What is sure thing principle in decision theory?

his refers to a logical principle which states that it is unnecessary to consider uncertainties while making a decision if these uncertainties will not affect the eventual decision taken by a person in any way. If an investor, for instance, will buy a stock regardless of the earnings of a company, it makes no sense to worry about whether it will report a profit or a loss. It is used to emphasise the point that it may be a waste of effort to consider the probability of various uncertain events if these events are effectively irrelevant to the final decision. The principle was proposed by American statistician Leonard Jimmie Savage in his 1954 book The Foundations of Statistics.

Source: The Hindu, 5/12/2018

The City’s Own

The centre and states must ensure that migrants are not denied dignity, rights

Prithvi Pankaj Shaw, whose original surname is “Gupta” and is based in Mumbai, hails from Gaya in Bihar. The 18-year-old cricketer has already broken most domestic records, before he was included in the Test team. However, there were reports doing the rounds recently about this talented boy being traumatised by certain nativist groups after he revealed his Bihari origins post his maiden ton, in the recently-held Hyderabad Test against the West Indies. Parallelly, an engineer and six plumbers of Bihari origin, working at a construction site in Vadodara, were beaten up for wearing lungis. All these incidents indicate a quintessential negative profiling of Biharis and Bihar. In the “metropolitan” city of Delhi, Doman Ray, a 32-year-old Dalit from the Katihar district of Bihar, got drowned while working in a Jahangirpuri sewer tank.

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The recent exodus of mainly Bihari migrants from Gujarat started when a Bihari labourer allegedly raped a 14-month-old girl in the Sabarkantha district of Gujarat on September 28. He was arrested soon after. But his dastardly act led to regional uproar and triggered a movement against Biharis and other north-Indian migrant workers. No doubt the incident was diabolic and shamed all right-thinking people in the country. The outrage may be genuine and not totally contrived. However, the Sabarkantha incident was indeed an aberration. The following outrage, therefore, can only be explained in terms of serious loopholes in the development model of Gujarat, the state which is now facing the crisis of overproduction.

Incidentally, the entire edifice of accumulation and super profits in the state is built around the migrant labourer, who faces dismal wages and poor working conditions. It is mandatory for the industries and employers in Gujarat to provide 85 per cent jobs to locals, but this was never followed because cheap migrant labour is available in abundance. The present problem of overproduction arose out of demonetisation, the absence of a new markets and a situation of almost stagflation. The consequent “banish migrant” movement in Gujarat is similar to the Datta Samant-sponsored strikes in Bombay during the early 1980s to bail out textile industrialists from the tangles of overproduction. One should also note that the efflorescence of Gujarat’s economy will not be complete without scripting the generosity of its industrialists towards its local employees, mostly at higher levels.

To dispel the stagnation in Gujarat’s economy, the news of a Surat-based diamond baron gifting 600 cars and 900 fixed deposit certificates as a Diwali bonanza to his employees, was highlighted. To give an extra punch to the event, it was so arranged that Prime Minister Narendra Modi himself handed over the car keys to those select few employees. There is, obviously, a clear contrast between the employers’ attitude towards local employees on the one hand, and the migrant labourers on the other.

Historically, in contrast to the present scenario, Gujarat and Bihar have had a close relationship. Not only were the nuts and bolts of the national movement worked out by M K Gandhi in Champaran, the conservative political figures of both the states shared a close relationship. Sardar Patel had supported Rajendra Prasad as the first President of India, even when Jawaharlal Nehruhad reservations about him. Later, in the Seventies, there was talk of Kanti Desai, son of Morarji Desai, fighting a parliamentary election from Begusarai in Bihar. Apart from close political equations with its associates, Gujarat was mindful of market cohesion, both national and international. The introduction of GST is also a powerful step towards the economic union of India. Thus, the recent “banish migrant” movement in Gujarat appears to be purely an anarchist exercise.

If the Indian Union is to function in a robust manner, it cannot allow centripetal forces to gain momentum. India has been home to two levels of nationalism, one pan-Indian and the other regional. Both have functioned parallelly without being in conflict. Tamil, Telugu, Gujarati, Marathi, Punjabi or Bengali subnationalism peacefully co-existed with Indian nationalism. In contrast, a subnational anchor was missing in the Hindi heartland. In the process, the sense of ownership of the state was also missing. In Bihar, there are only two identities, caste or national. And most of the migrants from Bihar realise their subnational identity only when they move outside the state and are tormented by local goons. It is the responsibility of the central and respective state governments to ensure that migrants are not tormented thus. Otherwise, the Indian Union will not survive.

Source: Indian Express, 5/12/2018

Lost opportunity

India missed the chance to usher in second generation reforms and free up private enterprise

Legend has it that a governor in 18th century Russia tried to impress Empress Catherine during her tour of Crimea by building facades of impressive villages along the way. These facades would be dismantled as soon as she passed them and reassembled further along her path. The recent schizophrenic commentary on the state of health of the Indian economy cannot but raise questions on the true state: Is India doing really well or are we just seeing a sequence of Potemkin villages?

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After averaging an annual GDP growth rate of 6.4 per cent (yoy) during 2012-14, growth in India increased to 7.3 per cent during 2015-17. Indeed, the growth rate for the latest available quarter was 8.2 per cent. And all of this despite the collective headwinds created by the demonetisation of November 2016 and introduction of the Goods and Service Tax (GST) last year. Simultaneously, the inflation rate has declined from 8.6 per cent during 2012-14 to 4.4 per cent during 2015-17.

Ordinarily, this growth and inflation record combined with improvement in indices like the “Ease of Doing Business” would end all debate about the health of the economy. Yet, we are treated to the spectacle of the same government that cites the positive growth and inflation statistics also claiming an imminent collapse of small and medium enterprises (SMEs), an implosion of the economy due to the absence of liquidity, a huge credit squeeze due to regulatory restrictions on banks, export weakness due to the rupee being too strong, rupee weakness due to interest rates not being raised enough, etc! How can all of these be simultaneously true?

To form a better understanding of the story, it is instructive to start by noting that world oil prices (WTI price) fell from $91 to $44 per barrel between July 2014 and July 2017. Given our daily imports of 5 million barrels of oil, this represented a cumulated saving of around $228 billion, or approximately $76 billion annually (around 3 per cent of annual GDP). The fall in oil prices did not, however, translate into a reduction in pump prices for consumers in India. Rather, it turned into a gigantic increase in government revenues to the tune of 3 per cent of GDP annually through an incipient increase in the excise tax on fuel.

This increase in revenue could potentially have been used to reduce the consolidated fiscal deficit, which had been running at an average of 6.7 per cent during 2012-14. However, the combined fiscal deficit of the Centre and states during 2014-17 actually increased to 6.9 per cent of GDP. In effect, government spending during this period grew by over 3 per cent of GDP annually. A different way of summarising this is that the growth pick-up in India over the past 3-4 years has come almost entirely out of this huge increase in government spending.

The oil party unfortunately has now ended. Over the past year prices have risen by around $20 per barrel. The choices have become stark. Either pump prices have to be raised in order to protect the tax revenues of the government. But this becomes politically unpalatable quite quickly. Alternatively, government spending has to be reduced to absorb the fall in oil tax revenues. But cutting government spending is problematic since it has been the main source of growth for the past few years.

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How does one solve this political-economic conundrum? One option is to find alternative sources of fiscal revenues. The current attempts at extracting $50 billion from the RBI’s capital reserves are one possibility. There are two problems with this. First, two-thirds of the RBI capital base of $145 billion are actually revaluation funds, which are only accounting entities rather than reflecting earned income. Moreover, the optics of raiding the central bank’s capital in order to fund a fiscal deficit is so fraught with institutional degradation of the RBI that markets might react negatively to such a move.

The second option is to get non-governmental agencies like scheduled commercial banks to open up the spending tap by lending much more. But this is problematic since a bunch of them are rife with non-performing assets and whose balance sheets are undergoing significant restructuring under the direction of the RBI. The increasingly shrill demands to weaken the Prompt Corrective Action (PCA) norms as well as the demand to ease up liquidity for SMEs are ways of squaring this circle. Unfortunately, forcing the RBI to relax existing regulatory norms has the rather big downside of the government owning responsibility for any subsequent banking sector problems.

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The last option is to somehow convince the RBI to lower real rates by cutting the policy rate. This runs the risk of undoing the gains on inflation that have been achieved over the past few years. Those who ignore this risk need only think back to the years between 2008 and 2012 when the RBI accommodated booming growth by delivering negative real interest rates for most of that period. The cost was that inflation ticked along at double digit rates.

The story of the Indian economic turnaround after 1992 was one of large productivity gains induced by removal of industrial and trade policy restrictions. Those reforms worked mainly through a better allocation of resources across different sectors of the economy. But that was a one-shot gain. The country now needs a second generation of reforms wherein factor markets including land and labour are liberalised. The last four years blessed India with a wonderful external climate along with widespread domestic support for reforms to free up private enterprise. Having missed that opportunity we are now reduced to parading Potemkin villages.

Source: Indian Express, 5/12/2018

Lessons from the Paris riots

India, and every other country facing agrarian unrest, would do well to take note of events in France

Paris is burning, and everyone should be worried. Violent protests by the gilets jaunes, or yellow jackets, in Paris over the weekend should set alarm bells ringing everywhere. Some of the protestors sported the Anonymous mask made famous by the Occupy protests, and modelled after the one worn by the protagonist in Alan Moore’s graphic novel, V for Vendetta, and which itself was a stylised rendition of Guy Fawkes’ face. The ostensible reason for the protests, simmering for some time, was anger over green taxes and high fuel prices, and although the latter came down by the time of the outbreak last weekend, people are still unhappy with the lack of jobs, the failure of local administration to provide basic services in the French hinterland, and rising prices.

That this happened in France, the most socialist of all First World countries, is telling. It was inevitable, though. Since the financial crisis of 2008, it has become evident that the current model of global business and trade is flawed. Indeed, leaders of the world’s most powerful nations admitted as much at the recent G-20 summit at Buenos Aires. Over the past decade, real incomes have declined across many countries, and even in those countries that do not have an unemployment problem, there are significant numbers of underemployed (simplistically explained as PhDs flipping burgers). The result is a desire for change — the election of Donald Trump in the US and Brexit are both manifestations of this. The result is a wave of protectionism around the globe that threatens global trade. And the result is anger of the sort seen in Paris over the weekend.

India isn’t wholly immune to a similar phenomenon. Sure, the economy has continued to expand over the past decade and incomes continue to increase, but farmers in many parts of the country are in the grip of an agrarian crisis — there have been at least four large protests by farmers in the past six months — and not enough jobs are being created (India needs 10-12 million new ones a year). And according to a recent report by Credit Suisse, the Gini coefficient, which measures inequality in a country, has gone up in India, from 81.3% in 2013 to 85.4% in 2018 (a coefficient of 100% means perfect inequality and 0%, perfect equality). Which is probably why India, and every other country, would do well to take note of events in Paris.

Source: Hindustan Times, 4/12/2018

India must re-evaluate its agroforestry policy

The moment a piece of land comes under any kind of plantation, there will be questions about issues of access and community rights.

India on Monday assured the ongoing climate change conference at Katowice in Poland that the country is committed to meeting its climate goals. In 2015, the country, as part of the requirement ahead of the finalisation of the Paris Agreement, listed a series of specific actions it would take to fight climate change. One of the important promises that India made was that it would create 2.5 to 3 billion tonnes of additional carbon sinks through extensive afforestation. A key strategy to achieve this goal will be to promote agroforestry or farm forestry, says a report in the Hindustan Times.

This focus on agroforestry, a judicious integration of tree species with agricultural crops and/or animals, is not unexpected since the practice is now recognised as an important one to restore degraded land and improve farmers’ incomes. Trees are valuable and profitable parts of agricultural systems because they provide timber, food and fuel, make soils more fertile, and protect the ecosystem services that agriculture depends upon. Agroforestry, however, is not unknown in India; it is practised across the country. But many farmers are not keen to take it up because of a lack of information on tree rotation and also the legal aspects involved in the trade of matured trees. To streamline the process, the Centre came up with the National Agroforestry Policy in 2014 to bring together various agroforestry programmes of different ministries under one platform.

While the focus on agroforestry to meet the twin objectives of meeting climate goals and improving the livelihood of farmers is laudable, there are concerns. One of the strongest criticisms is the emphasis on involving private players in the afforestation efforts, which leads to the question of benefit sharing between them and the landowners/community. Second, experts say the policy is trying to convert agricultural land into a manufacturing enterprise, which is not an ecologically sound solution. This is because agroforestry, which has a commercial motive at heart, usually leads to planting one particular species of tree. Third, an agricultural plot is not about farming only; it also supports different kinds of wildlife and communities such as pastoralists. The moment a piece of land comes under any kind of plantation, there will be questions about issues of access and community rights.

If India wants agroforestry to be the route to meet its climate goals, these serious concerns need to be sorted out first.

Source: Hindustan Times, 4/12/2018

Laughter is Prayer

When you begin your day in laughter and love, your life gets divinely enlivened. True prayer is laughing in the morning from outside and from deep inside. Laughter comes from the centre of our Being, from the core of our heart. Our belly is so full of laughter that the laughter permeates every cell in our body. True laughter is true prayer. When things go all right, everybody can laugh, but when everything falls apart, and yet you laugh, that is evolution and growth. Nothing in life is more worthy than your laughter. Never lose it. Events come and go. Some are pleasant, and others, unpleasant. There is an area deep in you that is left untouched. Hold on to what is untouched. Then you will be able to keep laughing. Sometimes you laugh just to avoid thinking or to avoid looking at yourself. But when you see and feel within that life is present and intense every moment, nothing can bother you or touch you. That laughter is authentic. You might have observed babies, six months or one year old. When they laugh, their whole body is jumping and bouncing. Every cell in the body is laughing. That is enlightenment. That laughter is innocent, pure, without inhibitions. Opinions are the impressions we make on our minds. If we have one experience repeated four or five times, then, for the rest of our lives, we tend to see life through those same experiences. We need to be able to see things as they are. When life’s essence blooms from within, there is true laughter akin to godliness. Laughter opens us up, opens the heart.

Source: Economic Times, 5/12/2018

What is polygyny threshold model in ecology?

This refers to the hypothesis that the practice of polygyny, where multiple females choose to mate with a single male, is the result of the desire to achieve access to resources held by dominant males. Accordingly, societies in which resources are concentrated in the hands of a few males should witness more polygyny. The hypothesis was first proposed by American ecologist Gordon H. Orians in his 1969 paper “On the evolution of mating systems in birds and mammals”. The model has also been used to explain the prevalence of polyandry in certain societies where resources needed for male survival are under the control of dominant females.

Source: The Hindu, 4/12/2018