The Unusual Suspects Of Consumer Surplus

It was the year 2000 when an attempt was made to make purchases online instead of the buyer being physically present in a market place. Following, many ups and downs sometime after 2005 online purchases through website or an app picked up. Today many consumers who are willing to spend more time, efforts and costs for obtaining goods/services easily, love this unusual trend!

How can anyone shop without physically feeling or experiencing the goods/services available virtually?

To solve this mystery, I listed down a few usual suspects … like the Internet, electronic devices (mobile phones/ computers) and Social Media businesses. But there might be more to these suspects than its meets the eye.

With the tip of my fingers acting as the quizzing glass, I hysterically began probing the suspects involved in this investigation. And what I found was the most remarkable although apparent perpetrators who have enabled this trend to grow dramatically.

On one of my WhatsApp groups, a friend was looking for home remedies for treating fever/flu among her kids. Another friend was looking for an alternative to lead-based non-stick cookware on the same group. Within minutes, answers were instantly exchanged and both the friends got what they were looking for at minimal costs. As I probed into this further, I found out that the homemakers in our group contributed to sharing most of the information about relevant markets for select goods and services…creating a CONSUMER SURPLUS!

Intriguing, isn’t it? My friends are able and willing to spend lot of money, time and effort for searching for specific goods/services. But my homemaker-friends directed them towards specific markets, brands or shops/people, thus reducing their time, effort and costs of searching, choosing, and purchasing, thus creating a consumer surplus.

Homemakers …are the real suspects, whose contributions are excluded while calculating India’s GDP…And without them the other three suspects make no sense at all!

Note: This blog was first published on CuriousEconomist.in on April 5, 2016 at http://curiouseconomist.in/363-2/

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Water Woe-nomics – Ranting about the Dark Side

WE, water hoarders…are we irrational, you ask?

(The last blog left my Paranoid-Obsessive-Compulsive-Melodramatic (POCM) self a bit disturbed…I’m letting her express here in Italics while I restrain myself to communicating within brackets.)

Look…I may be crazy but not spiteful like those water wasters and water robbers who have deliberately bursted the water pipelines in Mumbai /Thane. And what’s with their childish attitude…”If I don’t get water, then no one gets water”. It is because of those MORONS that we chose to fit a water tank at the first place. And you call us irrational?

(Not exactly irrational, but was thinking in lines how unfair it could possibly be or some people who have large families or cannot afford to hoard water)

What do you mean unfair to them? Who asked the same people to bribe the water officials to fix the pipelines which continued to get tampered every year and now this trend has become a normal thing! Google it…Google it now…I’m not lying! This happens every year!

(Err…The news does not talk about bribes…what you heard about bribes was hearsay!)

HEARSAY! (Oh dear! Am I only one feeling this heat?) Hearsay got the people of LATUR seem like the most violent people on earth according to the state government. They must have been thirsty, hungry, and diseased… and most of all not BATHED for days. Expecting them to begin water riots in their condition is outright crazy. And what kind of rule is this according to Section 144 that restricted people from gathering around a source of water in large numbers? Who got Latur to this point of water scarcity, heh? Why are the farmers in Maharashtra killing themselves? Don’t blame it on lack of rainfall! Blame it on growing water-hogging crops like SUGARCANE, the industry lobbyists …aarrrggh!

(Err…you are losing focus!)

I cannot believe this! How am I losing focus? If it is anyone in this world who is losing focus then it is the people of Delhi and the Indian Army

(Now, I didn’t see this coming…from bursting pipelines to Indian Army? What IS going on in my head?)

There is a water scarcity in our country, my friend! How can we use water as HOSTAGE? Sabotaging the flow of water just to flex your power and control over certain sections of Delhi city! And when this supressed section protested, the army was sent to control them leading to few people dying…HOW INSANE IS THIS!

(Well! She is right…it is insane. And it will be more insane if I sounded like Marie Antoinette, “If you cannot drink water, drink wine.” Sigh! There are some crazy choices made by government, businesses, communities, or people at large. I really hope we find a long-term solution against water scarcity)
(To be Continued…)

Note: This blog was first published on CuriousEconomist.in on April 20, 2016 at http://curiouseconomist.in/water-woe-nomics-ranting-dark-side/

Water Woe-nomics – The Rise of Water Hoarders

Water only for 2 hours!!! How will we clean dishes, wash clothes, BATHE!…no water to drink, no water to cook, no water to clean…We are all gonna DIE!!!

While my Paranoid-Obsessive-Compulsive-Melodramatic (POCM) side continues to panic, let me take you through the list of events that invoked so many personalities of mine, in unison. It all began in December 2015… Water supply was provided all days in a week except on a Wednesday and we were advised to store water for drinking and cooking between 6 am and 9 am. This trend was replaced with water-cuts for every Wednesday and Thursday in January 2016 and then Wednesday, Thursday and Friday in early February. And now, water cuts mean that water will be available, every day but only for 2 or sometimes 3 hours every morning with no water supply for the rest of the day. And that’s when my multiple personalities erupted every morning when I exasperatingly addressed to cleaning, washing, bathing, and storing (of water) processes within those 2 to 3 hours.

My reasonable side tried explaining (to myself) that scarcity of water is not an unusual phenomenon especially in suburban Mumbai when water woes have existed irrespective of rainfall. Water is not a free good. And, if it is scarce then it means that our municipalities do not have enough productive resources to fulfil our needs. In other words, it means that the demand for water seems excessively higher than the supply during scarcity, particularly with the summer already setting in.

“Yea, very hot, sweaty summer,… AND! I smell of armpits other than my own”, complained my paranoid self after travelling via multiple modes of transportation for 2 to 3 hours from metropolitan area (where I work) to the suburban area (where I live) of Mumbai. My husband, who usually chose to stay away when my POCM side erupted, reluctantly interrupted and pointed me towards a 300 litre water tank fit in the bathroom. He calmly filled up a bucket of water (from the tank), pulled my arm towards the bathroom door and locked me inside till I kept calm.

It was only then that I could see what my reasonable side tried explaining. Scarcity of any resource does not necessarily involve going to the brink of insanity but making certain choices in our lifestyles one of them being choosing to fit a 300 litre water tank in the bathroom and later fitting another 350 litre water tank in the kitchen like other (calm) residents of our housing society leading to water hoarding.

So we are not gonna die …yet! But is water hoarding good or bad? Is it rational or irrational?

(To be continued)

Note: This blog was first published on CuriousEconomist.in on April 15, 2016 at http://curiouseconomist.in/water-woe-nomics-rise-water-hoarders/

The Mocking-Ghosts of Economics

“Really, no plans for a family!” exclaimed my friend whom I had met after 5 years since his daughter was born. “It’s our lifestyle choice”, I answered hesitantly, while waiting for a response that would probably link how we broke our parents’ hearts by not allowing them to be grandparents OR search for good fertility clinics with our lifestyle choice. Instead, he remarked, “This does not make any sense. My wife and I work harder every day because we need to care for ours and our five-year old daughter’s future. And, that is how our work makes sense.”

Before I get into my argument for and/or against my friend’s remark, which is the crux of this blog, let me first introduce our lifestyle choice to you dear readers. We, as in my husband and I, follow what Census India calls as the “DINK” lifestyle or Double-Income-No-Kids lifestyle. And, (we) urbanites following DINK constitute to about 26% of total households with working persons. Surprisingly, DINK lifestyle is more popular in rural India which comprise 35% of total households with working persons probably suggesting their aspirations to be more towards a cosmopolitan lifestyle than us urbanite DINKs.

So is my friend right about DINK lifestyle not making any sense? I suddenly wished for the presence of dead/alive economists and probable theories, which could have easily rescued me in this conversation. And, the wish came true! The ghosts of the past economists joined our conversation but these ghosts were hardly of any help to me!

Thomas Malthus’s ghost agreed with my friend by pointing us to his essay on Principle of Population that indicated if an individual’s levels of subsistence increased then they tend to multiply causing an increase in population. But critics of Malthus countered him by linking rising population with depletion and scarcity of resources.

Joseph Schumpeter’s ghost added to my friend’s remark, “DINKs are these disintegrating-bourgeois couples…breaking all traditional rules, causing a decline of the family as a social, economic and reproductive institution.” Thorstein Veblen’s ghost didn’t help either who slyly said, “You DINKs must be some elite club members now directing your life only in luxury, health and fitness which is this latest fashion among YOU elite. Or you must be owning a Jaguar or Rolex watches eh?” Now, how did Thor know about the club membership and watches, I thought creating a bubble around my head, when Ernst Engel entered the scene and popped my thought bubble with his pompously sounding answer, “Because of my law!…Rise in incomes will lead you to spend more money on conspicuous goods/services rather than on necessities”. And all ghosts laughingly agreed to each other, mockingly calling me a DINK…DINKY and laboriously teased me. One random ghost also predicted alienation and polarization of DINKS making me wish for my disappearance from the conversation, the city, the society, the world!

But my good friend, who intently listened to all economist-ghosts mocking me, opportunely snapped a question that changed the tone of the conversation. He curiously asked, “Don’t you get the time to spend among yourselves where both of you could do anything together …like travelling, movies, plays/theatres?” To which I added affirmatively, “Books, concerts, adventures, and most of all pursuing the kind of work we really loved and are passionate about”. My friend sadly exclaimed, “I wish I had not fallen into this trap if you would have met my wife 5 years ago and explained what loving your work (including fun) really meant!”. Suddenly, all economist-ghosts hastily exited the scene leaving me (alone) with my friend who now continuously ranted about how he juggled between his work-life, personal life, his family’s multiplying needs, and repairs/maintenance of his Honda car!

Note: This blog was first published on CuriousEconomist.in on March 10, 2016 at http://curiouseconomist.in/double-income-no-kids/

A Two Rupee Coin Endowment

She was young, attractive, strong-built and her clothes/accessories along with her body language made it difficult to distinguish her from other ladies in the compartment. Nobody noticed her until she strutted across the compartment clapping the palms of her hands that made a noise short of a clap, gesturing blessings upon us by placing one (right) hand on every passenger’s head and stretched the palm of the same hand on our faces for money.

This transgender could have easily been one of us…travelling by train to work in a bank or a company managing or working with a team of her colleagues or was self-employed, probably earning an income or generating revenues and contributing to India’s productivity and economic growth. Sadly, she does not contribute to anything!

Instead, states in India (like Kerala) are attempting to bear huge costs of providing access to health, sanitation, education, training and employment, through subsidies, loans, etc., to transgender population (like this lady), which we as mainstream individuals would refuse to give them on our own.  And this could probably result into… (Drumroll in the background)...a “Market Failure”!

Gary Becker’s work on the Economics of Discrimination can be considered to explain this probable failure. According to Becker, a firm that discriminates minorities by paying them lesser than the non-minorities could incur huge costs of transaction for achieving higher productivity from the minorities. Thus, the prices of products produced by this firm could be higher than the prices of products produced by non-discriminating firm that encouraged higher productivity among their workers through competition. This essentially would mean that competition (in employment) could lead to less discrimination and in turn enable the prevalence of competitive prices.

In the context of my example, the firm can be swapped as the government while the discriminated-minorities could be replaced as the transgender population. Then as per Becker’s explanations, the government would expend huge (social) costs to accommodate transgender population within our strange society thus directing unequal distribution of resources towards such accommodation. This could create distortions in prices of products/services provided by transgender Population in comparison to prices of products/services provided by similar products/services producing firms.

“What a mess!”, I thought and quickly dug out a two rupee coin from the clutter in my bag pack. When I placed it on the lady’s palm, she pressed both her hands on my head muttering some blessings I could not understand.

But was it empathy or guilt? And, what does it mean to give away a two rupee coin to the transgender? Will that get her the opportunity she was deprived of?

“We humans are inherently flawed!”, vehemently exclaimed Rohit Pandey, a student at MDAE. And he continued to explain how all (kinds of) people cannot be mobilized together unless there was a common endowment in place for us to achieve.

So did he mean I should have given two thousand rupees to the transgender and felt more empathetic and less guilty?

Let me elaborate with an example. In the movie Lagaan, the main protagonist mobilised a diverse team of men (but no women and/or transgender) with specific skills to play a cricket match against the British. This team represented individuals from different ideologies, cultures, traditions, abilities and socio-economic statuses. But when few team members expressed their inhibitions to play (despite being strong, well-built and skilled) with certain team members who according to them represented unfavourable socio-economic status & physical disabilities, the protagonist directed them towards a major endowment that they would probably achieve if they placed their inhibitions aside and let everyone play cricket together after winning the match. That endowment was – No taxes on Returns! [Did the finale of the movie reflect any externality/ties?]

But are endowments enough to free the minorities from their misery, exploitation or discrimination?

Note: This blog was first published on CuriousEconomist.in on March 12, 2016 at http://curiouseconomist.in/economics-of-discrimination/

Peach-a-licious Lemonade

We got fooled into buying a Lemon instead of a Peach in 2005! …is the plot of this blog.

And, the main characters are:

  1. The buyers – My husband and I
  2. The seller – the owner of so-called Peach, an American citizen of South Asian (Desi) Origin
  3. The Peach that was actually a Lemon – A second-hand Nissan automatic car manufactured in 1994/5, which was bizarrely ‘Peach’ in color!

So, how did we get fooled?

Here are the simple steps undertaken by the seller:

Step 1: Attract the buyer by suggesting that he/she resembled a Bollywood actor/actress

Step 2: Distract the same buyer by narrating their numerous personal problems and struggles about living-alone in America without family/friends’ support

Step 3: Pretend to forget mentioning about the problems with the car’s brakes that were supposed to be amended (by the seller) prior to its sale.

I know! Step 1 should make anyone squeamish and Step 2 should make anyone concerned … but Step 3 was unacceptable as per Akerlof’s paper on Hidden (or asymmetric) information and the Lemons Market!

We confronted the seller and argued about the price of the car to be $1,995, instead of the $2,500 that we’d paid, as suggested by Kelley Blue Book. Oddly, the seller shrugged and brazenly repeated the above mentioned Step 1 and Step 2, invariably making us feel stupid about ourselves.

Sigh! Dejectedly, we paid the extra $275 to the mechanic for transforming the Lemon into Peach again. But when the day of our road trip befell, the transformed Peach ran remarkably across the beautiful Californian wine region to Santa Clara where our family yearningly awaited our arrival.  Peach went on to serve us very well until it broke down in early 2008… same year when we relocated to India.


Note: This blog was first published on CuriousEconomist.in on March 17, 2016 at http://curiouseconomist.in/step-step-guide-fooling-someone-buying-problem-car/