cafeconomics

 Today when a child is born in India, you need to wonder which community it belongs to - 'reserved or unreserved'. If it belongs to the unreserved community, then the future is not very bright unless the child exhibits extraordinary ability, which is definitely not always possible. So even before the child is born his or her destiny is already decided based on the community.  India's technological ability is among the best in the world and it is possible to identify people based on their income and wealth levels. Yet India's governments do not want to take any steps to move from a caste based reservation system to an income based system. No politician ever talks about this issue as it is considered 'contentious' and no one wants to damage their political careers. Around fifty percent of the population belongs to reserved communities and one needs only thirty to thirty five percent of the voting share, most of the time to form a government both at the center and ...

 Ronald Coase's Theory of Firm stressed on the importance of the firm in a market driven economy. Not all production processes can be outsourced from the market. Many production functions will have to stay within the firm in the best interests of the firm.   For example a pharma company will have to conduct in house research to produce and patent new drugs. It may not be prudent to depend on external research or tie-ups for all its products.We can also find several examples of horizontal and vertical integration in many sectors. Exxon and Mobil which were in the same stage of the value chain, merged to form an integrated oil behemoth primarily to save on costs. Walt Disney and Pixar was a successful vertical merger in 2006.  The success or failure of a merger is not the central idea of this article. The question that I would want to address here is 'which production processes should a firm outsource or in house and why?' If a firm can outsource a product or a part of...