Roshanda by any other name smell as sweet?

In which we weigh the importance of a parent’s first official act – naming the baby A boy named Winner and his brother, Loser.. the blackest names and the whitest names.. the segregation of culture: why seinfiedl never made the top fifty among the blackand low end names (and how one becomes the
other).. Britney spears: a symptom, not a cause.. is aviva the next madison?.. what your parents were telling the world when they gave you your name.

EPILOGUE: Two paths to Harvard

In which the dependability of data meets the randomness of life.

As you can imagine from this summary, the authors talk on such a diverse terms and ask questions that are funny and grave at the same time. But the answers are all based on real data and it’s fascinating to see how they come to the conclusion and the actual cause.

Needless to say all of the answers you answer (unless you have read this book or you think the way Levitt does) will be wrong.

A highly recommended read.

It really is. I mean do you even care if someone has a 5 star home, earns in 6-7 figures every year and have a dozen of BMW’s in their garage? I don’t even care if someone has grandeur fame or zillions of admirers. I really believe that an earned success is not worth it. How can you be successful when you are buried in your work every second and you have to think even before you breathe?

I really hate to be reminded that I should be working my ass off to be one of these so called “successfuls” in my society. Coz honestly it’s not worth it. When I see these “society claimed successful people”, I feel I couldn’t be more correct.

Business men: These so called Richs live on more than 14 hours work a day, less than 4 hours of sleep in the tyranny of their watch with messed up social life, messed up health and even more messed up family life. Give me a break. What’s the use of your millions when you can’t attend your son’s graduation, daughter’s birthday and your wife loves a man and that’s not you? Forget the friends’ get together and festive social gatherings. Do you even remember your children name? What’s so good about earning so much when you have lost almost everything in the process? What good a job you did when you are called a loner, while you find yourself buried in your enormous wealth which you no longer have time and zeal to spend. Take a deep breath. There’s more to life than earning bucks every second.

PhD doctors: If you have an option of marrying a library you would most probably have been married to a dozen of it. Why do you bury yourself with books all the time and do you know what? You have been sitting your ass off in front of this monitor for 8 hours straight. To find the details that don’t interest anyone, not even you? You go to the depths of such extent just to find that it has almost no practical use. And I too know that you have plagiarized your way through your thesis. Does is make any sense to you? I am not interested in this crap which you have apparently wasted almost all of your life researching on. Tell me how you feel. A “Dr” prefix to your name? Not bad. But all the life’s effort and work just for this? Think again.

Medical doctor: They got name and money and are the so called “life saver”. So what? Are they happy? They die every day while savings others life. Where is the pleasure and zeal in living when you found every day cleaning the wounds of everyone except yours? What’s the use of treating all the strangers while you have sickened all those that matters to you? Do you even realize that your social and family life is far worse than the wound you just cleaned? I wish you know the medicine to heal yourself.

Politicians: Ok just tell me what you do best? Let me tell you. You are best at finding the fault in others and making fool of yourself in the world stage where everyone can easily tell how crap you are. And yeah, you are best at fooling and troubling the people who have elected you. Being in so called top position doesn’t make you a top guy. Somebody has to be there. Unfortunately it happened to be you. It could be anyone or anything. how does it feels to talk crap all year, lavish on the money you don’t even deserve to touch, show the big dreams that you don’t even believe, and trouble the very people who have shown you the faith? Get a life.

Actors: Haha. Do you even act? Oh yeah. You act as if you’re an actor. How can you even be self esteemed to call yourself an “actor”. Stop fooling yourself.

This movie is a life cycle of a famed singer – Ian curtis. (He is well known for his epilepsy dance moves too). It is a perfect life cycle of a rock star in a sense that it depicts the born, rise and the demise of a star. The movie revolves around the born of a star, his rise to fame, his music journey, his troubled family life and extra marital love affairs, his mystery illness, and his depression and his tragic suicide in the end.

The presentation is great with some outstanding cinematography. A perfect classic theme is maintained throughout the film. This is greatly helped by the fact that whole the movie is in black and white. Original Ian Curtis songs throughout the film makes the movie musically rich.

A music lover will definitely give an “A”. A Good movie for the other genre of viewers too.

Candle: To fight the load-shed darkness
Notebook: To fight the loneliness
Pills: To fight the injury.

I recently grabbed a Michael Moore documentary DVD “Bowling for Columbine”. Like most of his previous movies, this one is also a real thought provoking one. This movie is primarily concerned about the use of guns and its impact on killings in the United States of America. What’s in the name “Bowling for Columbine“? Moore claims that 2 students, who were involved in the massacre incident in the Columbine High School, went to bowling class at early morning, the day of the massacre. However this particular fact had been controversial as the school claims that those students were absent in the day of killing. But the bigger picture here is about the school homicide that killed a dozen innocent school students.

Moore doesn’t argue about whether it’s right or not to possess guns neither about the gun control measures. He tries to find an answer on what is the reason behind such a large number of gun killings in the country. It’s not just that US has more guns. Comparing to its northern neighbor, Canada too have similar number of guns but the number of killings in US is in astronomical figures. In 2002 alone more than 11,427 people were killed in gun shooting. Moore exploits various sectors to find an answer.

Some Michigan residents state that they have to take care of security themselves. According to some they call 911/police because they have guns. So possess guns yourself and cut off the middle man. Take care of yourself and your family. Moore argues that if having lots of guns the reason for security, then America would be the world’s most secure country. But it’s just the opposite.
Canada has similar number of guns but the number of killings is almost null compared to that of America. Moore even portrays an outline that if you are an American the best thing you can do is to move northwards to Canada for safety, health care, good society etc.

So what exactly is responsible for the exceptionally high level of killing in USA? Not just guns because other countries have guns too. Not just violent history because there are lots of countries which have more violent histories, not just unemployment and not violent movie or video games.
Moore identifies three chief reasons behind the exceptionally high US gun killings.

1) US media: that fans up fear constantly among its citizens.
2) US Government: that solves every problem by bombing everywhere.
3) The US gun culture. Moore pictured it perfectly by receiving a gun for new bank account.

A typical Michael Moore movie which leaves you thinking as the movie ends.

This is most probably one of the hardest times for me. So many things to accomplish and non seems to go as my will. Have to worry about visa reapplication, been injured and resting for 2 weeks now – still 3 more to go, have to complete the MBA math quiz and submit to business school, no idea when can I return to work and no idea at what role I will restart again.

Perplexed. Trying hard to prioritize my responsibilities and concentrate.

Photo: Marbles in Maze inmagine.com

Well at times I really get bored with the everyday norms. Although I hate surprises, I do believe in experiencing a different feel every now and then.

Jack Johnson’s Break down fits almost perfectly.

I hope this old train breaks down
then I could take a walk around
and, see what there is to see
time is just a melody
With all the people in the street
walking fast as their feet can take them
I just roll through town
And though my window’s got a view
Well the frame I’m looking through
seems to have no concern for now
so for now I

I need this
old train to break down
oh please just
let me please break down

Well this engine screams out loud
Centipede gonna crawl westbound
so I don’t even make a sound
‘Cause it’s gonna sting me when I leave this town
And all the people in the street
that I’ll never get to meet
if these tracks don’t bend somehow
and I got no time
that I got to get to
where I don’t need to be
So I

I need this
old train to break down
oh please just
let me please break down

I need this
old train to breakdown
oh please just
let me please breakdown

I wanna break on down
but I can’t stop now
let me break on down

But you can’t stop nothing
if you got no control
of the thoughts in your mind
that you kept and you know
you don’t know nothing
but you don’t need to know
the wisdom’s in the trees
not the glass windows
You can’t stop wishing
If you don’t let go
of the things that you find
and you lose, and you know
you keep on rolling
put the moment on hold
the frame’s too bright
so put the blinds down low

I need this
old train to break down
oh please just
let me please break down
I need this
old train to break down
oh please just
let me please break down
I wanna break on down
but I can’t stop now

Song: Break Down (Jack Johnson)

Plenty of time we hear about teams being one man team. No matter how much you disagree, in most circumstances it does. I hate to say the same for my favorite team Liverpool. Are they the one man team? Well they have proved this season in plenty of occasions that they can in fact thrive even without the presence of talismanic captain Stephen Gerrard, but still the presence of him is immense. The stats never lie.

2008/2009 has been one of the seasons for Gerrard that was disrupted with injuries but still the stats are amazing.Liverpool scored 107 goals during the 2008/2009 campaign and Gerrard has himself either scored or directly assisted 41 of them. Unbelievable stats. He was involved in almost half the goals the team scored all season. That’s what I called an influence.

Back to the one man team. I don’t know any metrics to measure if any team is one man team or not. But it is a fact that teams are more reliant on someone more. Take Liverpool without Steven Gerrard, Manchester united without Christano Ronaldo, Arsenal without Cesc Fabregas, Chelsea without Lampard and they are not just the team without these superstars. They matter more. Their presence and individual brilliance matter to the team performance.

Everybody knows that every team has its unsung heroes but they still fall sort without their superstars.

The policymakers are eager to submit Nepal Development Strategy Paper (NDSP) to the donor community on May 15 in order to entice more aid and investment in the economy. The development strategy paper reflects the core economic and political beliefs of the Maoists government. In the next three years, the government aims to attain an average growth rate of 7.6 percent and reduce national poverty level to 21.5 percent. Additionally, it aims to achieve agricultural and non-agricultural growth rate of over five percent and 8.5 percent respectively.

Like in previous cases, these targets are unrealistic and do not reflect the ground economic realities. It seems the policymakers who drafted this paper are ignorant of labor disputes, power cuts, and loss of competitiveness of exportable goods, among other issues. The strategy paper is unclear about how it will help the economy make a transition to new productive activities, leading to production of goods and services that could be exported with comparative advantage.

It is debatable to what extent the agendas should be changed to make NDSP a consensus document and reflective of the current state of the ailing economy. Whatever the ideological orientation of final NDSP would be, given the critical and binding constraints on economic growth, policies that are consistent with the following strategies, in no particular order, would potentially help attain a moderate growth rate in the coming years.

First, given the geographical disadvantage, domestic policies should be synchronized with India’s and China’s economic policies in order to maximize neighborhood growth spillovers. Statistical evidence shows that the faster neighbors grow, the faster the landlocked country will grow. It has been shown that when neighbors grow at an additional one percentage point, growth of landlocked country raises by 0.4 percent. Also, low income countries tend to grow faster if they export goods and services typically exported by countries substantially richer than themselves. However, it is not realized in the case of Nepal because of the absence of critical complementary factors like transport infrastructure, governance, appropriability of returns to investment and ad hoc arbitrary policies that are often in conflict with prior economic objectives.

Second, rather than exclusively focusing on markets in the EU and the US, policies should be designed to maximize trading with our neighbors, India and China—the two emerging giants in the global economy. Tapping the untapped markets along the bordering states, where the transportation costs are low, by producing goods and services that are within the reach of the people residing there would be a fruitful exercise. The Indian state of UP alone presents a huge market of more than 190 million people, which is seven times the total population of Nepal. Some investors are already taking advantage of these markets. For instance, after loss of markets in the US and the EU, Nepali textile and clothing exporters are now looking at the Indian market. The amount of export of textile and clothing to India increased from NRs 365.9 million in 2004/05 to NRs 1137.3 million in 2005/06. Similarly, aligning tourism policies with that of Tibet could turn out to be fruitful and profitable. Additionally, policymakers should seriously work on designing policies that would project Nepal as a transit nation for trade between India and China.

Third, design policies to entice FDI in transport infrastructure and large- and small-scale hydropower projects. The government could substantially ease regulatory structure, ensure security of returns to investment and consistency of hydropower policy, resolve labor disputes, build grids to enhance connectivity and share risks with the private sector, among others. Given high consumption demand and low supply of electricity, hydropower could potentially be the most beneficial and profitable sector for investment. Convincing the donors and the banking industry to focus on large-scale projects and encouraging domestic enterprises and entrepreneurs to invest in small-scale projects could be an appropriate strategy.

Fourth, to give the struggling industrial sector a breathing space so that they can compete in price and quality in the international market, the government should implement the provisions outlined in Investment Board and SEZ ordinances, which were recently passed by the cabinet. Even though the WTO allows low-income countries with weak industrial base to establish SEZs and GPZs, so far this has not materialized due to political bickering, leading to delay in establishing backward and forward linkages in the industrial sector.

Fifth, the government should facilitate foreign investment in the tourism sector. Increasing visibility in the international tourism market, easing of visa restrictions, ensuring security, and, most importantly, improving tourism infrastructure such as road transport, airways, and ICT would help a lot. Note that in the Travel and Tourism Competitiveness Index 2008, Nepal ranks 116 out of 130 countries, which shows the lack of competitiveness of the Nepali tourism industry.

Sixth, the government should also facilitate foreign employment and inflow of remittances. Not much needs to be said about the role of remittances, which already account for almost 20 percent of GDP.

Seventh, the policymakers should not forget that the high population growth rate is also constraining increase in GDP per capita. Either jobs creation in the industrial sector should be rapid enough to outpace the rate at which youths are entering the job market or the government should initiate measures to lower population growth rate.

These strategies are not comprehensive. However, focusing policies on these strategies would help kick-start the growth engine and attain a modest and sustained growth rate.

Chandan Sapkota
sapkotac@dickinson.edu

In the last day of his role as prime minister, the Maoist premier Prachanda claimed that his administration gave “utmost importance to economic transformation” and made “major contribution to economic revolution”. Unlike his boss, former Finance Minister Dr. Baburam Bhattarai was a bit modest in laying claims about economic progress achieved under his leadership. In assessing the economic policies and progress under the Maoist administration, it is unclear how the dismal performance, especially in encouraging private sector and utilizing development expenditures, amounts to or leads to “economic revolution”.

The most successful and significant achievement of the previous administration was to ensure governance and accountability in revenue collection, which increased by 40 percent in the first ten months of the current fiscal year, for which credit goes to Dr. Bhattarai’s policies on taxation. Given the institutional intransience for good governance at customs and government agencies, many people, including myself, were skeptical about revenue targets of Dr. Bhattarai, who, with good leadership and ‘carrot and stick’ approach, was able to beat all pessimistic expectations. Under his leadership, the Inland Revenue Department was more vigilant than ever in curbing leakages, streamlined and cleaned up the mess in the department, and offered extra incentives to customs personnel for better performance.

The other commendable policies initiated by Dr. Bhattarai were loan waiver of heavily indebted farmers and the Youth Self-Employment Program (YSEP). These programs were well-intentioned but the execution was not all that clear. Overall, the huge demand for loans by youths and partial relief received by some of the poorest farmers was worth the policy experimentation.

Not all the program and policies of the previous administration were productive. The drive for more revenue generation and implementation of VDIS led to savings flight as nervous investors and savers searched for safer vaults abroad. While this policy was unpopular in the business community, the government, instead of trying to find a common path, wasted more than three months going head-on-head against the businessmen, whom it saw as “feudalist and bourgeois classes”. At a time when there was a desperate need for normalization of tension between the private sector and the government, this incident led to souring of relationship and fostered distrust between the two.

Fond of making bombastic, populist and unrealistic claims and a tendency to look backwards in the age of globalization, the Maoists government miserably failed in convincing the private sector, foreign investors, and development agencies that their Marxist/socialist model was worth trying. Filled with pompous slogans, socialist ideas and the aim to develop “national capitalism”, Dr. Bhattarai’s budget was not well received by the private sector. They, along with the development agencies, repeatedly asked him to be clear about government’s position on the role of private sector and in general the economic system. Trying to treat private sector and cooperatives in equal footing by bringing Investment Board and Cooperative Board under the Economic Council was probably the most dubious plan. Instead of streamlining of disaggregated economic activities, it led to more chaos and confusion in the industrial sector. Also, the plan to revive moribund, sick industries with the aim of increasing employment and channeling their production for government’s use was a blunder. The drumbeat of double-digit growth rate without assessing ground realities and workable economic policies perplexed people.

The most devastating and counterproductive policies were to let YCL make a mockery of contract enforcement, destabilize the already feeble industrial sector, and turn a deaf ear to dire call for industrial security. By implicitly supporting the activities of its militant cadres, the Maoist administration showed double standards in dealing with the private sector. Some of the Maoist ministers even endorsed and defended the extralegal occupation of industrial districts by YCL cadres, forced donation campaign, and threat to life and property of businessmen, whom they see as ‘feudalists’. The government engaged in multiple rounds of discussion with businessmen but did not budge on the call for disciplining YCL cadres and taming disruptive activities of trade unions. This led to closure of several garment firms, jute mills, and multinational companies, among others. The Maoists administration backtracked only after it was threatened of noncooperation by the opposition parties; it was not because it was responding to the concerns of the private sector.

Later on, the Maoist government was busy cleaning its own mess. Too focused on controlling and finding a way out for its disruptive cadres, it was helpless in supplying the most needed essential services in rural areas. For instance, it was powerless when more than one-third of the population was under the threat of starvation at the height of the global rise in price of food and commodities, and when major forests were on fire. Moreover, the government also did not do enough to manage safe return of IDPs.

With regards to macroeconomic management, the administration’s performance was very disappointing. The price level initially rose above 14 percent due to rise in food, fuel and commodity prices in the global market. However, as prices of these items declined globally, they were too sticky in the Nepali market, leading to inflation rate of above 10 percent. The government was unable to manage shortage of goods, which was created artificially by holding back inventories. The export sector continued to lose its grip in international market and trade deficit is rising. The supply of fuel was severely affected due to frequent closure of the main highway linking the Valley and Terai. The government had to bail out cash-strapped, debt-ridden NOC two times. Still, the nation lacks a plan to close big hole in NOC’s balance sheet. On top of that, there is no immediate plan to bridge the wedge (of 500 MW) between demand for and supply of electricity in the economy. Worse, domestic and foreign investors are not yet convinced of secure investment, rule of law, and respect for property rights in the infrastructure and hydropower sectors.

The Maoists also failed to mobilize development expenditure, leading to very few development programs being implemented—a point even Dr. Bhattarai has conceded. So far, only 27 percent of total capital expenditure has been spent. Meanwhile, achieving the targeted economic growth rate is now a fairy tale!

The economy is far from being transformed. There were some successes in revenue collection and welfare programs. However, there were even more problems– industrial relations deteriorated, allocated development money remained unspent, investors and donors remained skeptical of Maoists policies, price level spiraled upwards, and there was a severe shortage of energy, which further crippled the industrial sector, among others.

Chandan Sapkota