Pankaj Mishra

June 12, 2006

Readers of Maajorly Shadymax Arbit Fundaes are obviously too intelligent to be taken in by this Pankaj Mishra editorial, which manages to contradict itself repeatedly and also indulges in some very selective reporting of facts.

To take just one of the contradictions, Mishra first claims that when China adopted free market policies, the result was a 25% inflation rate in the late 1980s, and even says that the Tiananmen Square protests were not for greater democracy and accountability, but against rising prices (So was the Goddess of Democracy actually the Goddess of Low Prices?). But he then goes on to say that China’s adoption of free market policies is undermining European economies through cheap exports. You can’t have it both ways. Why do ‘neoliberal’ policies cause inflation in the 1980s, but 15 years on, with greater adoption cause deflation? And why are rising prices bad in China, and falling prices bad in Italy?

Tim Worstall has a rebuttal up on his blog. It makes some very excellent points about the things not mentioned in the editorial, and leaves Mishra looking pretty silly.

I disagree with Worstall’s opening paragraph, though, where he says Mishra seems to be suggesting that India and China need a healthy dose of socialism. Actually, Mishra’s beef with free market economics is not that it doesn’t work, but that it is a Western idea based on Western values, and thus unsuitable for India and China. If you were to take this to its logical conclusion, socialism is also ruled out as it too has Western origins. Mishra would presumably be satisfied if India and China were operating under pre-imperialistic conditions. Of course, this would mean scuppering democracy, free speech, the university system and bringing back untouchability, sati, absentee landlords, and foot binding, but at least these are homegrown concepts.

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If The Shoe Fits

June 11, 2006

On the topic of vegetarianism, the Master wrote:

Cut him off from the proteins and the amino-acids, and you soured his normally amiable nature, turning him into a sullen hater of his species who asked nothing better than to bite his n. and dearest and bite them good. But give him this steak and kidney pie outlet, thus allowing him to fulfil what they call his legitimate aspirations, and chagrin would vanish and he would become his old loveable self once more. The dark scowl would be replaced by the tender simper, the acid crack by the honeyed word, and all would be hotsy-totsy once more.

This could explain why Gujjus are so ornery, and go about rioting and vandalising and whatnot. All they need to do is have a nice steak, and they will overflow with love and benevolence once more.

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Gorilla Meets Gawaar

June 10, 2006

Gorilla Meets Gawaar

If I had a huge gorilla behind me, I’d be screaming with terror and running away with my valuables too. And the gorilla might be angry because he’s next to a Himesh Reshammiya poster.

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Getting Offended By Ads

June 10, 2006

I saw a TV commercial that enraged me. The first time I didn’t pay a great deal of attention.

A little boy, a well-fed kid, is by himself and finds his shoelace his undone. He decides then and there to learn how to tie it by himself. The camera lingers on him, on his intense look of concentration. He experiments, draws diagrams in the mud. It goes on and on; it looks inspiring. Finally the punchline of the card comes up. I thought it was going to be for a breakfast cereal or a milk additive for your children.

But then, besides his look of triumph you see a message for Surf Excel- “When kids set their mind on something, dirt gets in everywhere. So use Surf Excel to get dirt out of tough corners.” My jaw actually dropped. What was the message of this ad? That no matter what a kid’s learnings are, all that matters is that his clothes are clean? How crass, even cruel can you get?

Am I missing out on something here? I’m still angry- was it meant to be funny? Millions of boys and girls in this country spend their childhood in a school system that discourages self-learning and creative thinking- while we lucky few can write blogposts. Let’s subordinate their creativity to washing powder while we’re at it. Surf Excel is owned by Hindustan Lever. Shame on it, and on its advertising agency.

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Censorship for Television too II

June 10, 2006

So now the government has decided to go ahead and censor TV directly, without even bothering with a regulator.

The Hindustan Times reports that music channels will now have to run a scroll apologising for playing ‘obscene’ videos. And stop showing them henceforth.

What fun. I suppose next news channels will have to apologise for sensationalising news, and stop showing sensational news. And once that is done, they can stop reporting bad news and criticising the government altogether. After all that could hurt somebody’s feelings too.

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This is Appalling

June 7, 2006

I am shocked, shocked, to learn that criminals and anti-social elements have been buying SIM cards with forged documents in Haryana.

Those naughty criminals! How dare they! Don’t they know that they are supposed to provide their correct identity details so that the authorities can track them down? If they pretend to be honest people like us, the whole scheme is useless. All the effort we put into getting passport photos and photocopies of identity documents will go waste.

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Fun With Derivatives

June 5, 2006

Time to answer the questions raised by my post on using real estate options to pay for acquisition of land. I’ll answer the questions raised in the comments first, and then address some other issues.

Will the options be provided to displaced people free of cost, or sold? Will they be given loans to buy them? And who sells them the options?

I envisage free of cost, but that isn’t necessarily the right answer. I think that the right price will be something arrived at through trial and error, after seeing the results from many such compensation schemes. But you can have any nonzero inital price of the option, with a corresponding change in the price you exercise it at.

The options will be paid for by whoever is acquiring the land and displacing the original landholders. They will be sold by competing real estate agencies and property developers.
Does this mean that displaced people will move to the about-to-benefit regions?

No, it doesn’t. It just means that they become the landlords of the about-to-benefit regions (if they exercise the option). They collect the rent or the mortgage on the land. They don’t necessarily move in. But I’ll come back to this later.

If the government won’t even move them to any region, why will it move them to an about-to-benefit region?

Excellent question. For the government-backed Sardar Sarovar Authority, or indeed any developer, resettlement is a cost which they’d like to minimize. But if selling land to displaced people was a profitable activity, and multiple real estate vendors were competing to sell them land, this wouldn’t be a problem.

How do we reach this happy state? Well, real estate options are financial assets. You can borrow against them just as you can borrow against actual property or against shares. They become security for a property loan- and now the displaced family chooses where to buy property instead of just settling for what the government gives it.

Now, the objections I thought of myself.

This won’t work for the Narmada Dam victims, will it?

Sadly not. It’ll not work for anything at this point of time. It needs a lot of infrastructure in place before it can work.

Like what?

Ah, now we come to the meat of the matter. To make it truly effective, you need an existing large and liquid market in real estate options. The problem with this is that trading in real estate options did not actually begin until this year at the Chicago Board of Trade. Still, there’s no reason it won’t eventually catch on in India.

What if the option holder exercises the option, becomes the owner of the property, and chucks out the tenants?

Well, he would be in his rights to do so (assuming the local laws were actually biased in favour of landowners instead of tenants), but there are some ways to avoid this:

  1. Don’t allow delivery against the option. Just allow the option to be sold back to the original holder, so that the holder only gets the difference in prices, and not the real estate itself. I’m not a great fan of this one.
  2. Instead of an option on the real estate itself, make it an option on a mortgage-backed or rent-backed security, i.e., the holder will not own the real estate itself, but the right to collect all future mortgage payments or rental payments on it. This could work, but it assumes the existence of mortgage backed securities. Then again, if the Indian financial system can evolve to offer real estate options, it can surely offer mortgage backed securities, which are in much higher use.
  3. The developers of the property which is being optioned actually create surplus capacity for the prospective options. It could be done, but it would saddle them with an investment that offered no return for the life of the option. I don’t see this becoming very feasible.
  4. My personal favourite: instead of making it an option on actual real estate, make it an option on a real estate index.

What’s a real estate index?

Just as the Sensex measures the value of 30 specific stocks, and converts it into one single number, a real estate index would check property values at certain locations and convert that into a single number. You could have an all-India commercial property index based on office rents in Bangalore, Mumbai, Gurgaon, and Chennai. A Bombay residential property index based on flat rents in Andheri, Powai, Dadar, Colaba, and so on. This addresses one of the difficulties in deciding the market price of an actual piece of real estate.

What if unscrupulous property dealers offer low prices to the displaced people for their options? Those displaced people would take any amount of cash and spend it on booze instead of holding on to a piece of paper.

This is an argument against financial illiteracy, and not against options. After all, you could as easily ask ‘What if unscrupulous property dealers offer low prices to displaced people for the land they get as compensation?’.

So you do need to educate people on what the option actually does and how it can be used, but it isn’t a horribly difficult concept to explain.

And I’m not being facetious here, but cellphones can be a very powerful weapon where this is concerned. If fishermen can use them to find the market price of fish, displaced landowners can use them to find the market price of an option.

What was that you said about turning resettlement into a profitable activity?

Look, people who build a dam are good at civil engineering and project management. Not at buying land and helping people they’ve displaced to move there. So for starters, the people building a dam shouldn’t be in charge of resettlement- just pay for it.

But then should there be a single agency in charge of resettlement? No, dammit. Throw resettlement open to competition. Treat displaced people as consumers and entrepreneuers who want to buy income-generating property, not as refugees. Give them liquid assets like cash and real estate options (or even ownership-equity in the developing body) which they can use to buy land. Who sells them land? Competing property developers. Who provides them the options? Competing real estate agencies, anxious to close a deal. Once competition enters the sale of options as well as the purchase of land, displacement victims will get a much better deal. Also, the kinks in this new and untested scheme will be ironed out much faster.

I’m still doubtful about the whole thing.

I’m not surprised, because it is a whole new idea. But that’s why I’m plumping for a market in resettlement, because it’ll work out the problems much faster than I ever can.

That wraps it up. I don’t think I’ll have any more individual posts on this, though I’ll of course address all further questions in the comments.

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Arising Out of Ads

June 4, 2006

I must have seen more television in the past two months than I have in the two years before. I haven’t missed much. The ads are the best bit.

The Garnier fairness cream made me recall something I saw in China but didn’t remember to write about in the travelogue. The Chinese buy fairness creams too. As usual, the language gap prevented me from finding out details, but it was interesting to see that the Chinese beauty ideal also places a premium on fair skin.

It’s especially interesting because China was never colonised by the British to the extent that India was, so the usual explanation of the preference for fair skin being a colonial hangover doesn’t hold that much water.

Perhaps human beings actually do have an innate, genetic preference for fair skin, for whatever reason. Of course it is not logical, but sexual selection does not have to be.

*

Moving on, curly haired woomaans in the Slice and Sony Ericsson ads strongly are, so much so that they make me drop back into IIMB lingo. Is it the same girl in both the ads?

*

The Tata Mutual Fund which you should pick because it has “a hedging function for maximising returns and minimising risks” is a remarkable piece of financial gobbledegook. Because, after all, only Tata’s mutual fund will try to maximise returns or minimise risks.

Secondly, how the hell does it do both? Risk and return are proportional. You can maximise returns while fixing risk, or minimise returns while fixing risk, but you have to accept a tradeoff somewhere.

And finally, how, oh how, does a hedging function maximise returns? A hedge is done specifically to fix risk at an acceptable level. Returns don’t enter the picture.

*

Finally, the Frankfinn ad is one of the worst made ones I have had the privelege of seeing. Despite that, it is remarkable for another reason. It is the first ad I have ever seen which pitches a product as an alternative to marriage instead of as an aid to it. In remarkable opposition to stuff like Fair and Lovely and LIC.

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The Trouble With Civilization

June 4, 2006

I refer not to the concept, but the bestselling game series.

The premise of Civilization is simple. You’re the leader of a civilization (a tribe or a nationality). You start out in 4000 BC with only a settler. The settler founds a city. The city then produces more settlers, which found new cities. All these cities produce military units, improve themselves with things such as aqueducts and city walls and factories, and even Wonders of the World. And so it goes until 2020 AD, by which time you will hopefully have researched a lot of technology, have a huge military, and spread your civilization over as much of the world as possible.
Of course, there are other civilizations, being played by the computer (or by other people), which are also intent on world domination. You just have to conquer them, or make sure you establish your empire over virgin territory before they get the chance.

The series is now up to Civilization IV, and this particular sequel has hit a particularly sweet spot. There are enough features to make it fun and interesting, but the micromanagement isn’t so high that it becomes too challenging or tedious. The features include religion, great artists, great merchants, trade, diplomacy and a whole lot besides.

Being able to control all these things- religion, commerce, art and culture- is a lot of fun. But it is also the problem- it’s horribly inaccurate- which the game developers freely admit.

They originally built the game so that religions spread slowly along trade routes, invisible to the game player. This was no fun at all, so they eventually created something that gave the player more control- a missionary that could travel from city to city and spread religion faster than by normal means.

So here is the problem- Civilization is played in such a way that it is fun only when you have control over something. So if you add a feature that mirrors a concept in real life, it is only fun when you can control it yourself. But unfortunately in real life you don’t have that control. National goverments and individual cities and religions and merchants and scientists and artists are very rarely under the control of a single leader. They might be anatagonistic or cooperative or at outright war, but they’re never marching in lockstep to somebody else’s drumbeat. Fun comes at the expense of accuracy.

You could get both fun and accuracy, but the game would no longer be Civilization. But you could have a game where you do have competing civilizations- but at the same time you have competing elements within a civilization- if you could play a Chinese merchant or a Muslim cleric instead of just the Chinese leader. As the Chinese merchant you would interact with the Chinese government, merchants from other civilizations. You could lobby the Chinese government for mercantile policies or for free trade. If you were a very successful merchant, you could commission Wonders of the World in cities where you had influence. You could provide musicians and thespians with patronage. You could have run-ins with Buddhist or Taoist clergy over who got to control the levers of power. You could finance scientists to help discover the next technological breakthrough. You could gain sufficient power to have a say in whether your country went to war or not. You could eventually transcend your civilization, and control power in the American and Arabic and Aztec and Indian civilizations too.

Does something like this already exist, but with the Civilization-like features of immense complexity and turn-based-play? Or will I have to wait for Civ6?

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Posted by Aadisht

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