Tuesday, November 25, 2008

Analysis Of The Disparities Between Nations - Part I

Well, the video did set me thinking on one angle. Scandinavia (Sweden, Finland, Norway and Denmark) pays a lot of attention to inequality. Throughout Europe there is a strong thread of socialism in society. This can be witnessed in the high tax rates and excellent social security systems.

For example, primary and secondary education is free in Finland and in some cases even undergraduate education can be free. Tuition fees at undergraduate levels are quite nominal throughout Europe in government funded schools. And if you can prove your financial difficulties, then state aid is assured. Compared to our own socialist experiment, we would expect that government funded schooling = poor quality education. However, the bulk of the population in Finland goes to the government funded schools. If the quality of education were poor, then a market for private schools would have emerged. But from what I know, it is not the case.

However, this does not mean everything is hunky dory. There is one section of people that really finds it hard to make ends meet. My observation is that this section is dismissed as "bums" or "drug addicts". The argument is that, if they are in their plight inspite of all that the government does for them, well, it cannot be helped. In that sense it can be pretty tough for a few. It is not a perfect world but broadly, the western European nations appear to have done a good job.

But how do we test this or quantify this? The most commonly used metric for inequality is the Gini index. The Gini index is based on the Gini Coefficient which is calculated as follows. Let us play around with some statistics.

The data was taken from Human Development Reports. I had to make one assumption to smooth over data issues. The Population and GDP Per Capita figures in the excel sheets are for 2005. When I try to access the Gini Index data for 2005 it links to the 2007-08 data. I have assumed that the situation has not changed too much in the past 3 years in terms of inequalities.

Here is a list of top 15 nations in the Gini Index. I have also included the US and the BRIC countries. The analysis is based on a sample of 126 countries.

The Scandinavian countries are all in the top 10. But other than Japan, the rest of the company is not exactly enviable. Slovakia, Bosnia and Herzegovina(!), Hungary, Ukraine... Purely from casual reading we know these nations are not exactly the kind of nations that the world wants to emulate. Therefore, it appears that most of the equitable nations in the world are equitable because they appear to make everyone poor! The Hindu rate of growth!

Let us look at the BRIC countries. Amongst the BRIC countries we seem to be doing the best. We are at 54 while China is at 93 (yay!?) and Brazil at a really low 116. However, doing good on the Gini scale may not be such a great thing as the previous table suggested. That great model for the world (not anymore?) US is at 71. So only do nations that have low prosperity end up with a high Gini score? How do we measure prosperity?

One measure applied for prosperity is GDP per capita. GDP per capita has some flaws since it is an aggregate measure. But since we are taking that and Gini index into account, it should be an interesting exercise.

This makes more sense doesn't it? The ones whom we thought as not worthy of emulation have low GDP per capitas. Bosnia and Herzegovina has $2500, Slovakia at $8616, Ukraine at $1761. The Scandinavian countries stand out here too. Sweden has $39,637, Denmark at $47,769, Finland at $36,820 and Norway at a whopping $63,918.

Looking at the BRIC countries, there does seem to be an inverse relationship between Gini Coefficients and GDP Per Capita. Can we not grow without increasing inequality? (Afterthought, the same analysis will be better done with PPP adjusted GDP Per Capitas)

Let us do one thing. Let us take the nations with the highest GDP Per Capitas and check out their Gini Indices. Remeber when it comes to Gini Index, lower is better.

Interestingly, among the top 25 GDP per capitas we have countries like Qatar, Kuwait, Bahrain. These countries are there on the strength of their natural resources and comparing them is really not going to help us. Let us drop them and build a new table. And the BRIC countries were left out in this one.

(I could have skipped it, but really just wanted to illustrate a point. I also wanted to show how thinking processes really are iterative. When we read from textbooks, we read the end result of a thought process. Unfortunately, the thinker rarely gets to that stage without many a slip betwixt the cup and the lip.)

Okay, last one, I promise. This one shows the GDP Per Capita rank and Gini Index rank for nations.

A cursory glance seems to satisfy the hypothesis that the most prosperous are quite unequal. Let us look at those that have done really well. I define "successful" nations as those whose difference between Gini ranks and GDP Per Capita ranks is not greater than 10. (It is an arbitrary cutoff)

Those are: (Drumrolls please)

Norway, Denmark, Sweden, Netherland, Austria, Finland, France, Canada and Germany.

And what do you know. Barring Canada, the rest are in Europe. I know that they have a strong socialist philosophy. But how come socialism works for these people while it does not work for Czech Republic, Bulgaria, India, China?

Or wait, are these metrics developed in Europe? (!) Is it the result of a built-in bias in the metrics?

For a moment let us discard the "skewed metrics" theory. The question that remains is:

What went wrong with the socialism of India, China, Czech Republic, Bulgaria, Slovakia, Russia yet works for these countries?

PS: I had a fun 2 hours playing around with data. Another delectable tool for data handling is GapMinder. Check it out! Playing around with data could lead to interesting observations and voila you have a theory of your own!

PPS: What was the purpose of all this? In addition to raising some questions, I also wanted to demonstrate how to go about thinking about national development. I also observed that in the western world, there is a lot of obsession with development and growth. Maybe we could take a lesson or two from that.

A Matter of Perspective

I came across the following video from a friend's GTalk status message. You would have most probably watched this video, either on someone's status message or in a forward. It would have definitely provoked some emotion simply because every viewer identifies himself or herself with one of the respondents on the video. In that way, it is a pretty nice video. 

But it was interesting to see the comments. Some people got moved and agreed wholeheartedly. Whereas some others took the "heretical" stand and said, "Spend. That is the way to boost the economy". However, I was interested in some other things about the video.

a) Let us take the methodology. It is a survey and the question is fairly straight forward. "What would you do if you got Rs. 500?" Usually respondents are anonymous in a survey. It makes sense because that way people are likely to be more forthright with their opinions. On the other hand, this "survey" seems to reinforce the stereotypes. All the young people seem to have "frivolous" wants i.e piercings, booze (oh no!) and smokes (oh no no!), eating joints etc. And clearly, the sponsors of the video had a motive, there was a message they wanted to convey. So you can expect the responses to have been chosen with a bias. 

The reason this point occurred to me was I would have never said some of these things if I knew I was being filmed. My actual response would have been (if the survey were anonymous) "500... I will spend it on food." What would have happened is that it would have got spent on food, alcohol or a bus trip to Chennai. If I knew it were on TV, I would have said,"Buy a ticket to go home by Volvo bus" (Awww... :P) I think there is a term in Kotler for this, but I will call it "Posing effects". How you pose the question i.e wording as well as environment affects response in a very strong manner. (Is it called Framing Effects?)

Therefore, I am pleasantly surprised that some people were frank enough to admit what they really wanted. In Indian society, I believe there is a lot of false humility and false virtuousity that goes around (yours truly included) and if people are coming on TV and saying what they would really think, 3 cheers for that. 

Another feature of presenting such a survey is that the viewer cannot help forming a moral judgement on the respondent, because the viewer now has well... additional data - body language, face, clothes etc. Imagine an older person seeing the guy who said he would get a piercing or the girl who said she would get a haircut, the temptation to form a judgement is inevitable. Again, the question is just "What would you do if got Rs. 500?" The respondents may not have known the context their responses were going to be presented in. It may appear that some people are staggeringly selfish. But how do you know the respondent does not do some sort of charity already. If I gave Rs. 1000 from my income as a habit to charity and spent this Rs. 500 on alcohol would that make me good or bad? Also I don't mean to trivialize but if you asked a kid how he/she would spend money, the response can never be booze or smoke or even piercings.

Again I think I am overthinking this. The video is pretty nice at the end of the day and very very thought provoking. I only wished they had shown the responses and left the ending as a question and let the viewer take away his/her own message. This led me to a different string of thought that I have published here.

Sunday, November 23, 2008

A Snowy Afternoon

I woke up today at 2 in the afternoon and it already felt as if the sun had set. I got up and groggily opened the blinds to my window to be greeted by the following view.

A better view from the window in the common area:

(The blurred image is not due to any of my mistake, the visibility was quite poor. Of course, this is just the beginning and it only gets heavier.)

It was snowing heavily! I usually do not get excited by this, but somehow the presence of snow and the layer of white on everything adds a very different kind of beauty to the whole environment. The whiteness everywhere sets a background against which anything coloirful stands out by contrast. It is as if the whiteness accentuates the little colour that is there. I am looking forward to the view in the night. The light reflecting off the snow seems to make the night brighter!The snow seems to have a "calming effect" on nature and everything grinds to a halt. It is the time of the year when the trees are dead, bereft of leaves.

The leaf-less trees reminded me of a story by O.Henry called the Last Leaf. (Actually Maro reminded me of the story in Amsterdam) I think this story was there in the CBSE English textbook. (It can be read here) The story is about two people, a sick girl and an old painter. The sick girl believes she is about to die and her time would come when the last leaf falls off a tree. The old painter, tired of his mediocre commercial efforts, is still in search of his magnum opus. Obviously, the two characters are connected by the leaf and read the story to find out how. It has a really nice twist.

Anyway, the best thing to do in this weather is to curl up in bed, drink something hot and just watch a lot of movies. This is God telling us humans to pack up and hibernate. Amen to that!

Current Track: The Nowhere Man by The Beatles

Saturday, November 22, 2008

Carnatic Music Primer

Last term I had taken a course called Tracking Creative Boundaries. During the course, the professor mailed us an excellent primer to understand the technical aspects of carnatic music. Like always, I did not read it during the course. (sigh... a bit of discipline is all I ask for :P)

This is a classic guide for dummies. The biggest stumbling block for many a beginner interested in classical music is the forbidding jargon employed by aficionados. As a general rule in life, I am suspicious of people who use too much jargon and I have always harboured a suspicion that most people who "ooh aah" about carnatic music may not really be that good as a beginner may think. (A bit more discipline and a little less cynicism... the list grows!)

Anyway, the treatment (if one can use that word) in these 4 parts is accessible, yet sufficiently technical. Most importantly, the language is easy to understand. I have read the first part so far and I have found the analogies very useful to get a basic picture. Enough talk! The links can be accessed here.

I really liked this, so at the risk of repeating myself, if you have always wanted to know something about carnatic music (or even just about music) but was scared to look like a dumbass, you just have to read these pages.

P.S: These are pretty long HTML pages. One easy way would be to ctrl-A, ctrl-C, ctrl-V on to a word file. It is unlikely you would read it in one sitting. I found it easier to keep track of where I was.

Wednesday, November 19, 2008

Resource for learning HTML

I am embarrassed to admit this, but I really did not know HTML coding until yesterday! It is so cold to step outside, I get out only when I have to. Gone are the days of walking by Helsinki's port, or the walks to Hietsu beach.

As a result of being confined inside and the absence of a TV and the presence of an awesome wifi connection, I spend an inordinate amount of time on the internet. I came across this site by Dave Raggett. You can find info about the author here.

The following pages give you a quick guide to coding up a half decent website. He has divided it into Basics, Advanced and Adding a Touch of Style. It took me around 3.5-4 hrs to do the whole thing. But that it is because I took lots of breaks in between which in turn is because I hate reading off the laptop screen. If you have always wanted to do HTML, but haven't, this is really a quick get to work kind of a guide.

Friday, November 14, 2008

The Rich Merchant

A rich man once gave his son 500 gold coins* for a trip the latter was going on. Once the son returned he inquired about his journey. After dispensing with the pleasantries, he came to the question he had been itching to ask.

"So son... was the money enough? How much did you spend?", he enquired

"500 gold coins", the son said.

"Haha... that was the amount I gave you. How much is left?"

"Nothing is left. First day we went on this boat trip, then had this delicious dinner..."

"What?! You mean to say you have no money left after the trip?", the father asked in an alarmed tone

"Was I supposed to?", the son said, bewildered.

The father snapped.

"You wastrel, you idiot, you pampered brat! This irresponsibility is your mother's fault! There was a time in my life I could not afford three square meals a day. At your age if my father had given me 50 gold coins, I would have spent 10, told him that I spent 25, put the 15 coins in the bank and returned the rest. I was expecting this kind of sharpness from you. Instead, you come and stand before me having spent everything. At this rate, you will just eat away all the wealth that I have amassed with so much care. What do you have to say for your irresponsibility?"

The son regarded the tirade coolly. He was used to it.

"Your father was poor, so you had to scrounge. My father is rich, so I don't have to!"


While this may seem frivolous, the fact is the retort is absolutely spot on. It is amazing how many authorities do not grasp the significance of this simple moral. Contexts change, moral views change, outlooks change. The best strategy to preempt rebellion is to take the European way and create a space for new outlooks within the existing framework.

Thursday, November 13, 2008

Corporate Finance Link

Stumbled on to Prof. Aswath Damodaran's page from a friend's status message.

If you have taken Corporate Finance before or even if you did and think that your teacher was the studdest prof. to take the subject, I would recommend the webcasts on Corporate Finance.

The website can be accessed here. To access the webcasts, click on Classes&Support -> Corporate Finance (Full Semester MBA Class) -> Webcasts.

Wish more people really tore apart the subject as Prof. Damodaran does!

Wednesday, November 12, 2008

Despatches from Europe*

A Grand Bollywood Museum?

Salzburg is beautiful. That statement needs qualification. Much of Europe is beautiful in its way. However, Salzburg's beauty is different from Paris. Paris is a big city which throbs with life. There is a hustle and bustle and the cafes which act as islands of calm from which you can admire Paris. Salzburg's beauty is one that calms the mind, soothes the soul, helps the mind pause before letting it soar again. If you had a nervous breakdown or wanted to write a treatise, there are few places to beat Salzburg. Talking of beauty in Europe, the cities are so well maintained and so beautiful that after a point it begins to fade and when that happens, the headiness induced by beauty is replaced by a void... a void filled by boredom. The flip side to perfection?

At the risk of betraying my philistine tendencies, I was not going to visit Salzburg! I thought of heading straight to Vienna, but there is a God and the proof of His/Her love was that I was not sleeping as the train pulled into Salzburg.

(Houses nestled in the hills. There was a fog when the train pulled in, which gave it an almost dream-like quality)

One of the must-see sights in Salzburg is the Mozart residence. They have an extremely impressive museum in what was formerly the residence of the Mozart family. I was a bit hesitant to enter. The entry fee was 7.5 euros and I really do not know too much about western classical music. But enter I did and glad I was.

When you buy the ticket, you get an audio guide along with it. This is a really simple and handy device. The museum itself is very small, just one floor. As you enter a room, there are numbers attached to the exhibit. You key in that number and a narrator talks about the exhibit, with classical music playing in the background and also mentions a line or two about the musical piece. This is a beautiful but simple innovation.

I think we should have a huge museum dedicated to Indian music with such an audio guide. I use the term Indian very specifically. In my view, Indian music should consist of Hindustani, Carnatic and Film music. This would throw the purists into fits of horror and if I had the money I would do that just to get sadistic pleasure out of it!

On a related note, I think we need to build a huge Bollywood museum in Mumbai or even better Goa. It would make oodles of money. I cannot count the number of people who have said, "You are from India? I really like Bollywood movies!" It is kind of important. The reason is... for much of the west, India is about living with poverty, snake charmers, the Apu trilogy, the caste system and now cheap outsourced labour. Even though I am not the greatest lover of Bollywood movies, they change that perception of India.

The Art of Correspondence and Ambitious Fathers

The Mozart museum houses a significant body of letters that were exchanged between Father and Son. The exchanges reveal a proud but protective father worried about keeping a mischievous son on track to what the former thinks is the latter's potential. Mozart showed signs of genius quite early in life, early as in 3 years of age not 15 years of age! Father writes the following about his son to a friend,"...A God has been born in our own Salzburg" Mozart's father was an accomplished musician himself and comes across as demanding. Therefore, one can imagine the worry he would have had to go through.

The letters reminded one of the lost art of the correspondence. Of course, in today's times, there is no need for long communication. In fact, it would be frowned upon. But as a consequence, the charm of reflective thinking, witty and cutting observations that delight are lost.

A biography of Nehru by M.J.Akbar draws extensively on the correspondence between Jawaharlal Nehru and his father Motilal Nehru during Jawaharlal's days in England and it throws great light on the father's role in the development of his son. If I recall right, (and correct me if you think I am wrong) Motilal sends a picture of English Governor Generals of India (or some such high post) and writes to the effect that he would like Jawaharlal in that position.

Of course, from one perspective such things place undue pressure on the child. But from another perspective, perhaps these parents played the role of protective guides, showing a path and stepping in when the person looked like he was straying too much.

Either way, somehow I left with the feeling that writing letters leads to a kind of fulfilling relationship that modern methods be it emails or chats miss out on. Of course, that does not mean one has to write on paper, but if one writes proper emails, the way your english teacher would have liked it, perhaps it is more fun.

(View of Mozart house)

(Another shot)

(Christian Doppler's house is next to Mozart's :) For a town of its size, Salzburg has produced many achievers. Must be all that beauty! However the Doppler residence seems to have become commercial space. Note the ad!)

(One can imagine Doppler working at one of these windows)

(How to talk Arty!)

* I have always wanted to write "Despatches from " :)

Monday, November 10, 2008

Wintry Nights at Scandinavia

View from my balcony at 5 pm :) Oh Sun Lord, where are thou?