Wednesday, August 31, 2005

When the Levee Breaks 

This image from the Times-Picayune says it all. Almost all of New Orleans is now under water.

The mayor of New Orleans has just announced that hundreds, maybe thousands have died in the city alone. City officials are contemplating a total evacuation of the city. This after everyone assumed that New Orleans had actually dodged the bullet this time around.

If you'd like help people devastated by Katrina, head over to the Network for Good. Some of the folks who helped with the Tsunami Help Blog now have a Katrina Help Wiki up and running.

Andy Carvin has set up a blog/public gallery: Katrina Aftermath.

Instapundit has the most comprehensive list I've seen thus far of places you can donate to.

The rarely used Lost and Found section on Craig's List, New Orleans is now full of posts and gives you some idea of the human cost of this tragedy.

UPDATE: I never thought I'd live to see the day President Bush put out a call to all Americans to conserve gas.

Premji planning a Gates? 

One of my pet peeves in the past about Indian industrialists was their complete disdain towards charitable giving, the Tatas being the major exception. This situation changed quite a bit in the 90's with the arrival of the technology titans, who picked their cues from their American counterparts whose charitable giving is legendary. Of course, the estate tax in the U.S. acts as a real incentive for the rich to burnish their legacy rather than hand money over to the federal government. It looks like SEBI's new directive to firms to offer at least 25% of their shares for public trading may have an unintended consequence, besides of course being a boon to investors. Azim Premji, the richest Indian resident is considering offloading some of his shares in Wipro.
Premji didn't give a timeframe to cut his stake, but indicated it would depend on technical interpretations of the new rules and his monetary commitment to the Azim Premji Foundation, which provides education to poor children in rural India. "We are giving a lot of money to the foundation," he said.

Bill Gates has set the benchmark for charitable giving by offloading some $30 billion of his personal wealth to the Gates Foundation. As has been pointed out on this blog several times, the work done by the Gates Foundation in public health (especially with HIV and the vaccine initiatives) is without parallel. Now, Premji does not have that kind of money to throw around, but even if he decided to give away 10% of his wealth (approx $10 billion) to promote rural primary education in India, it would make a HUGE difference, if targeted well.

PS: FYI, IRS regulations in the United States require a Foundation to give away the equivalent of 5% of its endowment every year to maintain its charitable status. That's 5% of $30 billion every year for the Gates Foundation. I don't know what the rules are in the Indian tax code, but I presume it's something similar.

Tuesday, August 30, 2005

Random question du jour 

Fill the last blank, and explain why: The Beatles, The Who, The Band, -------

Just like that.

Sunset over Katrina's eye 

Here is an absolutely stunning picture of the sun setting over the eye of Hurricane Katrina, courtesy of a Flickr user who is part of the RAINEX (hurricane rainband and intesity change experiment) project. The picture was taken on August 28th from a NOAA-43 hurricane hunter aircraft, using a Canon PowerShot A300.

From a set of Flickr weather geekery pics by Mysterious Chicken. More impressive pictures there. Better resolution too. So, head over.

Via Boing Boing. Where else?

UPDATE: NOAA has some pics as well.

Monday, August 29, 2005

Desmond Morris and Naked Women 

I haven't read a Desmond Morris book in a long, long while. I used to be a fan of his books growing up, especially of Naked Ape, Bodytalk and Human Zoo. The New York Times weekend book review informs us that Morris has a new book out, called The Naked Woman. If one is to go by Helen Fisher's review, Morris has written yet another interesting book, this time about why and how the female body came to be, especially from an evolutionary perspective.
Women's everted lips are a good example of neoteny, the extension of childlike characteristics into adulthood, an evolutionary process Morris returns to frequently throughout the book. Women have more neotenous physical traits than men do. For example, pound for pound the average adult woman has about twice as much body fat, an infantile trait, as the average man. Women also have higher, more childlike voices and smoother, more finely boned baby faces, traits that Morris maintains evolved to elicit protective responses in their male mates.

In an age when many educated people resist the voluminous data on the biological variations between the sexes, Morris's unapologetic description of myriad gender differences is refreshing. Perhaps most important, Morris reiterates an anthropological tenet: for millions of years [ed: millions?] humankind lived in societies where women and men were regarded as different but largely equal. Today women in many cultures are gradually returning to their ancient human status. And in a time when some people question the concept of evolution, Morris's book gives an elegant view of nature's timeless evolutionary processes and one of its most sophisticated creations: woman.

Subscribing to Zoo Station via FeedBlitz 

Picking up the cue from Fred Wilson, I have installed a new service by FeedBlitz, which lets you subscribe and read this blog via e-mail. I had considered using Bloglet earlier, but heard too many people complain about its reliability. So, if you don't susbcribe to ZS via Bloglines or some other aggregator, but would instead like to read ZS in your inbox, consider subscribing to my FeedBlitz service.

I am using my Atom feed for FeedBlitz, but if any of you think Feedburner is better, please let me know. Similarly, if any of you subscribe via FeedBlitz and have problems having ZS delivered to your inbox, please let me know. This is all very beta stage right now.

Sunday, August 28, 2005

Guest post -- Is the Housing Bubble Common Knowledge? 

This is guest post by my friend, Steve Stohs, who is an economist at NOAA and a professor at UCSD. Steve, who is the most astute observer of the housing market I know, has been arguing that it is indeed a bubble and one that could burst soon, a bust that will have worldwide economic consequences. In the light of Alan Greenspan's comments at Jackson Hole about the bubble, this is a very timely piece. Yes, it is long, but is a must-read for anyone that cares about the global economy.

With the publication of two New York Times Op-ed pieces last week in the span of four days, Paul Krugman recently disseminated his view that the US housing market is in a bubble which, if not destined to pop, will at least hiss its way back down to size in the foreseeable future. Alan Greenspan, while still unwilling to mention the housing bubble by name, nonetheless issued dire warnings of the present risks in the US housing market at the Kansas City Federal Reserve Bank’s annual retreat to Jackson Hole this past Friday. Economists who were inculcated in graduate school with the rational expectations paradigm may wonder at this point whether "everyone" knows about the housing bubble and is in the process of adjusting their consumption and investing activities to reflect the risks inherent in the status quo.

Recent evidence I have seen suggests that, to the contrary, a majority of Americans are clueless, and are easily misled by the chorus of industry spokesmen who promote information that is deliberately intended to mislead. For instance, a recent Parade Magazine reader poll found 60%+ of respondents think that buying a home under current market conditions still represents a "good" investment. Many San Diegans do not have the faintest idea that there is anything atypical about double-digit real price increases year after year in the values of their homes -- they accept on faith the Realtor's various assurances: this is a great time to buy a home, prices in CA only go up, buy now or you will be forever priced out of the market, etc.

Only if one looks beneath the placid surface and pays attention to a multitude of extraordinary factors does one get the picture that a correction in housing is all but inevitable: (1) the explosive growth in Fannie Mae and Freddie Mac's share of the US mortgage market and its implications for eroding credit underwriting standards, (2) the historically high real price levels of housing in terms of price-to-rent ratio or price-to-income ratio, (3) the explosion (at least in CA) in the use of unsustainable creative financing strategies (I/O option ARMs, etc.), (4) hints of recent efforts at the Fed to cancel out the tsunami of speculation which they fostered in the early 2000s by dropping real interest rates to negative levels over an extended period of time, (5) the revelation from the National Association of Realtors that an estimated 36% of homes bought in the US during 2004 were second homes purchased for vacation or investment purposes (aka speculative purchases), and (6) the removal of the Chinese Yuan dollar peg, which should reduce future demand for Chinese government purchases of US government debt and mortgage backed securities. The above concerns have only recently emerged from the quiet discourse of elite policy circles into the bright spotlight of the popular financial press. Cocktail party discussion of capital gains on residential real estate investment have been quelled by a flood of popular media articles about how soon the housing bubble may burst, and how to protect oneself against the risk.

A correction appears to already be underway in the San Diego housing market – in my area of town (Rancho Bernardo / Poway) multiple "Open House" signs have sprouted up like weeds every recent weekend near the entrance from major traffic arteries into any and all housing tracts. Then there are the tiny but numerous “For Sale” signs which, on close inspection, appear on many lawns (small signs are less conspicuous, diluting the impression that many people are suddenly trying to cash out of their “investments”).

The inventory of San Diego homes for sale is currently at five times its level of eighteen months ago and steadily rising. Further, recent inventories have surpassed more than 75% of the decade long record of 19,280 homes on sale in July 1995, and appear to be on track to surpass this level in the near future given their current rate of increase. This is particularly ominous, as by 1995, Southern California prices had experienced several years of softening prices in the wake of a brutal recession. By contrast, the current rapid growth in inventory comes amid widespread economic optimism only slightly dampened by doubt over the recent slowdown in the housing market. Considering that this town is one of Paul Krugman’s so-called "Zoned Zones" where available land for residential development is highly limited, there are a phenomenal number of new single family homes and condominiums currently under construction which will soon swell the supply of homes for sale.

What appears to be the start of a correction may well go unnoticed to your typical San Diego home-buyer who can somehow stretch his household finances to purchase a house with a 100% financed interest-only option ARM loan in order to enjoy the prospect of making himself rich through double-digit future capital gains. Until the vast majority of area owner-occupant buyers and real estate investors have collectively realized that prices have stopped rapidly going up, we cannot conclude that the ultimate impact of any shift in market conditions has even begun to play out.

How is the unraveling of this bubble likely to occur? Initially the demand side of the market reaches a point of exhaustion, as there are no further creative financing tricks available to stretch budgets to afford new, ever higher price levels, and no affluent buyers left who are foolish enough to imperil their net worth by buying at a market top (this is where I believe we are currently). A slowdown in the rate of price appreciation merely initiates the adjustment process.

What ensues thereafter is a self-fulfilling prophecy for future price declines: A widespread awareness develops that prices are not going up anywhere near as fast any more. Next estimates of the value of owning a home are adjusted downwards to reflect lower anticipated capital gains from ownership. At this stage, recent speculative buyers have no further incentive to stay in the game, as their willingness to continue owning a property is predicated on an expected future capital gain sufficient to offset negative current cash flow.

The distortionary impact of "investing" activity shifts from the demand side to the supply side of the market. Inventory jumps, demand falls, and appreciation rates drop another notch, leading to a further downward revision to estimated future capital gains and, by extension, market values. Another vintage of speculative buyers now finds it more advantageous to sell than to hold on. This death spiral continues until it is widely understood that houses are not much better investment choices than stocks were circa 1999. At that point it may be worth considering houses as long-term investments once again, although reference to the Japanese housing market experience since the early 1990s shows that the next upswing can some times take many years to materialize ...

To fully gauge the risks of the housing bubble on the wider economy, we have to reckon with the large number of new jobs in the private sector in CA and other parts of the US created since 2001 in real-estate and related sectors, estimated by a recent Lehman Brothers study at over 70% across the US, and IMHO much higher in CA. (Lehman Brothers seem fond of the 70% figure, as that is also their estimated proportion of the rise in US net worth since 2001 due to surging home values.)

When the bubble deflates, the need for all these recently added jobs in the real estate sector will evaporate. This problem will be compounded by the incipient end of consumption spending fueled by cash out home equity financing. The US savings rate recently fell to 0%, and income has grown rather slowly in recent years, but homeowners nonetheless have been converting their home equity “savings” into consumption spending on Hummers, BMWs, SUVs, boats, and Super-sized McMansions. The argument that the housing market is protected from a serious downturn by a cushion of home equity appreciation seems highly questionable under the circumstances.

This spending is psychologically fueled by the Wealth Effect: appreciation on the value of long-term assets (stocks, bonds, and houses) whose values have risen inversely to the steady drop in long-term interest rates since 1982 makes US households feel richer, and thus freer to spend large sums of money on big ticket luxury items. Over fifty years of persistent (post-WWII) U.S. asset price inflation has inspired a folklore that the path to riches is to buy long-term assets and hold on, buying the dips if prices ever drop, since prices always go up over the long term. Few Americans seem to recognize that the deflation in asset prices which has occurred recently in Japan and historically in the 1930s and earlier periods in the US could ever recur.

Gone is the incentive to work hard and save money for the future, replaced by the realization that by borrowing or buying assets and holding on, we can all live in McMansions and share in the bounty created by the mass entry of cheap but highly skilled Asian labor to the global marketplace. With a critical mass of believers adopting this view, risk premiums on long-term assets have sunk to the point where yields are extremely low by historical standards. Only a continuation of high rates of capital gains fueled by steadily declining long-term interest rates could allow this trend to continue. But with soaring oil and gold prices screaming out of the headlines, and burgeoning levels of household, municipal, state, federal, and trade debt, what reasonable person can believe that inflation fears might not come out of hibernation soon?

Surging commodity prices against the backdrop of high debt levels place our government economic policy makers in a difficult position. Should they choose the politically unpopular course of higher taxes and lower spending over the temptation of whittling down the debt by sneaking in slightly higher future inflation rate which could eat away the debt through the magic of negative exponential growth? Casual empiricism leads some of us to wonder whether official inflation statistics might be somehow hiding inflation which is already underway, given steep increases in the costs of shelter and fuel which are large components of household consumption expenditures. If global debt markets catch even a whiff of higher inflation, they could punish the US bond market with higher interest rates as the inflation risk premium on long-term assets reverts to historical norms, bringing down the housing and stock markets in the process. Under a status quo continuation of the low rate conundrum, the US might retain low long-term interest rates at the risk of drowning under the weight of its future debt obligations.

The housing market is inherently inefficient, and the equilibrium adjustment process is glacially slow -- a far cry from the instantaneous equilibrium adjustment to new information envisioned by Efficient Market theorists. Your average US residential home buyer has neither the financial sophistication nor the long-term perspective on financial history necessary to weigh various conflicting opinions about whether a speculative mania has taken over the US housing market. Although even top officials at the Fed claim to be unable to answer this question except in retrospect, Alan Greenspan has become increasingly supportive of a precautious approach, and has repeatedly attempted in recent months to alert the public to the risks they face with progressively dire scenarios for the worst case which may ensue. The last time CA real estate hit a trough of affordability anywhere near as bad as the current one (1989), it took over six years for the Southern California market to bottom out. As valuations are much farther out of line with fundamentals this time around, it is hard to predict how long the correction will last, except to say that historically, larger bubbles have led to longer periods of correction. Only after this correction is well underway will the housing bubble truly become common knowledge.

More Commie Hypocrisy 

Not that we needed further proof, but here is yet another story in the Indian Express that exposes the Left's profound hypocrisy in India, especially the national leadership's attacks on the marginally progressive CM of Bengal. What's their beef with him this time?
He’s talking to the Salim group of companies in Indonesia, known for its links with former President Suharto—in whose regime thousands were murdered—for setting up an industrial park in Kolkata. The comrades obviously don’t want facts to confuse them. For, what they ignore to see is that China, where several CPM delegations are making ‘‘study trips,’’ has opened its doors to Salim group—and rolled out the red carpet. Today, the Salim Group is building a ‘‘five-star world plaza” in Shanghai, It’s also building hotels, developing property and constructing model dairy farms in China.

Not just that, Salim owns a part of COSCO, a company where every director on the board is a Communist party functionary. If the Suharto-tainted Salim group is good enough for the Chinese, it is surely good enough for our Indian comrades. In China’s case, the fact that Suharto’s gangs killed ethnic Chinese should have made matters worse than for our Indian friends.

Maybe it's time for the PM to consider appointing Sitaram Yechury and Prakash Karat as Indian ambassadors to North Korea and Cuba respectively? How else do we get rid of the menace of the national leadership of the Communist Party? Clearly, they can't be voted out of office since they were never elected into office, in the first place. The buggers!!

Cross-posted to The Indian Economy Blog

The Chris Hitchens takedown 

Christopher Hitchens was an amusing polemicist right through the nineties, best remembered for his scathing criticism of Henry Kissinger and Mother Teresa. Since 9/11 though, Hitchens has come completely unhinged and has lost touch with reality in a way that would make Donald Rumsfeld seem sane. With all the fervour of the newly converted, he has gone around accusing anyone who disagrees with President Bush of being unpatriotic and worse. And for the most part, Hitchens gets away with calling skeptical Americans names.

Until he ran into Jon Stewart last week, that is. Now, I've always known that there is tremendous political astuteness hiding under that self-deprecatory humour that Stewart employs to such great effect. Even so, I was surprised by how effectively he dealt with Hitchens' arguments. I think you owe it to yourself to head over to the Daily Show site and watch the full clip of the Hitchens takedown. The fun begins about 7-8 mins into the clip. As Alex Tabarrok puts it, "Hitchens knows he has been beat and can hardly wait to escape at the close."

Saturday, August 27, 2005

Blog du Jour: DesiPundit 

This is a blog I ought to have linked to a long while back. DesiPundit is the Indian blogosphere's answer to Instapundit. Patrix, Ash, Kaps, Vulturo and Vikram do an amazing job of aggregating the best content from the Indian blogosphere. So, when this crew requests you to share the love, you just do it. Make sure you add DesiPundit to your daily diet. It's the best way to keep up with the Indian blogosphere.

Proof of god's existence 

Here's a page that offers 300+ proofs of god's existence. They include
(1) Eric Clapton is God.
(2) Therefore, God exists.

(1) We cannot prove that we don't live in a Matrix-like world.
(2) Therefore we cannot know reality.
(3) If reality is contingent, then everything is possible.
(4) Therefore, God exists.

(1) This pizza tastes funny.
(2) That purple llama on the ceiling is juggling chainsaws.
(3) Purple llamas can't juggle chainsaws.
(4) It must be a miracle!
(5) Therefore, God exists.

Friday, August 26, 2005

The Taliban in Bangalore? 

Nitin/The Acorn has been making a few posts on the funny new laws being enacted by the Bangalore city government to prevent the sale of alcohol after 11:30 pm. The new laws tip from being funny to utterly ridiculous with its ban on dancing, and insistence that classical music be played to prevent people from dancing into the wee hours. This is in Bangalore, which is currently laying claim to being a cosmopolitan and international city. And you can always trust the city government officials to sound super-sanctimonious:
‘‘The new law is for the good of the people. Why should people stay out late and spoil their own health. We have spoken to a lot of people and learnt that the law has not affected them,’’ says Deputy Commissioner of Police (admn) B Shivakumar.

Well, Shivakumar needs to understand something about a liberal democracy, which India claims to be. Part of the idea is to protect the minority (yes, those immoral dancers) from the tyranny of the majority. Covering up for the fact that the Dharam Singh government is incapable of doing anything constructive, like build real infrastructure for example, by going after people out to have some fun is not going to fool anybody. Despite all the economic progress in India, the babus who continue to be the self-appointed paternalistic guardians of Indian morals and values don't seem to understand the need to stay the hell out of other people's lives. Maybe they don't because they don't understand that morality is a highly relative concept.

These bureaucrats need to have a reading of John Stuart Mill's On Liberty introduced as part of their job requirements. Maybe that way, they will understand the concept of the harm principle, which is one of the cornerstones of a liberal democracy.
The sole end for which mankind are warranted, individually or collectively, in interfering with the liberty of action of any of their number, is self-protection. That the only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others. His own good, either physical or moral, is not sufficient warrant. He cannot rightfully be compelled to do or forbear because it will be better for him to do so, because it will make him happier, because, in the opinion of others, to do so would be wise, or even right... The only part of the conduct of anyone, for which he is amenable to society, is that which concerns others. In the part which merely concerns himself, his independence is, of right, absolute. Over himself, over his own body and mind, the individual is sovereign.

So, the babus could argue that drunken revellers impose an externality on others, thereby causing harm to them. Even assuming this is true (and I don't know this for a fact), surely there are more market-oriented ways to deal with this than an outright ban? What might work?

Assuming there are very high social costs to people getting drunk, how about bars increasing the price of every additional drink? Your third drink will cost 25% more, the fourth one costs 50% more and your sixth costs twice as much as the first. Of course, there are just random numbers. You can insert whatever numbers you like there, but the question is will this form of taxation prevent over-drinking? Or will it turn out to be too difficult to enforce? Is it even warranted if we can instead enforce the concept of designated driving (because drunk driving is a sharp violation of the harm principle)?

If it is warranted and does work, it will generate additional revenues for the government through taxes, which in turn will offset the costs of additional policing. It will generate additional revenue for the bar, which it can use to clean up the vomit. It will give at least some revellers pause because of the increasing prices. What other ideas do you, dear reader, have in terms of market-based solutions?

While on the subject of liberalism, let me also turn your attention to Kaushik Basu's new piece on the Beeb, which calls for increased social progress in India, especially vis-a-vis the gay community. IPC 377, which actually decrees that homosexual acts are punishable offences owing to their criminality, is a law that has always baffled me. The moral crusaders insist that homosexuality is a foreign import. In fact, IPC 377 (enacted by Macaulay) is the foreign import, while homosexuality was always part and parcel of Indian sexuality. Britain herself abandoned her equivalent of 377 sometime in the 50's or 60's, so why on earth do we persist with it? Once again, if we invoke the harm principle, what possible harm does a homosexual couple inflict on anyone else? Just because you don't like it does not mean you can infringe upon someone's else's rights. Like Basu, I too hope that IPC 377 will be amended soon and that the liberal in liberal democracy will finally mean something real and concrete.

PS: I agree with Nitin that the government is barking up the wrong tree when it comes to dancing. If alcohol imposes a social cost, find a way to deal with it. I can see no social costs, however, to someone dancing the night away in a night club. It simply is not the government's business at all.

The cellphone revolution 

Stories about the impact of mobile phones on the economic development process (the topic of my dissertation research) seem to be multiplying in the media. Yesterday, the NYT carried a long story on the subject by Sharon LaFraniere, reporting from South Africa.
From 1999 through 2004, the number of mobile subscribers in Africa jumped to 76.8 million, from 7.5 million, an average annual increase of 58 percent. South Africa, the continent's richest nation, accounted for one-fifth of that growth. Asia, the next fastest-expanding market, grew by an annual average of just 34 percent in that period.

Africa's cellphone boom has taken the industry by surprise. Africans have never been rabid telephone users; even Mongolians have twice as many land lines per person. And with most Africans living on $2 a day or less, they were supposed to be too poor to justify corporate investments in cellular networks far outside the more prosperous cities and towns. But when African nations began to privatize their telephone monopolies in the mid-1990's, and fiercely competitive operators began to sell air time in smaller, cheaper units, cellphone use exploded. It turned out that Africans had never been big phone users because nobody had given them the chance.

Isn't it amazing how this sounds exactly the Indian experience, where mobile phones were deemed to be a rich person's plaything and taxes and duty structures were imposed accordingly? The first phones in India cost in excess of Rs 40,000 (1995 prices) and calls were billed at Rs 16.5 per minute for incoming and outgoing calls. Obviously, at those rates, the device could be nothing but a rich man's plaything. Once the telecom sector was deregulated post-1999, there has been explosive growth. On the 10th anniversary of the introduction of mobile phone services in India (on August 23rd), the user base was at about 59 million.

In India, as in Africa, the problem going forward, as mobile services expand into rural markets off the electricity grid, will be how to effectively recharge the phone. My personal take is that it opens up a secondary business opportunity for entrepreneurs willing to collect cellphones from a large number of users and recharging them either off a car battery or from a location that is on the grid. And if all else fails, there's always Peter Ash's revolutionary new cellphone charging technology.

Public Service Post: Ghumo.com 

ContentSutra points to a new website, Ghumo.com, that lets you trawl through bargain-basement air fares on the domestic sector in India. Currently, the site supports Indian Airlines, Jet Airways, SpiceJet and Kingfisher Airlines (no Air Deccan) and a cursory search gave me some pretty decent airfares on the Bom-Blr sector. Their business model seems to be based on a revenue share agreement with the airlines, since customers can use the site for free.

For international travel to India, the two best websites I've seen are the ubiquitous Makemytrip and Mobissimo. If you have any additional suggestions on either domestic or international travel, please add value in comments.

Wednesday, August 24, 2005

McKinsey quarterly interview with Manmohan Singh 

Rajat Gupta, the former CEO of McKinsey, sat down with PM Manmohan Singh for an interview the day after his Independence Day speech. While reading Singh's extremely well articulated views, a couple of things stand out. Manmohan Singh does not need lessons from any of us on what needs to be done to unleash the full potential of the Indian economy. He knows what is required, except he is hamstrung by political realities (witness the number of times he talks about the CMP and pressures from the Left). A lot of us tend to forget this fact when we get frustrated with how slowly the reform process has moved in the past year. Singh also specifically addresses some of the economic bottlenecks India faces.

Work is in place to ensure that our road system is modernized. But our railway system also requires massive investments. We are working with the Japanese government to draw up a program in which the freight corridors between Mumbai–Delhi, Mumbai–Chennai, and Delhi–Kolkata can be modernized. Our estimate is that that will cost about 25 thousand crore of rupees [$5.7 billion], and that's our high priority as far as the railway system is concerned. We need to modernize our airports in a big way. Already plans are under way to modernize and expand the airport facilities in Delhi, Mumbai, Hyderabad, and Bangalore. We also are now in the process of modernizing our seaports. Privatization, public-private partnerships, and new initiatives have been tried. My own estimate is that we need an investment of about $150 billion in the next seven to eight years to realize our ambition to provide our country with an infrastructure which is equal to the economic and social challenges that we face.

We are a coalition government, and that limits our options in some ways. Privatization happens to be one such area. As somebody said, a politician before he can become a statesman has to remain in office long enough. So we have to make those compromises. As far as profitable public enterprises are concerned, especially those which are doing exceedingly well, we don't see that they have to be privatized. But these enterprises, if they want to raise resources for their own expansion, they are free to go to the market. The Common Minimum Program, which is the benchmark for us to assess where we want to go, talks about the navratnas. These navratnas are companies essentially in the oil sectors, the power sectors, which are doing really well and, other than going to the market to raise funds for their own expansion, our options are limited by what is stated in the Common Minimum Program.

Labour reforms
When we talk about labor reforms, we are essentially talking about 10 percent of our labor force, which is accounted for in the so-called organized sector. Outside this 10 percent, for the 90 percent we are a completely flexible labor market. The normal laws of the market take precedence. Even within this organized sector, the problem is most acute in the public sector. In the private sector, most people tell me that they can find ways and means of working out voluntary agreements with the trade unions, whereby necessary labor flexibility can be introduced. In the public sector, we have rigid laws, and therefore there is this problem.

Extreme rigidities in the labor market, inflexibility of the labor market, is not consistent in our achieving our goals in a world where demand conditions are changing so fast, technological conditions are changing so fast. But there are limitations for the time being. We don't have a broad-based consensus in our coalition for me to assert that I can move forward in a big way. But I do recognize that we should take credible action. Our colleagues who are in government in West Bengal . . . do appreciate the need for labor market flexibility. It is my task to carry conviction to our Left colleagues in Delhi.

Read the whole thing. It's excellent.

Cross-posted to The Indian Economy Blog

Google pushes forward with plans for world domination 

Earlier this week, they announced the arrival of the new, improved Google Desktop, which probably means Google is moving ever closer to an OS-type system. All the bandwidth this week, however, has been saturated by Google's latest challenge to AOL, Microsoft and Yahoo: Google Talk, the new communications tool that bundles Gmail with an instant messaging system. The good news with Google Talk is that it sports a clean interface, is a quick download, doesn't have unnecessary clutter and provides exceptional voice quality. What's more, the software (which runs on a Jabber server) is based on open standards and will work with GAIM (instructions here), for instance. I haven't tried it with Trillian yet, so I don't know.

However, I have to say this is the first Google product that didn't absolutely floor me. There are just too many things that one is used to that Google Talk does not provide. For starters, it can't be used on a Mac or a Linux machine. It doesn't allow you to send files or use video chat. It doesn't feature a mobile version and neither does it allow you to send text to a mobile phone. What's more, the VoIP feature does not allow you to call a landline. Surprisingly enough, for a search company product, Google Talk doesn't even have a search feature built in.

I am sure all of these problems are currently being worked on at the Googleplex and will probably be incorporated into the full release of Google Talk. For now though, don't be in too much of a hurry to abandon Yahoo Messenger and/or Skype just yet.

Tuesday, August 23, 2005

Intelligent Pastafarian Design 

To discuss whether biology (which is based fundamentally on evolutionary theory) classes need to incorporate intelligent design seems to me like a well-designed insult to intelligence itself. Nonetheless, head over to Boing Boing for some thoughtful discussion on Pastafarianism, the new religion that worships the Flying Spaghetti Monster. In response to criticism that they might be trivializing the whole debate, the editors of BB have upped the ante and offered this challenge to the intelligent design cult:
We are willing to pay any individual *$250,000 $1,000,000 if they can produce empirical evidence which proves that Jesus is not the son of the Flying Spaghetti Monster.

A million dollars is a lot of money, so if you feel strongly enough about the newest cult on the block, you can submit your entries here.

UPDATE: Amit Varma points to PZ Myers's thorough fisk of the weirdest new addition to the anti-evolution club, Deepak Chopra.

Knowledge @ Wharton special on Indian R&D 

Following in the wake of the Businessweek cover story, Knowledge @ Wharton has a special issue out on the rise of India as an R&D hub.
India has long enjoyed a reputation as a destination for IT and business process outsourcing. Now, the country is fast emerging as a major center for cutting-edge research and development (R&D) projects for global multinationals such as Microsoft and Motorola as well as Indian firms. More and more companies in industries ranging from IT and telecommunications through pharmaceuticals and biotech are setting up ambitious R&D projects, in part to serve the Indian market, but also with an eye to delivering new generations of products faster to the global market. What forces are shaping these trends? What does the future hold?

The stories in the special issue are:

R&D in India: The Curtain Rises, The Play Has Begun...

How R&D Is Changing Indian Pharma and Auto Companies

Anatomy of a Deal: Using Venture Capital to Fund Pharma R&D

Contract Research for Global Firms Creates Hotspots for IT, Telecom and Biotech

"In the End, R&D Has to Get Products to Market"

Human Capital: Can India Bridge the Knowledge Gaps Needed for Research?

Confessions of an Aspiring Venture Capitalist

Cross-posted on The Indian Economy.

Peak Oil and More 

As oil futures stray ever close to the $70 mark, the future of an oil-based economy has become the topic du jour in the media. Many of you have probably read the widely discussed cover story in the NYT magazine this Sunday about a possible peak oil scenario. In particular, Peter Maass addresses the issue of depleting Saudi capacity, especially at Ghawar, the largest oil field in the world.
Simmons found that the Saudis are using increasingly large amounts of water to force oil out of Ghawar. Most of the wells are concentrated in the northern portion of the 174-mile-long field. That might seem like good news -- when the north runs low, the Saudis need only to drill wells in the south. But in fact it is bad news, Simmons concluded, because the southern portions of Ghawar are geologically more difficult to draw oil from. ''Someday (and perhaps that day will be soon), the remarkably high well flow rates at Ghawar's northern end will fade, as reservoir pressures finally plummet,'' Simmons writes in his book. ''Then, Saudi Arabian oil output will clearly have peaked. The death of this great king'' -- meaning Ghawar -- ''leaves no field of vaguely comparable stature in the line of succession. Twilight at Ghawar is fast approaching.'' He goes on: ''The geological phenomena and natural driving forces that created the Saudi oil miracle are conspiring now in normal and predictable ways to bring it to its conclusion, in a time frame potentially far shorter than officialdom would have us believe.'' Simmons concludes, ''Saudi Arabia clearly seems to be nearing or at its peak output and cannot materially grow its oil production.''

Steven Levitt points out many of the problems in Maass's story on the Freakonomics blog. Levitt has a specific problem with paragraph in Maass's story.
The onset of triple-digit prices might seem a blessing for the Saudis -- they would receive greater amounts of money for their increasingly scarce oil. But one popular misunderstanding about the Saudis -- and about OPEC in general -- is that high prices, no matter how high, are to their benefit. Although oil costing more than $60 a barrel hasn't caused a global recession, that could still happen: it can take a while for high prices to have their ruinous impact. And the higher above $60 that prices rise, the more likely a recession will become. High oil prices are inflationary; they raise the cost of virtually everything -- from gasoline to jet fuel to plastics and fertilizers -- and that means people buy less and travel less, which means a drop-off in economic activity. So after a brief windfall for producers, oil prices would slide as recession sets in and once-voracious economies slow down, using less oil. Prices have collapsed before, and not so long ago: in 1998, oil fell to $10 a barrel after an untimely increase in OPEC production and a reduction in demand from Asia, which was suffering through a financial crash.

Levitt responds...
Oops, there goes the whole peak oil argument. When the price rises, demand falls, and oil prices slide. What happened to the "end of the world as we know it?" Now we are back to $10 a barrel oil. Without realizing it, the author just invoked basic economics to invalidate the entire premise of the article!

I don't know if the world of oil is as simple as Levitt makes it out to be. Oil is the one commodity that makes the modern world tick, and even assuming that substitutes will come along (Levitt's contention) at some point, I am not sure the transition to a non-fossil fuel based economy will be painless for the global economy, even though I believe it is inevitable in the medium-term. In the immortal words (also quoted in the NYT story) of former Saudi oil minister, Sheik Ahmed Zaki Yamani, "The Stone Age didn't end for lack of stone, and the oil age will end long before the world runs out of oil."

In the meanwhile, John McTierney John Tierney is inspired by Julian Simon's famous bet with Paul Ehrlich to wager $5,000 with Matthew Simmons, pessimist-in-chief of Maass's story. Simmons is betting that the price of oil will cross $200 a barrel by 2010 (in 2005 prices). Whether the Cornucopians win this one too, we'll just have to wait and see.

UPDATE: Econbrowser has an excellent post on the Tierney-Simmons wager. Prof Hamilton had earlier made a must-read post on the dodgy pricing mechanism in the Chinese oil sector.

Downloading Linux in India 

Downloading software over a low-speed connection can be quite a nightmare. I remember some folks in my lab - this was way back in the mid-90's - trying to download Netscape because there was this really cool thing that everybody was talking about called a "browser". Gosh, what a pain that was. Downloading and installing something like Linux in India - oh well, if you don't have a high-speed line, you might as well forget about it.

I happened upon Carthik's blog this morning, and I noticed that he is actually offering to ship Ubuntu Linux live/install disks for FREE to India. Awesome!

Ubuntu Linux is, in one word, spectacular. I installed Ubuntu on my computer last month. It was a pretty smooth install. Ubuntu has shot up to number one in terms of Linux distro's in a matter of a year or so, and I think it is for good reason. Easy to install, rich set of features, blazing fast. Good out-of-the-box experience, although there are other distro's which might pip Ubuntu to the post on that. I did have to tweak a bunch of stuff to get it to work on my laptop, but it wasn't too bad. I would highly recommend it. Sez Carthik :

I figure that good should beget good, and so am willing to pass on the free distribution, at my own personal cost. The reason for doing this is that though you do get free cds from Ubuntu's shipit system, it takes an awfully long time, and what's not available immediately has very little worth. So I decided to re-ship them. If anyone wants a copy of the live and install disks of Ubuntu 5.04, please leave me a comment with your postal address in it, and I shall ship it to you for free. If you don't want to leave a comment, then you can email me at mail@carthik.net.

Update : That brings up the question : what would be a good way to distribute Linux in India on a large-scale? Set up a mirror site (problem : low bandwidth on the receiving end)? Snail-mail (people send in a self-addressed envelope)?

Monday, August 22, 2005

PSA: National Scrabble Championship 2005 

As has been mentioned before, two Zoo Station bloggers are avid Scrabble players. Unfortunately we have both been too busy to get ourselves to Reno, NV where the 5-day-long National Scrabble Championship is now underway. But we have been following the adventures of our many Scrabble-playing friends via the excellent internet coverage of the event, with regularly updated results, photos and commentary.

Best of all, we can even follow some of the live action by watching a ball-by-ball rack-by-rack webcast of the game at the top table. You, dear reader, are strongly encouraged to click on that last link (or this next one) and match wits with some of the best Scrabble players in the world.

UPDATE: Stefan Fatsis, the author of the remarkable book Word Freak and staff reporter for the Wall Street Journal is blogging the event and his own performance in it. It's an excellent read.

Sunday, August 21, 2005

U2, Pico Iyer? 

Pico Iyer has a little column in the weekend edition of the Financial Times, where he discusses U2, globalism, Dharamsala, the Dalai Lama and more (sounds like the mandate of this blog?). Extracts will not do Iyer justice, so I'll desist.

The Prince of Wales and the Ashes 

Matthew Engel, columnist for the Financial Times and Wisden, poses an interesting question: does the English cricket team perform better every time the Prince of Wales gets married? The reference, of course, is to England's stellar showing against Australia in the current Ashes series.
It happens every time the Prince of Wales gets married. In 1981, within weeks of Charles’ wedding to Diana, a young tearaway called Ian Botham marked the occasion by leading England to a stunning set of victories over Australia at cricket. For a while, England held sway over their greatest sporting rivals, Botham was the most famous sportsman in the country and the most traditional English game became cool and fashionable again. The generation that had grown up in the 1960s embraced cricket and the Arcadian idyll it represents.

But it all faded horribly, just like the royal marriage. In 1989, Australia regained the Ashes, the quasi-mythical trophy for which the teams compete; and they have held them ever since, and always by embarrassingly wide margins. In England, football, which in the 1980s was associated with marauding gangs of hooligans, regained its old dominance and more: for schoolboys, supporting one Premiership team or another has become more compulsory than mathematics.

Here's hoping that English cricket fortunes (not to mention the Prince's new marriage) lasts longer this time around.

Lee Kuan Yew in Der Spiegel 

Lee Kuan Yew is a personality who I find myself conflicted about. I find his dictatorial tendencies (some of which linger in Singapore today) absoloutely abhorrent. At the same time, there is no denying that he was a brilliant thinker who turned a piece of real estate that neither the Brits nor the Malaysians really wanted into one of the most advanced economies of the world. Though he has retired from active politics, you can see glimpses of his political astuteness in this interview with Der Sipegel. Most of the interview is devoted to the rise of China and its consequences.
What is gradually happening is the restoration of the world balance to what it was in the early 19th century or late 18th century when China and India together were responsible for more than 40 percent of world GDP. With those two countries becoming part of the globalized trading world, they are going to go back to approximately the level of world GDP that they previously occupied. But that doesn't make them the superpowers of the world.

Economically, there will be a shift to the Pacific from the Atlantic Ocean and you can already see that in the shipping volumes of Chinese ports. Every shipping line is trying to get into association with a Chinese container port. India is slower because their infrastructure is still to be completed. But I think they will join in the race, build roads, bridges, airports, container ports and they'll become a manufacturing hub. Raw materials go in, finished goods go out.

Where does this rapid growth in India and China leave Singapore? Where does S'pore's competitive advantage lie?
Such as where the rule of law, intellectual property and security of production systems are required, because for them to establish that, it will take 20 to 30 years. We are concentrating on bio medicine, pharmaceuticals and all products requiring protection of intellectual property rights. No pharmaceutical company is going to go have its precious patents disclosed. So that is why they are here in Singapore and not in China.

Lee's advice to European governments?
Every year, our unions and the Labour Department subsidize trips to China and India. We tell the participants: Don't just look at the Great Wall but go to the factories and ask, "What are you paid?" What hours do you work?" And they come back shell-shocked. The Chinese had perestroika first, then glasnost. That's where the Russians made their mistake.

Chinese relations with Taiwan?
Their objective is to raise the level of damage they can deliver to the Americans if they intervene in Taiwan. Their objective is not to defeat the Americans, which they cannot do. They know they will be defeated. They want to weaken the American resolve to intervene. That is their objective, but they do not want to attack Taiwan. I think they have put themselves into a position internationally that if Taiwan declares independence, they must react and if Beijing's leadership doesn't, they would be finished, they would be a paper tiger and they know that. So, they passed the anti-secession law to tell the Taiwanese and the Americans and the Japanese, "I do not want to fight, but if you allow Taiwan to go for independence, I will have to fight." I think the anti-secession law is a law to preserve the status quo.

Advice to North Korea?
If I were Kim I would freeze the programme, tell the Americans you can inspect, but if you attack me, I will use it. That leaves the Americans with the problem of checking and verifying and intercepting ships, aircraft, endless problems.

Read the whole thing. It's excellent.

Yet another TOI blooper 

Over at Sepia Mutiny, Manish Vij captures the latest in a long list of bloopers from the venerable Times of India. Enjoy.

Friday, August 19, 2005

Movie Recommendations: Broken Flowers and Grizzly Man 

I watched two exceptional movies this week. The first, Broken Flowers, Jim Jarmusch's first movie since Coffee and Cigarettes, stars Bill Murray (need I say more?), Sharon Stone and Jessica Lange, among others. Truth be told, the movie runs more on a poker-faced Bill Murray's little twitches and smiles than on any other performer or even the script. Briefly, Bill Murray plays an over-the-hill Don Juan (in the words of his current girlfriend) who gets a mysterious letter (presumably from one of his former lovers) informing him that he had a son he never knew of. Encouraged by his Ethiopian friend (the first Ethiopian character in a Hollywood movie?), Winston, Murray takes off on a journey into his past and into the lives of his ex-flames. What follows establishes why Murray is one of the, if not the, greatest actor of his generation. Rotten Tomatoes gives it an 89% freshness rating.

Grizzly Man is Werner Herzog's newest movie. Herzog is, along with Stanley Kubrick, my favourite director. If Herzog makes a movie, I watch it, which was why I went to watch this one. Even by Herzog's standards though, Grizzly Man is an unusually brilliant film. It tells the bittersweet story of Tim Treadwell, who made the news for having spent 13 summers with the grizzlies of Katmai National Park in Alaska. Unfortunately, the 13th summer ended with Treadwell and his girlfriend, Amie Huguenard, being attacked and eaten alive by hungry grizzlies. Herzog uses over 100 hours of footage shot by Treadwell himself to recount the story of a complex and compelling character (following in the footsteps of Fitzcarraldo and Aguirre in that sense). In fact, if it weren't for a baseball cap covering the lens, Treadwell may have managed to film his own death. The audio track of the attack exists, though Herzog spares us the agony of listening to it.

It's easy for us to dismiss Treadwell as yet another tree-hugger who somehow got it into his head that the bears were his friends. Herzog's genius, however, is that he doesn't glorify Treadwell and neither does he mock him, despite Herzog's instinctive cynicism. Besides a glimpse into the mind of a very tortured soul who thought the grizzlies were his escape from humanity, there are also moments of almost indescribable beauty (remember Aguirre?) in the film that alone make it a must-see. And if you still think a documentary cannot be a must-see, here's Roger Ebert's take on the movie. And Manohlia Dargis's. Rotten Tomatoes gives it a 93% freshness rating.

While on the subject of messing with nature, have you been following the news of the project to 'Pleistocene re-wild' the U.S. plains?

Thursday, August 18, 2005

Fareed Zakaria in the Voice 

You know you've arrived when the Village Voice calls you a muslim/heart-throb/super-pundit, who despite being a neo-con at heart, also manages to be the darling of the liberal viewers of the Daily Show. Here's a profile of Zakaria by the Voice.
Political columnist and editor of Newsweek International is dubbed an "intellectual heartthrob" by Jon Stewart. Upper-class Indian academic raised in mostly secular household becomes America's favorite explainer of the Muslim world, regularly appearing on Charlie Rose, This Week With George Stephanopoulos, and now on his own weekly PBS news series, Foreign Exchange With Fareed Zakaria.

In a daring move, Zakaria has chosen to have mostly non-Americans as guests, a technique that often yields surprising insights. He's discussed the Iraq situation with the country's deputy prime minister, talked to a Yemeni editor about the connections between Yemen and Al Qaeda, and gabbed about Islam's treatment of women with Muslim feminists. Perhaps in another era this wouldn't have seemed like such a bold move, but as one nation under Bush, we've grown increasingly proud of our insularity. Zakaria sees the media's reaction to the London bombings as an example of American self-centeredness: "Ten minutes after the British have gone through this terrible tragedy, we were already saying, 'How safe are our subways? Sure, London has just suffered this terrible catastrophic loss—but enough about you, what about us!' " he says, smiling. "I think this attitude does translate into the way we interact with the world as a government and as a people." He envisions Foreign Exchange as a half-hour corrective: "If you want to understand what's going on in the rest of the world, listen to what foreigners are saying about it."

Wednesday, August 17, 2005

A Twist In Their Tale 

This is not the sort of post I would make normally, but I think the metamorphosizing story of the death of Jean Charles de Menezes on the London tube is deeply disturbing and deserves all of our attention. Especially to those of us who have the 'wrong' skin colour and happen to live in cities where the terrorist threat is very real. It seems like Menezes could have been any of us. Scotland Yard's initial version of events went something like this:
Man walks out of apartment building under surveillance, wearing heavy, padded jacket in warm weather (carrying a rucksack too, according to some reports). Police (in plainclothes) follow him/give him chase. Man refuses to follow police orders, runs away from cops, vaults ticket barrier and runs into train. Man pushed to ground and shot in the head 7 times.

Unfortunately for Scotland Yard, someone leaked a confidential report into Menezes's killing to ITV and it's been in the news since. According to the leaked report, this is what really happened:
Man walks out of apartment building, which was under surveillance. He was not carrying a ruck sack and was in fact wearing a light denim jacket, which is what a lot of Londoners wear in the summer. He boards a bus and arrives at the tube station. CCTV footage shows the man walking slowly into the station, picking up a free newspaper, calmly passing through the barrier, descending using the elevator, entering the train, and sitting down facing the platform. Police run into the car, restrain the man by pushing him back against his seat and shoot him in the head seven times and once in his shoulders. Three bullets miss.

I am willing to give Scotland Yard (who were working under very tough circumstances) the benefit of the doubt, however, and will wait to read the report of the full investigation before passing any further judgement. Any which way you look at it though, it's chilling to read about the effects of unrestrained power being handed over to law enforcement officials, even if they're as competent as Scotland Yard normally are.

In other news, Boing Boing points to an effort by prankster/gamer/performance artist Jane McGonigal to reshelve George Orwell's masterpiece, 1984, to the section in bookstores she believes it belongs to -- Current Affairs.

Tuesday, August 16, 2005

Blog du Jour: Overheard in NYC 

(Via Jed) Extremely funny blog which compiles snippets of conversations heard in and around New York City. Here are a few samples from Overheard in New York.
Girl #1: I just came came back for vacation.
Girl #2: Really? From where?
Girl #1: New Jersey.
Girl #2: What? That's not a vacation, bitch.

---R train

Guy #1: I heard someone say Friday evening was so wild, a town on Long Island was hit with a tomato! What's up with that? A tomato? Is that like when it rains frogs for no reason?
Guy #2: That's tornado, you dick! Say it with me: tor-na-do!
Guy #1: Oh...okay.

--Penn Station

Tourist guy: What's that building over there?
Tourist chick: That's the Empire State Building, silly.
Tourist guy: Oh...yeah.

--Empire State Building observation deck

Tourist lady: What floor are the Renaissance paintings on?


You get the drift. Now, go laugh your arse off!

Changes at Zoo Station 

The arrival of a new team blog marks the end of an old team blog. Zoo Station will now go back to being my personal blog, as it used to be in its first year and then some of its existence. My current set of co-bloggers will now become frequent guest posters on ZS. I want to thank them for hanging out with me the past year and I look forward to frequent guest contributions from them.

Tip: Blogger for Word 

For what it's worth, here is an interesting new tool for the Microsoft Word fans among you. Blogger for Word is a downloadable app that lets you add a Blogger bar to MS Word. In turn, BFW lets you do regular Blogger stuff (including saving and publishing) straight from a Word document.

Best slashdot comment ever? 

(via Boing Boing) We have a winner! I believe I have just read my all-time favourite Slashdot comment. Commenting on a post about the melting of Siberian permafrost, commenter MillionthMonkey posted this tour de force: a long yet sustained and insightful Goofus-and-Gallant-themed take on some facts of life relevant to the "debate" on whether global warming is for real.

Some choice excerpts:

GOOFUS gets little respect as a scientist outside the scientific community.
GALLANT gets little respect as a scientist inside the scientific community.

GOOFUS and his graduate students do the dirty work of collecting raw data and looking for conclusions to be drawn from it.
GALLANT does the dirty work of discrediting GOOFUS by manipulating his data in Excel with statistically invalid techniques.

GOOFUS isn't paid much attention by the press since his opinions are commonplace among scientists.
GALLANT holds maverick opinions for a scientist which keeps him busy running from one balanced talk show to the next.

Bombay rain redux 

Finally, a major US-based blog picks up the story of the recent record-breaking rains in Bombay/Mumbai. Several readers of ZS probably know this already, but for those who don't, let me note that the blog pointed to, Cloudburst Mumbai, is a great piece of work.

Incidentally, I was talking to a South Bombay resident the other day and heard that people there had no idea just how bad things were elsewhere in the city and that they went clubbing and partying that night! Pathetic...

Monday, August 15, 2005

New blog: Indian Economy 

This has been in the works for a while, but I guess Independence Day is as good a day as any to announce the arrival of a new blog that monitors the Indian economy. In some ways, the new blogs marks the revival of India Economy Watch, a now defunct blog that older readers of ZS might remember. The Indian Economy is a team blog and my co-bloggers are:
Prashant Kothari of Inside, Outside.
Atanu Dey of Deeshaa.
Kaushik Bannerjee of Random Notes.
Amit Varma of India Uncut
Yazad Jal of Anar Cap Lib
Amitabh Arora, a first-time blogger who is an executive director at Lehman Brothers in NYC.

As you can see, it's a first rate team and I certainly hope we can put out some useful content for those of you who have a serious interest in monitoring the Indian economy. Once again, the website is at www.indianeconomy.org. The blog is still very much in beta mode, so there are plenty of glitches that need to be ironed out. If you come across any serious problem with the site, please let me know.

Riding the Valuation Wave 

Adam Hamilton at Zeal LLC has a great essay on Long Valuation Waves in the stockmarket:

There are periods of history when investors can’t get enough stocks and are willing to buy at any price, regardless of valuations. Thankfully 1999 was not too long ago so we all remember well what these mania periods are like. And there are other periods when investors won’t touch stocks with ten-foot poles. Like a 20-year old trying to imagine the Saturnian winter, unless you were actively investing from 1974 to 1982 you have never experienced one of these.

This herd psychology moves in great waves too, and is actually the underlying driver of the Long Valuation Waves. Early in the 34-year cycles investors are fairly neutral about stocks, but gradually they get interested and a Boom ignites. After maybe a decade of booming, greed festers and a Bubble spawns, pushing prices up far faster than earnings and sending valuations spiraling heavenwards.

Sooner or later this mania psychology fails when all the capital that can be enticed in has been sucked in. Without any new buyers mania prices collapse in the Burst phase. And then over the next half wavelength the Bust manifests itself. The financial markets are perpetually experiencing these Boom Bubble Burst Bust cycles, driven by investor psychology, and empirically measurable by the Long Valuation Waves.

Marc Faber
talks about a similar phenomenon in his excellent book "Tomorrow's Gold" (and it's not surprising; the idea of long waves in the market is not new). Interestingly, both authors advise against investing in stocks at the present point in the cycle. So what do they advise? You guessed it -- commodities!


To all the Indian readers of this blog, in India and elsewhere, Happy Independence Day. For those of you who are interested, here is the full text of PM Manmohan Singh's I-Day address from the Red Fort.

And while I am at it, Happy Independence Day also to the occasional readers I've seen from South Korea. I guess we can safely assume noone in North Korea can actually get online to read a greeting aimed at them :)

Sunday, August 14, 2005

Ebert's list of worst movies 

Roger Ebert (he of Ebert & Siskel, and now of Ebert and Roeper) has put together a list of movies that he absolutely detests. Most of the movies in there deserve to be there and would make it to most of our worst movies lists too. For some reason though, Ebert also includes The Usual Suspects in his list. Isn't that a bit strange, especially coming from a guy who regularly gives Spielberg movies 4 stars? Does anyone else think "The Usual Suspects" was a disaster?

Broadband Internet to cure poverty? 

I don't know if this stuff is reliable, but I came across this pretty crazy story in the Times of London. According to the Times, Ethiopia is "is spending 10 per cent of its annual GDP on a broadband, satellite-based internet system." Before you fall out of your chair, let's also look at an example of what this money is being used for.
Most secondary schools have now received the huge plasma-screen televisions that will soon display internet-streamed MPEG 2 digital video, including instructional films and quizzes.


Let's look at some of macro-data on Ethiopia from the World Bank. The country has a population of about 68 million. Life expectancy is 42. Literacy is at about 43%. GDP in 2003 was $6.7 billion. Per-capita income is about $90, or $0.25 a day.

In a country that is reeling from a multitude of problems, the government wants to invest about $700 million (about $10 per person) in building satellite-based broadband internet connectivity, in the belief that Ethiopia could leave all its problems behind IF ONLY it had access to the Internet. Have these guys completely taken leave of their senses? Don't they see more pressing problems to be solved (infant and maternal mortality perhaps?) before giving everyone a computer and plasma screen TV's?

This is typical of the sort of muddled thinking that considers the 'digital divide' a pressing problem that needs to be solved pronto if any country is to advance economically. Here's what I wrote in my dissertation about this.
The digital divide in the developing world is merely a symptom of a deeper problem, namely poverty. Poor people do not take up advanced communications technologies because they do not have the money to do so. They do not take up air-conditioning (documented in economics research as productivity enhancing) for the same reason. So, there is no reason why the digital divide should receive any more attention than the ‘air-conditioning divide’. ICTs serve a purpose, namely reducing transactions costs and generating income. If people do not adopt ICTs, it is at least partly because the cost-benefit analysis does not work out for them. They make these calculations assuming ICTs to not be an end in itself, but a means to an end. Addressing the underlying problem of poverty would be a more useful endeavor than addressing one of the many, many symptoms of poverty.

Governments with very scarce resources (like Ethiopia) should give serious thought to how these resources are allocated. Every dollar allocated to building satellite-based connectivity is a dollar not invested in primary health, for example. Of course, the govt could argue that the investment in connectivity also leads to improvements in health and primary education, areas with demonstrable market failures. Unfortunately, the evidence for this (in the economic literature) is scant, beyond the occasional anecdote. The government should also consider the costs/benefits of investing in high-tech solutions versus the costs of investing in low-tech, brick-and-mortar solutions (better teachers, classrooms, better clinics etc). Until then, the idea of investing 10% of GDP of a desperately poor country in a pie-in-the-sky project, based on warm, cuddly, and fuzzy thinking is pretty close to criminal.

Unless of course, the Times of London is doing a Times of India and pulled the 10% number out of thin air.

Saturday, August 13, 2005

Blogs and disciplining the MSM 

Over at Marginal Revolution, Robin Hanson addresses an issue we've been discussing on Zoo Station the past week.
How about "Michael Jackson arrested today"? Few readers would normally check this firsthand, but if a big story like this was wrong then a competing publication might make a stink, and then one of your friends might check it out. For the vast majority of media claims, however, there is little incentive to make a big stink, and few people who care would ever learn the truth given a stink. So if it takes the media much effort to learn the truth, why should they bother?

Media watchdog charities might claim to check for you, but why should you believe they share your interest in knowing the truth, instead of just wanting you to write them a check? Bloggers can also claim to help you check, but if those bloggers mainly care about attracting readers, the same problem remains.

The only real solution I can see is to make better use of the people you have good reason to think really do share your strong interest in knowing the truth about some topic. So connected blogs by people who know each other in other ways may be the key. Perhaps such networks lower the cost of raising a stink to the people who care. Of course it may also be that most of us do not really care about the truth; we might just want interesting new things to talk about with each other. Which might explain the otherwise-surprising lack of interest in this problem (which applies to academia at least as well as to the media).

Friday, August 12, 2005

Yet another India/China cover story 

The cover story of the latest issue of Businessweek (U.S. edition) is about what you need to know about India and China, as the balance of economic power shifts east and the Asian century becomes a reality. Too many stories in there to link to individually (it's a double issue), so follow the link and read whatever catches your fancy.

There's social networking, and then there's Small World 

Social networking was the in-thing in 2003/04 with huge amounts of media bandwidth and VC money being hogged by Friendster, Orkut etc. Most of these social networking sites are now passe or in the news for all the wrong reasons. This morning though, Boing Boing informed me of the existence of aSmallWorld, an invite-only club so exclusive that even Xeni Jardin can't get you in. According to Xeni, aSmallWorld is a favourite of celebrities, the gliterati and eurotrash (in no particular order).

So, my question to you, dear ZS reader is this. Are there any among you (and yours) who are members of aSmallWorld who can do for me what Xeni Jardin cannot? Like Groucho Marx, I too want to be a member of a club that will *not* have me.

Thursday, August 11, 2005

Friedman at the IFC 

Here is a video feed of a talk Tom Friedman gave recently at the International Finance Corporation, partly to plug the book. If you like Friedman's arguments, watch it. If you don't, this talk will annoy you for the most part, since he's being as imbecilic as ever, never mind that he's talking to an audience that probably understands globalization better than he does.

PS: Siddharth Varadarajan, deputy editor of The Hindu, has a critique of Friedman's book on his excellent new blog.

Wednesday, August 10, 2005

Francis Crick and the seat of consciousness 

According to the Economist, Francis Crick attempted to unravel one of the great mysteries of life -- the nature of consciousness -- before he died last year. In a paper he published alongwith Christof Koch, Crick tries to explain the integrated nature of conscious sensation.
The part of the brain that caught the two researchers' interest is the claustrum, a thin sheet of grey matter that lies concealed beneath part of the cortex (the outer covering of the brain that carries out the computations involved in seeing, hearing and language).

The key to the researchers' claim is that most, if not all, regions of the cortex have two-way connections to the claustrum, as do the structures involved in emotion. It is plausible that the smell, the colour and the texture of the rose, all processed in different parts of the cortex, could be bound together into one cohesive, conscious experience by the claustrum. The authors liken it to a conductor who synchronises and co-ordinates various parts into a united whole.

Time will tell whether Crick's spectacular contribution to understanding genetics will be replicated in the sphere of consciousness.

One from/about the Vault 

Grateful Dead fans are well aware of the Vault, the infamous place from where previously unheard of video and audio keeps trickling out for Deadheads to twirl to (when in doubt, and otherwise). But, I only recently learnt that the Vault was actually as well protected as the gold storage rooms of the New York Fed (ok, I exaggerate), thanks to this NYT story by Seth Schiesel, published on the occasion of the opening of the Jerry Garcia amphitheater in San Francisco. Apparently, only two people have access to the key that opens the Vault. The article also throws some light into the unique business model of the Dead, one that may well become the de facto standard in the music industry as more and more artists use to Internet to bypass the industry to reach out to fans directly.
When I first got into the record business I learned that it wasn't cool to be into the Grateful Dead," said Christopher Sabec, 40, a lawyer who said he saw the band more than 250 times and is now chief executive of the Jerry Garcia Estate L.L.C., controlled by Mr. Garcia's heirs. "But if you look at where the music business has been forced to go by technology, now it's not about selling records. It's about live shows and inspiring a fan base to be absolutely loyal. Hello? Who did that first? The Grateful Dead."

The Jerry Garcia company and Grateful Dead Productions are separate businesses each generating millions of dollars of revenue a year. Just how many millions is not publicly known. But consumers still buy more than a million J. Garcia-brand neckties each year, and Cherry Garcia is often the top-selling brand of Ben & Jerry's ice cream, each pint generating royalties for the Garcia heirs.

The Grateful Dead was the first major band to allow fans to freely make and trade recordings of its live performances in the belief that spreading the music that way would ensure long-term success. That formula was later adopted almost wholesale by other successful bands, including Phish, and fans still avidly trade live Grateful Dead recordings online. Even though there are now high-quality recordings for sale, created using the official sound-mixing boards used at concerts, fans are still free to trade recordings made in the crowd. The band used to offer a special section of seating for amateur tapers. "They wanted to create a space for themselves and their fans to gather and play, and that didn't sit well in the offices of the record business," said Mr. Sabec, who is perhaps best known in the music industry for discovering and managing the 1990's teen-pop group Hanson. "Now I find myself sitting in meetings where other bands are using the Dead as a model."

Tuesday, August 09, 2005

Not just the Times of India 

In response to my previous post about collablogging and monitoring what passes for news in the TOI, many of you wrote in to say that we should be monitoring not just the Times, but all Indian media outlets. As if prove your point, I came across this interview with Adi Godrej on the Rediff website. They start by calling him a middle-class billionaire, which is a funny thing to say about a billionaire, leave alone the scion of one of the oldest and wealthiest families in India. But, they do save the best for last.
As for his next travel plans, he would love to go to Russia, which fascinates him, even though he isn't too enamoured of the concept of socialism and communism. "If at 20, you are not a socialist, you are heartless. But at 40, if you are a socialist, you are headless. I agree with Winston Churchill's famous remarks that socialism is nothing but equal distribution of poverty."

His strong dislike for the concept, however, will not stop Godrej from including the Communist country as his 76th port of destination shortly.

Russia, a Communist country? Tell that to Gennadiy Zyuganov and the Communist Party of the Russian Federation (CPRF), who last saw executive power in 1991. Vladimir Putin rules with the support of the centrist United Russia party, while the Commies are among the major opposition parties in Russian politics.

Now, how much effort would it have taken the reporters or the sub-editors to correct such a glaring factual error? Or is it that both the reporters and the sub-editors are caught in a time-warp and haven't quite come to terms with the death of communism in the former Soviet Union?

Intelligence and ethnicity 

University of Utah anthropologist Henry Harpending and colleagues Gregory Cochran and Jason Hardy have an upcoming paper in Journal of Biosocial Science, titled "Natural History of Ashkenazi Intelligence". Quoting from its abstract:
This paper elaborates the hypothesis that the unique demography and sociology of Ashkenazim in medieval Europe selected for intelligence. Ashkenazi literacy, economic specialization, and closure to inward gene flow led to a social environment in which there was high fitness payoff to intelligence, specifically verbal and mathematical intelligence but not spatial ability.
I am obviously not qualified to comment on the merits of the paper or on the standing of its authors in their community. I have no doubt that several readers will be sceptical of the paper's use of IQ as a measure of intelligence, though I personally don't see a problem with that. The paper offers some additional anecdotal evidence of unusually high intelligence among Ashkenazim:
During the 20th century, they made up about 3% of the US population but won 27% of the US Nobel science prizes and 25% of the ACM Turing awards. They account for more than half of [sic] world chess champions.
I can certainly add to this type of anecdotal evidence. I see plenty of it within the research communities I am familiar with: theoretical computer science and combinatorics. I also see plenty of it within my hobby community of tournament Scrabble players; an overwhelming majority of grandmaster-level Scrabble players in the US and Canada are Askhenazi Jews.

For further discussion, I refer you to the article "Natural Genius?" from the latest edition of The Economist that talks about this paper, leading off with the fantastic sentence "The idea that some ethnic groups may, on average, be more intelligent than others is one of those hypotheses that dare not speak its name."

It's NOT pining for the fjords! 

The Times reports that a particularly foul-mouthed parrot at the Warwickshire Wildlife Sanctuary has been placed in solitary confinement for his scandalous swearing.
"We don't know who taught him the words, but he seems to have a problem with authority figures," said Ms Clark.

"When he saw the policemen coming, he said: 'Hello, you two w*****s'. He told the mayoress and the lady vicar to f*** off. He stands on the top of his cage swaying his head backwards and forwards, singing 'B*****ks', "B*****ks'."
I've heard several similar stories about parrots in India, but I've never been sworn at myself by one of them. Has any of you, dear readers?

Monday, August 08, 2005

Scrutinizing the Times of India 

I think every single Indian blogger has, at some at some time or another, expressed frustration about the state of affairs at the Times of India. TOI, which was once an excellent newspaper, has now deteriorated into a pile of bile and a grave misuse of trees. So, what does one do about it?

Part of the trouble is that India has never had a newspaper of record, like the New York Times or the Washington Post. But even so, when did journalism come to mean advertorials and endless stories about celebrities and their flossing habits, stories that even the National Enquirer would be embarassed to carry?

Even as we contemplate why TOI's trash commands an audience that runs into several hundreds of thousands (lack of alternatives, dumbed-down audiences etc), I think bloggers could apply a great deal of pressure on the TOI and the Indian media in general. Uma's post about the TOI's coverage of the rains in Bombay raised quite a storm in the Indian blogosphere as did their atrocious coverage of the Air France crash in Toronto. Back in May, there was the awful embarassment of plagiarising a spoof.

Atanu and I were discussing this on chat sometime back. While we recognised the need for India to have a newspaper of record, we came to the conclusion that the time was right to start a blogger-driven Watching the TOI-type blog, simply to catalog the horror that the world's largest selling English newspaper has become. If enough people contribute, bloggers may even prevail on the TOI to at least lower the amount of garbage they print every day. We could even paraphrase Newshounds' memorable catchphrase to something like "We read the TOI so you don't have to."

Needless to say, I can't do this sitting in the U.S. with access only to the online edition of the TOI. So, I figured I'd toss the idea into the blogosphere and see if any of you (especially folks based in India) want to run with it. Any takers?