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India! I dare you to be rich

Category Archive: Economics

How a large population leads to prosperity, better health and longer life for everyone

I chanced upon this short essay by Bryan Caplan. This is very topical, particularly for Indians, who tend to be one of the most confused people on the subject of population. This, by the way, is precisely what I say in Breaking Free of Nehru and other writings. True, the population must be well educated. There must be a strong governance system. But population, per se, is a good thing.

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Whenever a baby is born, at least someone has a reason to rejoice. What about the rest of us? Should we join the party, or mutter that the birth of another human being is nothing to be happy about? In practice, we tend to celebrate every particular baby, but grumble about the consequences of babies in general.

The classic grumble is that population growth leads to poverty. When a stranger crashes a party, the invited guests get smaller slices of cake. Similarly, the argument runs, the birth of a new baby, eager for his cut of the world’s resources, helps impoverish those of us who are already here.

This complaint is true in a trivial sense: Babies rarely hold steady jobs but still have to eat. A birth adds a consumer to the world without adding a producer, so as a matter of arithmetic, any child’s arrival reduces average consumption. Still, your infant’s unemployment hardly gives neighbors, countrymen, or the world much reason to complain. Unless your family is on welfare, it’s your problem, not theirs. Parents, not society, give up fancy vacations to pay for diapers, formula, and Onesies.

In any case, babies don’t stay unemployed forever. Those who see more people as a source of poverty are missing half the story: Over the course of their lives, human beings do not just consume, they also produce. Kids eventually grow up and pull their own weight. The world economy is not like a party where everyone splits a birthday cake; it is more like a potluck where everyone brings a dish.

If this seems like wishful thinking, consider: The total number of people on earth and the average standard of living skyrocketed over the last two centuries. The world has never been more populous or more prosperous than it is today. Never. By historic standards, almost everything is cheap. You may wince at the price of gas, but have you looked inside a WalMart lately? They’re practically giving stuff away.

These would be amazing coincidences if population growth were an important cause of poverty. Indeed, it makes you wonder: Is our population a cause of our prosperity?

The answer is almost certainly yes. The main source of progress is newideas. We are richer today than we were 100 years ago because we learned so much. We learned ways for one farmer to feed hundreds of people, we learned how to fly, we learned how to make iPhones. As Nobel Prize-winning economist Robert Lucas puts it, the world’s expanding prosperity is “mainly an ongoing intellectual achievement, a sustained flow of new ideas.”

The magic of ideas is all around us. As a little boy, I typed my first words on my mom’s electric typewriter and corrected mistakes by hand. Now I use Microsoft Word, and I haven’t touched a bottle of Liquid Paper in twenty years. If you put this book down for a moment, the fruit of new ideas is probably right in front of your eyes. If you’re wearing contact lenses or had Lasik surgery, the fruit of new ideas is actually on your eyes.

The sweetest thing about ideas is how cheap they are to share. A million people—or 7 billion—can enjoy the latest discovery almost as easily as a solitary hermit. In fact, ideas often become more useful when more people use them. The Internet was so-so when only one person in 100 had a modem; now we can’t live without it.

Our future depends on new ideas. So how would you respond to a precocious five-year-old who asks: “Where do new ideas come from?” You don’t have to dodge the question out of embarrassment. Feel free to blurt out the scandalous truth: New ideas come from people¬ especially smart, creative people. When you get more people, you get more smart, creative people; and when you get more smart, creative people, you get more new ideas. In the words of economist Julian Simon, “the human imagination” is “the ultimate resource.”

If seven castaways wash up on a desert island, how many will be creative geniuses? On Gilligan’s Island, the answer is one (remember “the Professor”?), but few groups of seven random strangers would be so well-endowed. As the population of the island grows from seven to 7,000 or 7 million, the chance that Thomas Edison, Bill Gates, Beethoven, or the Professor resides there sharply improves. Once you hit a population of 7 billion—as Earth soon will—the island will be home for 7,000 innovators who are literally one in a million.

Now consider: If you had the right stuff to change the world, you might not bother. The market has to be big enough to make creativity worthwhile. If, like the Professor, you have only seven potential customers counting yourself, most innovations won’t pay. Suppose the Professor could spend a year of his life working on an idea worth $1 per person. As long as he’s stuck on the island, he’ll be working for $7 a year. He’d be better off picking coconuts. If the Professor could escape the island and bring his idea to a world market of 7 billion customers, though, it would amply repay a lifetime of research.

It takes a whole planet to sustain the progress that we take for granted. You need smart, creative people to get new ideas, but they’re not enough. You also need armies of customers to turn creativity into a paying job. Creative geniuses are the most dramatic characters in the story of progress. Without a cast of billions of extras, however, the story would be less exciting. Indeed, without the extras, there would be no story to tell.

The world of today is better than the world of yesterday for the same reason: We belong to a much larger community than our ancestors did. The result is the modern world, where great new ideas pop up nonstop.

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Friedman explains the Negative Income Tax in two minutes. And, no, it is NOT a “basic” income concept.

Chanced upon an interview of Friedman by Gary Becker. A two minute extract regarding NIT:

It is very important for those who haven't understood it, to listen carefully:

a) Once implemented, ALL OTHER welfare schemes must be abolished.

b) It is a TOP-UP, not a FLAT amount per person. 

c) It is NOT given to anyone (no matter how poor) till that person has demonstrated maximum desire to earn an independent living within his/her capability. 

In brief, is is DEFINITELY not the same as a "basic" income model being promoted by some lefties and communists.

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A pay-per-click news consolidation platform – request for info

All over the world pay walls are coming down on users. Quality journalism can't be obtained free. Sometimes, people are being forced to watch ads, in place of pay walls.

I was wondering whether anyone knows of (or is developing) a pay-per-click news consolidation platform.

What I have in mind is this:

I as a business (platform provider) work out a deal with all newspapers, magazines and electronic academic journals to market their product to consumers across the world. 

The writer/editor/owner of the article plugs a price per click for the article (it would allow for an extensive array of advanced auction-model based options).

Before each individual URL shows up to a buyer (reader) its price is first visible (say, 1 cent), which the buyer then clicks to go to the article, or is otherwise directed to an advertisement which displays for (say) 5 seconds. The buyer/reader has a pre-paid account. The buyer/ reader logs into the account once and a cookie remains on his/her browser. Thereafter, based on the number of articles viewed, the user’s account is debited.

This will allow a range of options to be created including pay per click for those too busy to wait for ads, or simply not able to spare time to sign up with a different password to 100s of different sits. One password, one login, and get everything. They pay per click.

I’ve got an extensive set of ideas on how to make this work. Essentially it would require the application not only of IT but of some of the most advanced ideas in economics. 

It would also allow writers to be paid based on quality, and would encourge the kind of writing that the market wants. Even private bloggers of quality could choose to go behind a paywall and become a "supplier".  

Would like to know if anyone is doing this or is interested in doing it.

This would become very popular once more and more newspapers/magazines go behind a pay wall. Those who get irritated with ads will thereby be able to read ANY URL they like in the world, without any ad. This idea, if not already developed by anyone/ could become the equivalent of ebay for news. If it works, it is a multi-billion dollar business. That's why I want to know whether this is already in place somewhere.

Google operates a strong economics team to determine its ad system, led by Hal Varian. I've got some ideas about how some advanced economics principles and concepts can be used to make such a platform a great success.

NOTE: Since comments feature is down (due to spam filter not working), please write to me at sabhlok@gmail.com.

ADDENDUM

Vishal Singh has informed me that a preliminary platform exists in this space: https://flipboard.com/

Vishal is doubtful whether such a model will work. Many content providers like newspapers and magazines have found that the only workable business model seems to be ads. He believes this model could be of interest for the long tail of independent providers like bloggers and small businesses.

In this regard, I differ from Vishal, because I believe that once the mechanics of this model are mastered, then a MENU of choices becomes available to providers:

a) Free (like bloggers whose only goal is to spread their message)

b) Free but with ads (like this blog and most newspapers), where the provider (like me) doesn't get his base income from the blog/online news but from something else. Ads are generally grossly insufficient to allow the provider a reasonable return on time.

c) Pay-per-click for each article (at a rate to be separately established for each article) which would allow people who don't want ads or full subscriptions to access the information [this model will also be valuable for organisational subscriptoin which can then be 'sub-let' to 1000 or more employees in one go, achieving economies of scale for buyers].

d) Full online and/or print subscription model.

Slides

download here.

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Rothbard describing Mises’s great sense of humour

I've not paid much attention to Rothbard, but given some positive words from Peter Boettke recently, decided to review his work. Nothing like a talk by the man himself, to get to know him and to understand his views.

This talk is good. I'm a quarter way through it, but came across an exceptionally brilliant take on economists (he is citing Mises whose lectures he had attended in 1949).

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“Kautilya: The True Founder of Economics” – a book by Balbir Sihag, has just been published

Prof. Sihag has written extensively on Chanakya (also known as Kautilya). I've discussed many of his writings on this blog. His book "Kautilya: The True Founder of Economics" has now been published.

Prof Sihag was writing this book last year when he spoke at India International Centre and met a few FTI members.

It is now available here:

http://www.vitastapublishing.com/
http://westernbookdepot.com/product.php?catid=279&cn=

The publisher is making it available also through
Amazon.com
Flipkart
Infibeam
and all online stores.

(Currently it is not available on Amazon, Flipkart, Infibeam).

I'll write more as soon as I get hold of it.

ADDENDUM

Available also here:

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