cafeconomics

 The Gini Coefficient measures the equality of incomes of the population in an economy. As shown in the image below the % cumulative population is marked on the x-axis and the corresponding cumulative incomes are marked on the y-axis. The red curve showing actual distribution of incomes is called Lorenzo curve and the distance between the line of equality and Lorenzo curve is measured by the Gini coefficient. A score closer to 0 indicates perfect equality whereas a score of 100 indicates perfect inequality. This is a list of 100+ countries sorted by Gini coefficient sourced from https://knoema.com/atlas/ranks/GINI-index It is not surprising for us to note that many of the developing countries are facing high degree of inequality whereas some of the Western European and Scandinavian countries have better income equality. The income inequality in United States is close to that of Uganda and Mongolia! The Neoclassical Theory The traditional neoclassical theory states that factor incom...

 Whether we like it or not India's fortunes are linked to the global growth and well-being more than ever before.   In the last five years, correlation between India's and global growth rate has only gone up. India's economic performance is subject to global headwinds and tailwinds and in the coming decades this correlation is only going to get more significant. 

Hey here are some reform ideas ! Some of them may be naive but hope at least some of them are useful. 1. 21 years of compulsory education for all - 25% free education mandatory for bulge bracket educational institutions - move from mid day meal to two times meal a day for poor children - other children and parents can chip in. No additional burden on government at least in private institutions. Not one child shall remain devoid of education in this country. 2.  One India, One Election (or Two Elections at most ) in a period of five years - if you have so many elections then you have to divide time between campaigning and administration - waste of time and election expenditures. 3. Planned and Calibrated approach towards population explosion - can our cities accommodate, if population rises to 200 crores ? 4. Legalize election bonus - political parties buying votes from citizens -  so why not legalize election bonus ? Show your sources of income. 5. Income/ Wealth based reserva...

 If you are fascinated by the heavenly wonders of astronomy, then look back towards earth and you will find that economics is an equally fascinating area! Here are a few paradoxes from everyday economics which seem absurd at first sight but are real (and sometimes funny!). 1. The tail wags the dog: Suppose you are extremely thirsty - you go to a wayside store and buy a water bottle. What is the worth of the first sip of water? Way more than the price you pay for the bottle right!? With each subsequent gulp of water the utility of water decreases due to diminishing marginal utility. Similarly, any good or service that you purchase includes remuneration to the producer for undertaking the risk of production and the price that  you pay may be way more than the costs of production. In the figure above, the demand curve represents the marginal utility derived by a consumer by consumption of the good. As you can see, it is downward sloping because, with each successive unit of cons...

 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...

 Here are some tips and tricks for Excel users. Pending minor edits.   1               Use tab to select a formula when it is selected in blue. 2               Number formatting is a façade. 3               Count function counts only numbers. Count function does not count words. 4               CountA function counts everything both words and numbers. Only those cells that are not empty. 5               Use SUM IFS and COUNT IFS rather than SUMIF and Count IF even if you have only one condition. 6               Pivots need to be refreshed for data updates. 7    ...