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 on April 5, 2016 at

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 on April 20, 2016 at

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 on April 15, 2016 at

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 on March 10, 2016 at

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 on March 12, 2016 at

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 on March 17, 2016 at

Budget…and all that Jazz!

My first encounter to India’s Annual Budget (event) was in 1997 when the then Finance Minister, Chidambaram’s ‘Dream Budget’ was 13-Budget-box-IndiaInk-slide-Q99W-articleInlinetelevised live. I sat right in front of the TV with a notepad and pen to write about “my findings”…like I was some investigator solving an Economics’ puzzle. I didn’t understand the importance of the hype created behind this speech. Was it because it was televised live or was it because  India’s economy was ready for an economic boom or was it because this was my first attempt to relate the economic affairs of our country with everything I was learning about economics?

confusedbjIt was definitely, a hype! And, I can easily say that today. But in 1997, I was embarrassed to admit that I understood nothing about Chidambaram’s passionately articulated speech, which left me confused. Luckily then, I also had (and still have) honest friends, who felt the same way; they too, considered this event to be a marketing gimmick by a new or existing government.

So here are some pointers you need to consider before feeling confused about the budget.

  1. The annual budget is a plan. A plan for how much money will be allocated to execute and implement many schemes
  2. This scheme can be anything that can affect the whole economy like plans for infrastructure, hospitals, etc. OR schemes for specific sectors like Power and Defense or for all businesses like the implementation of Goods and Service Tax (GST) OR for a specific cause like the “Beti Bachaao, Beti Padhaao”
  3. The plan does NOT in any way influence growth and development of the economy during announcement. It may NOT even influence growth and development during that year either (Refer to Trickle-down Economics blog)
  4. Since it is a plan, it goes through a process of approval (by the majority) in the Lok Sabha and Rajya Sabha
  5. Once the budget is approved at the central level, the same process is continued at a State level. The approval is based on the state finances and how much states’ can budget them for implementation
  6. Accordingly, all schemes under the budget may or may not get approved at the Centre and/or at the State level
  7. Schemes that are approved across centre and states may not be allocated the budgeted amount because the budget plan does not include the money allocated for planning, execution, resources involved, monitoring and (pre and post) evaluation. Nobody knows how much money is really invested until economic surveys are published the following year which again provide estimates (Refer to Trickle-down Economics blog)
  8. It is a marketing gimmick because various socio-economic facts provided by the Ministry of Finance, Planning Commission, etc are supplemented with the budget, making it seem like our state affairs and relationships between governments within India and between countries abroad are happy and supportive. Reality is it creates a speculative environment of confidence which has never existed between ministers in India or abroad
  9. The stock market indices falling or increasing rapidly during the budget announcement is the investors’ way of expressing their confidence about the budget. But they are in NO WAY reflective of what 1.2 billion Indians feel. Stock market’s reaction must be always taken with a pinch of salt.
  10. Annual budget is also not a reliable source for determining whether India will experience good times or bad times. Economic fundamentals of the country should be cross-checked from newspapers, journals, articles, government websites and most of all keeping yourself updated with your surroundings regularly to understand economic conditions of our country is a necessity

My verdict: A slowdown in the economy was looming around India even before the new government’s budget speech. Let’s hope the plans get implemented


By Bhakti Joshi

Thank Heavens for the Greenery Around!

Imagine a snow-capped mountain and tree at its foothill. All of a sudden, the sun appears above, causing the snow to melt into a waterfall or a river that flows through across the land and reaches the roots of the tree located right at the bottom.  The tree leaves now bask in the sun and the tree itself rejuvenates with a display of flowers and fruits. It’s a perfect scenario, wherein all factors converge and unite to follow a ‘natural’ course, designed to benefit all that surrounds the space of the mountain.

The adequately melted snow (into water) and a fully-rejuvenated tree could serve as an analogy for understanding ‘trickle-down economics’….

…an accumulation of resources (tax money) or policy-level decisions are designed at the top level of our socio-economic system. These should be collaboratively executed and implemented by institutions like governments, corporates, investors, etc., to benefit  the entire society (at the ground-level).However, for the success of these policies, the above mentioned entities need to  unite  and work together, just like the natural rejuvenation system we mentioned above.

Take the example of, whether FDI[1] should be allowed in India’s organized retail sector, or policy measures like changes in the interest rate by the central bank to curb inflation or AGM[2]s by companies announcing profits made by companies. All of these are based on trickle-down economics, which begins with accumulating something in lump-sum from certain sections of the society (mostly rich), which gets indirectly redistributed to everyone equally. This could be through a cooperative involvement of many people like businesses, researchers, common people, legal entities, etc. This concept however, raises three questions:

Whether is it really possible that everything, that is accumulated, can be redistributed?

Can the redistribution be done equally?

Whether this benefits everyone at an individual level, specifically does it better an individual’s standard of living?

If we look at the world around us and our daily lives, we might find answers to the above questions. It makes us believe that trickle-down economics may not be working adequately and to its potential.

Huge structures fail to do so primarily due to lack of internal cooperation and greed for power causing rivalry within them. Lack of transparency and accountability are other deterrents to the success of the intent of ideas and policies. Rigid structures, made by people have become static like mountains that stubbornly refuse to move or explain their positions. That’s where the ideas fail and debates begin.

Only if nature worked in a similar fashion, mountains would be semi-barren and trees would be pale-green.

By Bhakti Joshi

mountain n tree

[1]Foreign Direct Investment

[2]Annual General Meetings that involve disclosure of the companies’ fiscal performance

Anything that shines… is now an Onion?

Why are there pictures of onions on engagement rings instead of diamonds floating across emails or social networks? Why are onion prices compared to rising petrol prices? And it has been 3 years…3 whole years since there were speculations regarding shortages of onions in 2010. It is true that shortages of any goods/services are one of the reasons for rising prices. Other reasons include wars or natural calamities or failed harvest or all the three aforementioned altogether. So did we really experience shortages, natural calamities or continuous war that has affected supply of onions for the last 3 years? Before we go into a complaining mode and mock rising onion prices to engagement rings, let’s look at what onions really mean to us? Yes, the demand-side!

Onions are mostly associated with Indians for their culinary usage. Every dish, vegetarian or non-vegetarian (besides Jain food), requires onions. Onions complement every dish in taste, color, texture or aroma. It also has several medicinal properties but we needn’t even get there. In the context of economics, onions can be considered as complementary goods and I cannot think of… or do not know of an immediate substitute to onions. Now, complementary goods like onions are interrelated with the use of paired goods, just like sugar or milk acts a complement to tea, or chutney to idlies, etc. But onions are mixed into various food items…so they could be paired with cereals like RICE and WHEAT (rotis or Indian tortillas).

You might wonder how onion prices are associated with rice and wheat? Well! Let me clarify one thing about the usage of onions…It’s a vegetable mixed with other vegetables or meat to prepare a food dish. This food dish can be eaten either with rice or wheat (rotis) or both, which is how onions indirectly complement rice and wheat. To make things easy we can divide our country’s eating habits into rice eaters and wheat eaters. Being vegetarian or non-vegetarian is secondary and use of onions among vegetarians (minus Jain food) and non-vegetarians is mostly mandatory. And yes, you are thinking right. Rise in prices of onions will have a ripple effect on prices of other vegetables, meat, etc. Don’t you hear people talk about the rising prices of eggs and coconuts? Coming back to association of onion prices with rice and wheat prices…In economic terms, prices of goods that complement other goods usually have a negative relationship, which means a fall in prices of goods like rice or wheat should lead to an increase in the prices of complementary goods like onions. For example, when you go to watch a movie in a movie theatre, prices of popcorn are relatively higher than the market prices. It is like generating extra profit from a complementary food product like popcorn along with the purchase of a movie ticket.

Let’s look at some supply-side statistics also. According to the Food and Agriculture Organisation (FAOSTAT) India is the world’s second largest producers of onions and rice, following China and the third largest producer of wheat. Onions, rice and wheat are harvested twice in a year so that we can consume them throughout the year. And…we also export them to various countries across the globe, earning Rs. 1,967 crores from onions’ export, Rs 33,858 crores from rice exports and Rs. 10,529 crores from wheat exports as on FY13. Did you see that? Some 5-DIGIT crores of money from RICE and WHEAT exports!

The fact that we can export these agricultural products would mean that there is more than enough available in the domestic market. Exports, brings us to another phenomena that may have added more oil to the rising-onion-prices fire. RUPEE DEPRECIATION! Currently, the value of the Rupee is about Rs. 62 to a US dollar and at the same time this year in 2010, it was valued at Rs 45.06 to a US dollar. The value of the Indian rupee fell by Rs 17 in a span of 3 years, which may depict instability in both India and United States (which could be a different blog and I won’t digress into that now). Now to understand how rupee depreciation and inflation are related, you will have to ignore the instability bit and focus on exports earnings of onions, rice and wheat. So while you may think that the value of the rupee has lost value, we have earned more through rice and wheat exports making the prices for rice and wheat in domestic markets cheaper. India’s food prices are usually relatively inexpensive and foreign markets -want to buy these food items but for that they would need to buy India’s currency. An increase in supply of currency for foreign purchases of goods like rice and wheat (we export many items other than food) leads to depreciation. While foreign countries purchase more rupees, domestic prices for rice and wheat lose value and start declining, and this has really happened. If you check rice and wheat prices month-on-month or month-on-year for the last 3 years, they have gradually declined. With falling prices of rice and wheat, something that is dearer to us without whom the taste of the bhendi (okra) or butter chicken is incomplete …the onions… had to face the brunt L

Could this have been avoided? Yes! Through foresighted monetary policies but we were busy being greedy or being over-confident about our capabilities. Our standard of living did not exactly adjust to profits we earned with the depreciation and we never adjusted the wages to the inflation either. I fail to understand where that depreciated money’s profit has gone or is still going…Maybe I’ll figure it out and explain it in another blog, till then the questions or challenges to explore from this blog are:

– Whether the relationship between prices of onions with prices of rice and wheat is negative?

– Whether rupee depreciation has any relationship with inflation in India and prices of rice and wheat in particular?

– With the cyclone hitting Andhra Pradesh what will happen to onion prices?

Somebody? Anybody?


By Bhakti Joshi