Relative pricing revisited

Yesterday I bought a pair of jeans. Normally it wouldn’t be a spectacular event (though one of my first blogposts was about a pair of jeans), but regular squatting has meant that I’ve been tearing through jeans well-at-a-faster-rate, and also that it’s been hard to find jeans that fit me well.

Basically, I have a well-above-average thigh and a well-below-average arse for my waist size, and that makes it hard to find readymade pants that fit well. As a consequence I’ve hardly bought trousers in the last 2-3 years, though I’ve been losing many pairs to the tear in this period of time.

And so when I found a pair of jeans that fit me comfortably yesterday I wasn’t too concerned about paying a record price for it (about 1.8 times the maximum I’d ever paid for a pair in the past). In fact, I’d seen another pair that fit well a few minutes earlier (and it was a much fancier brand), but it was well above budget (3 times as expensive as my historically costliest ever pair), and so I moved on (more importantly, it came with a button fly, and I’d find that rather inconvenient).

Jeans having been bought, we went off to a restaurant at the mall for lunch, at the end of which the wife pointed out that the money we paid for the lunch was more than the difference in prices between the two pairs of jeans. And that if only we would avoid eating out when it’s avoidable, we could spend on getting ourselves much more fancier clothes without feeling guilty.

I’ve written about relative prices in the past, especially about the Big Mac Index, and how it doesn’t make sense because of differential liquidity. After moving to London, I’m yet to come to terms with the fact that relative prices of goods here is vastly different from that back home; and that I haven’t adjusted my lifestyle accordingly leading to inefficient spending and a possible strain on lifestyle.

Food, for example, is much more expensive here than in India (we’ll use official exchange rates for the purpose of this post). The average coffee costs £2.5 (INR 225), which is about 10 times the price of an average coffee in Bangalore (I’m talking about a good quick cup of coffee here, so ignoring the chains which are basically table rentals). The average weekday takeaway lunch costs £6 (INR 540), which is again 10X what it costs in Bangalore.

Semi-fancy meals (a leisurely meal at a sit down restaurant with a drink, perhaps) are relatively less costly here, costing about £25-30 per head compared to INR 1200-1500 in Bangalore, a ratio of about 2X. A beer at a pub costs about the same, though cocktails here are much more expensive.

The alternative to eating out is, of course, eating in, and most “regular” ingredients such as vegetables and rice cost more here, though cheeses (which are relatively less liquid in India) are actually cheaper here. Milk costs about the same.

Controlling for quality, clothes cost about the same (or might even be less costly here when you go for slightly more fancy stuff). Electronics again cost about the same (they come through the same global supply chain). Contact lenses are more expensive here (though the ones I buy in India are manufactured in the UK!).

In my book, I have a chapter called “if you want to live like a Roman, live in Rome”. It’s about how different cities have different relative liquidity of goods. Similarly, different cities and countries have different relative prices, and long-term residents of these places evolve their spending to optimise for their given set of relative prices.

And when you move cities or countries, if you don’t change your lifestyle accordingly you might end up spending suboptimally, and get less welfare from life.

Once again this points out problems with international price indices being constructed based on a particular commodity, or set of commodities. For not only are different commodities differentially liquid (as I pointed out in my Mint piece linked above) in different places, but also the “standard consumption basket” also varies from city to city!

And if a Delhi-ite consumes lots of apples, and a Bangalorean consumes lots of oranges, you can’t make an apples-to-apples comparison in cost of living in these cities!

Large sites and universally accessible blocks

Currently reading this paper by Brelsford, Martin, Hand and Bettencourt of the Santa Fe Institute (did I tell you I just got my first MOOC certificate from this institute last week?) on the topology of cities. I have only a rudimentary understanding of topology (thanks to an excellent session with Dr. V Vinay), but considering that I know Graph Theory fairly well, I’ve been able to follow the paper so far.

The paper talks about “universally accessible blocks” in cities, which is basically about blocks where each unit can be accessed directly by road without going through other units. Developed cities, the paper argues, has mostly universally accessible blocks, while non-universally accessible blocks are artefacts of non-developed countries and old cities.

The problem with non-univerally accessible blocks is that the “inner units” in such blocks (which are not directly accessible by road) are mostly deprived of public and emergency services and this affects the  quality of life in such blocks. The paper, for example, talks about mostly slums having such architecture, and that newly developed cities usually try to have universally accessible blocks.

When Bangalore was developed in a planned fashion starting in the 1950s (led by the “City Improvement Trust Board” which later morphed into the “Bangalore Development Authority”), a number of new areas were designed for large houses. Large sites were allotted, and regulations framed such that buildings on such sites be sparse (they were called “bungalow sites”). The part of Bangalore I live in, Jayanagar, for example, has a large concentration of such bungalow sites.

While in theory such sites make sense, the fact is that not too many people were enthused about sparse buildings on such sites. So they took advantage of loopholes in regulation (even best designed policies have loopholes) to build multiple buildings on the site. Later on, these sites got partitioned into smaller sites, with at least one building on each smaller site. As a result of partitioning, a large number of units thus created were not “accessible”.

Allotting big sites and getting people to build big houses on them in order to “lead development” into a new area might have been a great idea in theory, but the fact that most people could not afford to build such big houses and loopholes in regulation resulted in non-accessible units! Of course it results in lower infrastructure costs (since the road network is sparser than is necessary), but it comes at a price since not everyone has equal access to infrastructure.

As a wise man once said, #thatzwhy we need strong regulation.

Jakarta: General Notes

I’ve been in Jakarta for about two days now (not counting the weekend trip to Yogyakarta) and I’m not particularly impressed. My main problem with the city is that it is not walkable – roads are so wide and traffic so fast-moving that they are impossible to cross; there are absolutely no pavements to walk on (forcing you to take shelter from parked cars while walking) and there are no zebra crossings at all in some places!

A side effect of this unwalkable-ness is that it is impossible for you to explore – I haven’t seen any bus stops or buses nearby, too. So if I’ve to go somewhere it has to be by taxi, and with a purpose. This has led to my not going out anywhere at all, save for two malls that are close to my hotel and which can be reached without crossing any major roads (though you need to walk through a shady-looking alley to get there).

In some ways this city is like Gurgaon on steroids – massive roads, massive malls, massive traffic jams and massive freeways. To its credit the city is quite clean (much cleaner than any Indian city I’ve been to) and there is a functioning and efficient taxi system, so you can get around if there’s someplace you want to get around to.

But if you just want to spend some time here, “take in the city”, have a look around and so on, it is surely not the place.

The other day the wife and I were having a conversation on where we want to live, and one thing we agreed upon is that we want to live in a place where the commute doesn’t drive your life. Of course, rather ironically, the only time that has been true for me was in Gurgaon in 2008-09, when I had a commute which took less than 20 minutes at any point of time, because of which I didn’t have to base my schedule on when traffic would be smooth. A later visit to Gurgaon has shown that this is not true of Gurgaon any more (the same 20 minute commute from 2009 took 40 minutes on a rather empty Saturday morning in 2014).

I think I’m too much of a sucker for walking and public transport to be able to survive in a place like Jakarta.