Month: December 2013

Dictators and straightening dogs’ tails

There is this story from Hindu mythology I remember reading when I was a kid. I don’t remember the source but I remember the story really well. It basically goes like this.

A man wishes for a servant and gets one. The servant tells the master, “I’ll do anything you ask me to do. But I’ll serve you under one condition. If at any point in time I don’t have work, I’ll eat you up”. Given the amount of work the master has, he thinks this is a pretty good deal, and hires the servant.

The servant turns out to be super efficient. All the tasks the master gives are completed in a jiffy, and the master is hard-pressed to give more tasks, let he be eaten up. Finally the master pleads with the servant, that he has no more work to give, and that he will “free” him, and the servant to spare him.

The servant doesn’t agree. “This is not according to the terms of the contract”, he says, and threatens to eat up the master. Just then, the master sees this dog, with a crooked tail. The master tasks the servant with straightening out the dog’s tail. Legend goes that the servant is trying to straighten a dog’s tail until this day.

So why did I tell this story? Because I saw this tweet from former chess world champion Garry Kasparov, and found it pertinent.

A powerful and efficient dictator is like the servant in the above tale. Once he is done with “getting the trains to run on time”, he uses his power to come after you. And the only way you can prevent him from coming after you then is to give him some nonsensical work like straightening a dog’s tail.

Notice that the servant in the above story does only one job at a time. So once he started trying to straighten the dog’s tail (a task assigned to him so that the master survives), he wasn’t able to do any other task. In other words, he became useless!

So the moral of this story and Kasparov’s analogy is that a dictator, even if he works for you, will do so only for a short period of time.

 

Premier League Sub-Tables

Ahead of the Chelsea-Liverpool game on Sunday, the pre-match show showed a “sub-table” of the premier league of how the top 8 teams had fared against each other. While by definition, the Premier League is played among 20 teams, and your result against Chelsea is as important as that against Crystal Palace, looking at sub-leagues like this one can help us gauge what the overall points table is trying to hide.

In this post I’ll just show the sub-league of the top of the league (top 3 to top 7) and bottom of the league (bottom 3 to bottom 7). Offered without further comment.

topbottom7

Silencing the temple

The temple across the road from my house has really started annoying me. The priest has one tape, of supposedly “devotional” songs and this morning he thought it appropriate to play it on the loudspeaker at 5:30, startling me and waking me up.

This is not the first time he has done so, either. He has been a consistent offender. Earlier, the tape would go on at around 7:30, after we had woken up so it didn’t really affect me so much – I’d put on my own music to drown the offending noise and all would be fine. Of late, though, the bugger seems to be getting to his temple early, and he considers it his sacred duty to wake up the locality with his noise.

Polite attempts (by the wife) to ask him to turn down the volume have had no impact. I’m told over ten years back my grandmother-in-law (known in her time to have been an extremely strong and clever woman) had tried her own methods to silence him, but had failed and given up (one of her rare failures, according to the wife). One of the things she had apparently tried was to threaten to call in the cops. It didn’t work.

As we lay tossing and turning in bed this morning having been rudely woken up by the temple noise, we thought of strategies. One was to write out a police complaint, get neighbours to weigh in with their support and go to the cops. Another was to get in touch with the local politicians (corporator, MLA, etc.) and see if they can do something about it.

One thing bothers me about either approach, though – no there is no risk per se, but I don’t think any of this will really work. The problem is the Indian definition of “secularism” – which is not “each citizen will practice his/her own religion in private and the state will not interfere” but instead is “each citizen can make a big loud show of practicing his/her religion and the state will not interfere”.

And so if I go to the cops or the politicians asking them to intervene, one question that will invariably come up is why the temple priest should shut up when there are no restrictions whatsoever on the muezzin’s call. And if you go to the muezzin and ask him to turn down the volume, he’ll agree on the condition that the loudspeakers at the Ganesh pandals be turned down. And thus we will set off on an infinite loop.

This is the sad story with religion in India. Anything goes in the name of religion. If you oppose something done in the name of religion itself, you are being anti-religion, and that is blasphemous.

Anyway, I still have the conundrum of how to deal with the hooligan priest in the temple across the road from my house!

Visas to India

Between January 2012 and October 2013, India issued over 34000 employment visas. Where did these 34000 foreign workers come from?

empvisas

 

Notice that the number of people with employment visas from Japan and Germany outstrip all other countries, by a long way! The United States is not even in the top 12! The other notable exception? Bangladesh!

What about tourists? Where do India’s tourists come from? Between January 2012 and October 2013, India issued about 4.5 million tourist visas. And where did these tourists come from? This graph here shows the percentages:

tourvisas

 

And which country contributes the maximum number of tourists to India? Bangladesh! 800,000 or almost 18% of India’s tourists in these 22 months came from Bangladesh! And they didn’t come here for medical treatment – that has been taken care of in another category of visas!

Go figure.

Premier League – Home and Away

So we are halfway through what is easily the most competitive English Premier League in recent times. To illustrate, Liverpool were on top of the table at Christmas, and after two successive defeats, lie fifth at the New Year. Anything can happen this season and the top seven or eight teams are all still in contention.

One interesting factor this season, however, has been the fixture list. For example, only Manchester United among the top eight has played at Anfield (Liverpool’s home ground) this season. Liverpool has played every other top eight team away so far – which means they will face them all at home in the second half of the season.

On the other hand, Manchester City has hosted all top eight teams bar Chelsea so far! Which means they will be playing all these teams away this season! Sunderland is currently bottom. However, they have hosted mostly top-half teams (which are significantly superior to them) and played away to other bottom half teams which are of comparable strength.

The following table illustrates who has hosted whom. The table is to be read row-wise. “H” and a red cell means that the team in the corresponding row has hosted the team in the corresponding column. A while cell and “A” implies otherwise.Notice that this is the only point of time in the season when we can do this analysis for now everyone has played everyone else exactly once. Teams in this table are ordered in descending order of points.

plhomeaway

 

 

 

Can we have a metric of who has had the best set of home fixtures this season so far? For this, let us define a “home index”. For each team, this is calculated as the difference between the average points of the teams played at home and the average points of the teams played away.

Let me illustrate. Arsenal, for example have so far hosted Chelsea, Everton, Liverpool, Spurs, Southampton, Hull, Stoke, Villa and Norwich. These teams have an average of 28.6 points as of now. Arsenal has so far visited the rest of the clubs, viz. Manchester City, Manchester United, Newcastle, Swansea, Cardiff, West Brom, Crystal Palace, Fulham, West Ham and Sunderland. These teams average 22.6 points as of now. So Arsenal’s home index is 28.6 – 22.6 = 6.0

A positive home index implies a team has played more strong teams at home and weak teams away. It is not easy to say, however, whether this implies an easier second half of the season. Arsenal, for example, would be happy to host the weaker teams they have traveled to, but the fixture list means they will be traveling to more strong teams, which means the potential for dropping points is higher.

Among the relegation-threatened teams, Sunderland has the highest “home index”, and for them the season is likely to become better – in the second half, they will get to host the weaker teams whom they can reasonably expect to beat while traveling to stronger teams (who they’ve lost to anyway) won’t change much. Thus, a high home index is a positive for lower-ranked clubs.

The following graph shows the home-away index for all clubs:

haindexNotice that both Arsenal and Manchester City have had an easier run so far – hosting the better teams. it will be interesting to see how they perform in the second half of the season when they travel to the better clubs. Especially given that Liverpool and Chelsea have had a bad run of fixtures in the first half and are likely to improve in the second half.

Finally, the first part of the post assumes that teams are better off playing at home rather than away. Is this really true? To check this, let us look at the average points scored by teams in home and away games. This number should be taken with a pinch of salt, though – teams with a high home index are less likely to perform significantly better at home compared to away.

Based on the performance so far, the average points in home games is 0.28 more than the average points in an away game. However, we also need to take into account the home index. When we regress the difference between home and away points against the home index, we find that for every one point higher in home index, the difference between home and away performance comes down by 0.04 (the R-square, for those that are interested in such things, is 15%).

The following table shows the difference in home and away performances of different teams:

homeaway2Most teams, you can see from this table, have done better home than away. The significant exceptions are Aston Villa, Manchester United and Spurs. Villa and Manchester United have a high Home Index which possibly explains this. There is no explanation of spurs’ home form, though.

 

 

 

 

 

Pricing railway safety

Yet another railway accident has happened. As someone on twitter pointed out,

The problem with the Indian Railways is that there is no real measure of safety. How do we know how much safer the trains and tracks are compared to last year? Given the way the Railway finances are put out currently, there is no way to figure this out. Without the railways putting out more disclosures, is there a way to put a number on how safe the Indian Railways are? In other words, is there a way to “price” railway safety?

As you are well aware, and as the above tweet points out, it is standard practice in Indian Railway accidents for the Railway Minister to announce an ex-gratia payment to the families of the dead and the injured in case of any accident. I’m not sure if there is a formula to this but one cannot rule out the arbitrariness of this amount. As I had pointed out in an earlier post on RQ, accident compensation needs to be predictable and automatic. Can we use this to price railway safety?

First of all, we need to point out that the railways follows a cash accounting system, and thus doesn’t need to account for any contingent liabilities such as ex-gratia payment (last weekend I sat through an awesome lecture by Prof. Mukul Asher (councillor to Takshashila) on public finances, and he pointed this out). Hence, it would be prudent on behalf of the Indian Railways to hedge out this contingent liability.

How do you hedge a contingent liability? By buying insurance! What the Indian Railways needs to do is to buy group accident insurance – all the ex-gratia payments will then by paid out by the insurance company, and the railways will only pay a premium to these companies, thus hedging out the risk! And this process will help put a price on railway safety!

How is that? Let us say that given the railways’ bad record in safety, and its continued promises that safety will be improved each year, the railways decides to take up group accident insurance on an annual basis. Let us say that there is a competitive bidding process among general insurers in India (both public and private sector) to provide this insurance (railways is a large organization, and insuring them will be a matter of prestige, so companies will bid for it). The premium as determined by this competitive bidding process is the price of railway safety!

We can do better – instead of buying one overall policy, the Railways can think of insuring different routes separately, or perhaps zones. This will help put a price on the safety of each route or zone! There will be some transaction cost, of course, but price discovery will happen, and we will be able to put a price on risk!

But then, this is all wishful thinking. It is unlikely this will happen because:

1. Given the cash accounting system followed by the railways, there is no incentive to hedge contingent liabilities
2. Buying insurance means increasing scrutiny. The railways will not want to be scrutinized too hard. It is currently an opaque organization and it will want to be that way.
3. Given the railways are wholly government owned and there are government owned general insurers, there might be some collusion which might  result in underpricing the risk.
And so forth…

Nevertheless, the point of this post is that it is possible to put a price on safety!

Spending on Indian Players in IPL Auctions

In the first IPL Auction in 2008, teams spent an average (median) of 47% of their overall spend on Indian players, the rest going to foreign players. By the time of the auction in 2011, however, they had wisened up to the fact that only four foreigners can play in the eleven, and the average (median) spend on Indian players went up to 65%.

How did different teams fare on this count? The following graph describes this (I’m generally not a big fan of “dodged” bar graphs but couldn’t think of a better way of representing this data. If you have any ideas, do let me know).

foreignspend

 

As you can see in this graph, most teams significantly increased their spending on Indian players. The only teams that failed to do so were Deccan Chargers (who performed really badly and then dropped out of the IPL), Kings XI Punjab (performed badly all three seasons) and Rajasthan Royals (who built their team around “uncapped” Indian players who were not part of the auction).

It will be interesting to see what this ratio is like in the following auction.

 

 

 

 

 

 

 

 

 

Commute Distance and Prosperity

There is an interesting report on The Hindu Blogs about commute distance and prosperity. Referring to a World Bank report in 2005, the blog post talks about richer people commuting longer distances to work. Rukmini S, who has written the piece, also finds from the latest NSSO data that richer states in India have a higher proportion of people commuting more than 5 km to work.

I didn’t like the visualization (or the lack of it) in Rukmini’s article, and hence this post. I thought the point about long commutes to work and richer states would be better made in a scatter plot, and that is what I produce here:

commutegsdp

 

On the X axis is the proportion of the Urban population in each state that commutes over 5 km to work each way. The data is from the latest NSSO Survey (page 28-29). On the Y axis I have a measure of the level of economic activity in a state – the per capita Gross State Domestic Product. The advantage of this measure is that it takes out from the equation the size of the state itself, and instead focuses on the level of economic activity per person. The figures are from 2011-12 and the numbers are based on 2004-05 prices. The data is from the RBI website.

The correlation is clear – barring a few small states, the above plot clearly shoes that more the proportion of people that commute long distances to work, the greater the economic activity in that state. The question, however, is whether there is a causal effect and if so, in which direction – does people traveling longer distances cause greater economic activity or does greater economic activity lead to people commuting longer distances?

The world bank paper proposes that the more well to do commute longer distances only because the cost of local transport in Mumbai is high and the poor cannot afford that. This is a view that Rukmini endorses in her piece in the Hindu. The argument doesn’t particularly make sense, though. Do the world bank researchers intend to say that transport costs outstrip housing costs in prime areas in Mumbai? If so, it is extremely hard to believe.

At the state level, one possible reason why people in richer states travel more is because greater economic activity happens in bigger urban agglomerations. The economic activity of a town or village is a super-linear function of the number of people living there. And when you have larger urban agglomerations, people tend to live farther from their workplaces, and thus commute more.

Again – this is a chicken and egg problem – a level of economic activity in a town or village leads to increase in population, which results in greater commutes. Increase in population leads to even greater economic activity, and this sets off a virtuous cycle. The 20-fold increase in Bangalore’s population in the last 70 years can be attested to this cycle, and it is hard to put a direction of causation to it.

The above explanation, however, doesn’t explain the following graph. This graph is identical to the one above except that here we look at the proportion of rural residents who commute over 5 km to work. And this is again positively correlated with economic activity!

commutegsdprural

 

What can possibly explain this? One way to explain this is that when people stay close to a town or city with high economic activity, they might prefer to participate in that rather than working in the village itself, and thus they might be commuting longer distances. States with high economic activity are likely to have a larger number of villages close to urban/semi-urban centres of high economic activity, and thus people are likely to travel longer distances.

When more people are willing to travel longer distances for work, it leads to people coming together to work at a higher rate than it normally happens in a village, and this leads to higher economci activity! Again, it is hard to put a directionality to the causation!

Why I became a Liverpool fan

In mid-April 2005, I was on the District Line train from Mansion House to South Kensington, in London, and in the Victoria station, a huge number of people got on to the train. They were all dressed in red, and carrying Liverpool scarves and cans of Carlsberg beer. They were on their way to Stamford Bridge, to watch Liverpool take on Chelski in the Champions League semis at Stamford Bridge. And they started singing. 

It was magical, as they first sang “you never walk alone”, and then followed it up with personalized songs for each of the players, and for the coach Rafa Benitez. I remember one going “Steve Gerrard Gerrard, pass the ball forty yards .. ” . And another, to the tune of “La Bamba”, going “Rarararararafa Benitez, Xabi Alonso, Garcia and Nunez” (honouring all the Spaniards in the team). I was sold.
Till then, I hadn’t been much of a football fan, though I would watch the odd World Cup or Euro game. I had never really followed club football, and never supported any team. That day, things changed. I went to a crowded pub in Kensington to watch the game, perhaps I was the only Red fan there. I got to know the names of the Liverpool players (I’d heard of Gerrard and Milan Baros thanks to their exploits in Euro ’04, and I knew Alonso, Garcia and Nunez (never saw him play) thanks to the song). And quietly cheered for Liverpool in that semi final.
It has been a roller coaster ride for the last eight odd years, with more downs than ups. The undoubted high came just a month after I’d declared myself a Liverpool fan, when they came back from 0-3 down to beat Milan in the Champions League finals in Istanbul. There have been several low points, the one that hurts the most is them failing to win the Premiership in 2008-09, when they came a close second. And then, they were to sell Xabi Alonso, who had been my favourite player.
The kind of passion I feel when I watch Liverpool play is unmatched, even by what I feel when I watch the Indian Test cricket team. There is a kind of tension that develops that I seldom feel otherwise. The disappointment when they lose (or fail to win) is the kind that I normally reserve for personal debacles.
And to think it all started with a random train ride with a bunch of loud drunks.

Baptists and Bootleggers: Karnataka Edition

“Baptists and bootleggers” is a popular concept in economics. It is used to illustrate that in the absence of sound economic thinking, good intentions don’t count for much. According to this concept, baptists want to ban the sale of alcohol on Sundays because it is the day of the lord, and they don’t want people to be drinking that day. And this plays out directly into the hands of bootleggers – who make a living supplying people their booze on Sundays.

So by calling for the sale of liquor to be banned on Sundays, baptists are essentially encouraging an illegal activity and an illegal trade. If not for the baptists, people would be able to buy their liquor legally on Sundays, and bootleggers would be out of business.

There is also a social cost to policies like this – by pushing an activity (such as the sale of liquor on Sundays) underground, you encourage nefarious elements to get into business, rather than keeping it in clean hands. And this is likely to increase the overall rate of crime.

Thus, by their supposedly moral position that alcohol should not be sold on Sundays, baptists actually end up unintentionally encouraging crime!

A similar story to this has been playing out in Karnataka in the last twenty years. For whatever reason, in 1993, the government of Karnataka decided to freeze the total number of liquor licenses in the state. Since 1993, if you want to open a bar or a liquor shop, you need to purchase a license from the secondary market. Effectively, for every new liquor outlet, some outlet somewhere in the state has to close down (whether such closure is usually voluntary or not is left as an exercise to the reader). This increases the cost of liquor intermediation in the state and leads to higher prices for the consumer.

While higher prices may be desirable for “sin goods” such as liquor, there is a better way for the government to increase consumer prices – by levying higher taxes, which ensures that the additional money thus paid by the consumer flows into the government coffers. By limiting the number of licenses, however, the government doesn’t get extra revenue.

Instead what this encourages is illegal sale of liquor! That there is a limit on the number of liquor licenses doesn’t push down people’s need for liquor. And they end up buying liquor from illegal sources and bootleggers, and it becomes difficult to maintain quality and hygiene standards on such sales. And with a bar having to close down for every new one that needs to open, you might imagine the kind of characters that might get involved in the process.

Back in 2008, a friend was trying to start a lounge bar, and he mentioned that he had to pay up to the tune of Rs. 30 lakh to get his license, while the official price is about a tenth of the amount. It is obvious that not all the money he paid for his license went to the government’s coffers.

Where do the baptists come here? Because every time there is a proposal to increase the number of liquor licenses, you will have a wave of morality which protests this decision. They are the baptists who keep Karnataka’s bootleggers in business.

Also read this piece on the funny rules of Karnataka’s liquor licensing regime.