cafeconomics

The office of a public representative is sacrosanct - the time in office is people's time and the money is tax payer's money. So those who are elected to public office cannot conduct other economic activities while holding office. Any incomes or wealth accrued to them from pre-existing businesses during the period of office should be put in an escrow account until they demit the public office. We find that some public representatives take advantage of the current loopholes of the system. Irrespective of the profession or practice, while in office a public representative cannot conduct other economic activity. This has to be put in place both in spirit and deed. A pubic representative's time and energies must be completely dedicated to her office and people of the constituency. Second, when the respective legislative body is not in office, a public representative must be physically present in the geographical territory of the respective constituency. Quite often we find that...

Why can't education be made universal and compulsory until 21 years of age ? At least in major democracies, education infrastructure is already in place with both government and private players. Governments around the world spend millions on child care and education and yet there is a considerable proportion of children suffering from mal-nourishment and illiteracy. Quite often, we find children working in eat outs, commercial establishments and farms. In some extreme situations, we come across children working in even hazardous plants. Agreed that in most cases, these children may be the bread-winners of the family. But that cannot be a reason for children not attending schools and colleges. There are other welfare schemes in place for adults. At least during schooling hours, children should be prohibited from work. Governments have to make education compulsory until 21 years of age for all children. Any employment schemes that lock-in children into future jobs before 21 should be...

GDP on its own may not present a complete picture of growth, therefore, per capita GDP has been included here to better understand trends in growth. When we look at GDP and per capita GDP growth over the past six decades for major economies it shows that Asian tigers are roaring. But when we look at growth in the past three decades it is really the Chinese miracle that attracts your attention. Since the decade starting from 1991, Japan has been stuck in a quagmire. India has a CAGR of around 8% for the past three decades. So China and India have been leading global growth in the more recent past.  To be fair to the advanced economies you need to look at the base effect and to get a better picture of growth. For a country like the United States with GDP of $ 20 trillions (2018) even a 2% growth transforms into $400 billions which is 15% of India's 2018 GDP.  Second, for India and China to grow someone has to buy their exports - whether it is software services or manufacturing g...

Economists develop methods and measures to quantify economic variables. But very few people talk about or measure 'freeloading'. Governments around the world spend millions on providing subsidies and benefits to their citizens in one form or the other. For generations many families and societies have received benefits and prospered. People are so used to these freebies by now and politicians are scared to withdraw them for electoral reasons. In countries where there is a scramble between subsidies and development the impact of freeloading is all the more exacerbated. Surprisingly, there are no measures for freeloading. Why do people need freebies after surpassing a certain income/wealth level ? After all, there are people standing in the line who do not receive any benefits ?  With the currently available technology and computing power, it is possible to assign a unique identification number to every citizen of the country. Every child that is born can be assigned a unique numb...

All other things being equal and setting aside political issues, the per capita billionaires of an economy can be a good indicator of economic opportunity and ease of doing business. One may argue that for countries with huge population, the number gets skewed to the wrong side. If we look at the brighter side, each individual is an agent of growth - each individual is an economic opportunity waiting to be unleashed - each individual is a potential engine of growth. So I took the top 15 countries by the number of billionaires and divided by the population of the respective country. It results in some small numbers, so I multiplied by 1 million again and this is the result. Higher the number, better it is! Of course, this number does not include the qualitative aspects of life such as living in a democracy and leading a free life. Sometimes, we take living in a free country for granted! In an ideal situation, countries with higher population should produce higher number of billionaires....

Protection of private property rights and law enforcement are crucial for a well functioning market economy. When citizens don't have rights to hold property then there is no sense of ownership and no sense of achievement. There is no incentive to produce or innovate or even participate. Having said that, it is important to ensure that economic opportunity and the fruits of growth are available to everyone. Prolonged inequality in income and wealth distribution leads to dissatisfaction among people which may have volatile consequences. Even for advanced economies like the United States income and wealth inequality pose existential challenges. Any form of governance, when not well administered leads to an all powerful crony elite group whose interests may not be aligned with the majority. The extent of income inequality in an economy is given by Gini coefficient and the list of countries by Gini is given here: https://en.wikipedia.org/wiki/List_of_countries_by_income_equality Econom...

All financial assets derive their value from real economic assets and activity. Time and again we have seen that financial asset prices run ahead of economic activity. Hope is built into human nature - tomorrow will be better than today. One fine example of human expectations is in the price to earnings ratios. We find that prices are running ahead of earnings by many multiples and sometimes these prices get wild and beyond reason. The problem here is that whenever there is a big price correction in financial assets, it paralyses the economic system. Credit which is the lifeline of the economy dries up and there is a panic everywhere. People on the 'Main Street' who are in no way connected to or invested in financial assets are impacted. What does a poor farmer or small business man in some corner of an emerging market have to do with the 30-year mortgage backed security devised by someone in Wall Street? Prof. Damodaran in his lectures states that with the advent of media and ...