On becoming a right-winger

No I’m not talking about people like David Beckham or Theo Walcott here. I’m talking about political stance. There is supposed to be this saying somewhere that goes “if you are 50 and liberal, you don’t have a head. If you are 20 and conservative you don’t have a heart” or some such. I probably first heard it some three years back, and ever since I’ve wondered why I’ve always been a right-winger in terms of my political stance. And I perhaps now have the answer.

The “social” component of rightwingery is not difficult to explain – from the ages of eight to ten, I was a member of the Rashtriya Swayamsevak Sangh (RSS). They used to have shakhas close to my house in Jayanagar, and I would go there primarily to play Kabaddi. And I don’t think it was anything to do with what they taught us there, but maybe because the seniors there campaigned for the BJP in the 1991 elections (and my parents also then supported the BJP) I became a “social right-winger”. I’ve mostly been a supporter of the BJP since then, and if I were to vote (my name mysteriously disappeared off the voter list between 2004 and 2008, and I haven’t got myself re-registered) today I’d still vote for the BJP.

I’m much less of a social conservative now than I was maybe five years ago. I can probably describe myself as centrist – a position that is inadequately represented by any Indian political party. And it is possible that my current support for the BJP is reinforced by their economic policies during their regime earlier this decade. Which brings me to the more interesting question – about why I’ve always been an economic “conservative”.

I didn’t have an answer to this till recently, but I wonder how much it had to do with the fact that 1. I don’t have any siblings,  2. I was a topper in school.

I tend to believe that the lack of siblings helped define clear property rights for me at an early age – it is easier to divide up toys and other stuff among cousins than among siblings. And when you are convinced of property rights, you are much less likely to believe in stuff like “common good” and stuff.

As for being the topper, I’m reminded of how the class would plead with the teacher to make the exams easy, or to postpone assignment deadlines. Me being the topper, however, would have none of it. I would look at situations like those to RG (IITM lingo derived from “relative grading”) the rest of my class, and would always end up campaigning in the opposite direction (this continued till I was in IIM – when I was no longer the topper – I would encourage professors to set tough papers while the then toppers would ask for easy papers – the irony!).

While others were struggling to add two digit numbers, I would be showing off my skills at adding six-digit numbers, and encouraging the teacher to move faster. I considered myself to be “elite” and thought it was beneath myself to do what the “proletariat” did – postponing assignment deadlines or going slow in class. I would not be a part of the “class struggle”. I was a “have” (and I knew about property rights) and I would fight to retain my advantage.

So one objection to this theory could be that a lot of commies are topper-types. But here, we need to make a distinction. What if they were toppers like the ones that we had in IIMs – those that would clamour for easy papers, those that would do things the done way, and do better only because they mugged more? (I never listened to anyone. for example, I considered it beneath myself to add 5 to 4 as “five in the mind and six in the hand” and counting off fingers – while my competitor for topper used to happily do that, in public). My proposition is that those that became “radicals”, and were topper-types, weren’t that radical after all when they were young. If they were, they would’ve never turned left.

Dissociation

One thing that I’ve observed that most of us Indians lack is the ability to dissociate and disown. We are not readily willing to let go of people or things that we have once identified with ourselves, and we frequently get into trouble due to that.

Exhibit 1: So you have these random sundry hooligans who go around in the name of Hindutva creating nuisance and causing communal tension. On similar lines there is the so-called “Hindu terror”. But the official Sangh Parivar does little to dissociate from that, and ends up getting its name getting caught in various random acts which only ends up distancing it from the moderate right-of-centre.

Exhibit 2: When A Raja was under fire in the 2G scam, some Dalit organizations came out in support of him saying he was being unfairly targeted just because he’s Dalit. It was a similar case with former Karnataka Chief Justice PD Dinakaran. I don’t understand why Dalits want to identify themselves with such crooks and tarnish their community’s reputation, rather than distancing themselves and accusing them of sullying the name of the community.

Exhibit 3: All Lingayat mutts have come out in support of BS Yediyurappa, despite several calls for his resignation. Nothing more needs to be said.

Exhibit 4: A (distant) relative was recently arrested for pulling off a Ponzi scheme. Far from ridiculing him and distancing themselves from him, I found that most of the extended family chose to downplay the incident and avoid talk about the arrest (he’s been released on bail).

I remember reading about Obama’s presidential campaign, about how he strategically distanced himself from people he was once close to (his grandmom, some reverend, etc.) as soon as he realized that they were getting inconvenient for him.

I don’t understand why most Indians are incapable of such pragmatism, and choose to believe too much in “relationships”. And blindly back people we’ve been associated with rather than taking a pragmatic and selfish stand.

o!!!

o!!! (super) is indeed a super movie. It is so awesome in so many different dimensions, that it’s hard to capture it all in one post. I guess in this post I’ll simply stick to the economic aspect of the movie.

So basically the premise is that in 2030 India is the most powerful country in the world. Bangalore is clean and green, with whites working as chauffeurs and sweepers, with 70 pounds to the rupee, and so forth. The movie is a fairly elaborate nested story about how this transformation is brought about.  (rest of post under the fold. spoilers are there)

Continue reading “o!!!”

Keeping Transaction Costs Low

The Bruhat Bangalore Mahanagara Palike’s coffers aren’t Bruhat, it seems. For the up-coming road widening project, for which considerable amounts of land need to be acquired, it seems like the BBMP can’t afford to pay in cash. Hence, it has been proposed that compensation will be paid in terms of Transferable Development Rights (TDRs). The basic funda is that when your land gets acquired, you get rights to construct more in some other existing site, or on the remaining part of your site, or some such.

Quoting

According to a BBMP official, TDR is an instrument through which the Palike facilitates landlosers to construct additional floor or building in the remaining portion of the property or anywhere in the City.

The BBMP would issue a Development Rights Certificate (DRC), which can be either be utilised for personal need or can be sold to anyone who wants to construct an extra floor. The owner gets the right to construct a built up area 1.5 times over and above of that the property acquired for development. For instance, if 600 sq ft built-up area is given up to the BBMP, the property owner will receive a DRC for 900 sq ft built-up area.

This is interesting on several counts. Firstly, do you realize that what the BBMP is paying for the land is effectively an option? A TDR is nothing but an OPTION to construct more than what would normally have been permitted. The valuation of this option hinges upon the fact that current building laws are highly restrictive (in terms of the built up area as a proportion of the site area) and so the option of constructing more will actually be valuable.

It would be interesting to see how these options get valued. You can trust that there will be a lot of litigation concerning this since you can expect most people to have problem with the valuation. First of all valuation of financial options is itself so tough, you can imagine how hard valuing these TDRs can be.

Then, there is the whole supply aspect. The whole model of these TDRs will hinge upon the unwritten promise that more such rights will not be given away any time in the near future, since that will cause the value of existing TDRs to drop sharply. Given that there is one single agency (the BBMP) that controls the supply of such rights, and that the potential supply of such rights is infinite, there is a chance that valuation of these rights might be depressed.

One important thing the BBMP needs to take into account while issuing these rights is to make sure there are no transaction costs for trading these rights. The “transferable” bit needs to be emphasized in order for the value of these rights to be truly unlocked. I can see a large number of individuals who will be compensated with these rights who will want to trade them away, since they are unlikely to possess another site to utilize them. And given the number of big buildings coming up on small sites, I can foresee there being a decent demand for it.

I do hope that investment banks (or their equivalent) come forward in order to make markets in these rights. I’m sure banks won’t miss opportunity to step in here, but the important thing is for regulation that will enable such intermediation. It is in the interests of the BBMP to keep these transaction costs low, since that is going to have a positive impact on the valuation of these rights, and eventually less such rights can be given.

Postscript: It would be interesting to study the impact of these rights on bribery rates of BBMP officials. I’m sure that currently a lot of money is made in illegally granting rights for buildings that don’t conform to regulations. Since there will now be a legal way of getting similar favours (I’m told that the Akrama-Sakrama scheme has similar intentions) it would be useful to see if bribes do drop.

Democracy

So next Saturday Shivamma, my aunt’s full-time maid, is going all the way back to her village near Challakere (Chitradurga district, Karnataka; six hours away from Bangalore) just to cast her vote in the Gram Panchayat (village council) elections.

My aunt can’t let go of her for more than a day but Shivamma’s relatives are really insistent that she exercises her franchise. They say that her visit to the village would be worth it even if she won’t be able to spend much time there apart from casting her vote!

Shows how much every single vote matters when the number of voters is low!

Tax Breaks

One thing that has struck me recently is about charitable organizations that try to attract donations by claiming “100% tax break under section 80G” or a similar 50% tax break or some such thing. Given how often organizations use this technique to get funds, I’m sure this works. That people do choose where to donate their money depending upon the amount of tax break they get.

I’m just trying to illustrate this concept from another angle. Let’s say you donate Rs. 10000 to a charity that has gives a “100% tax free” receipt. So effectively your taxable income goes down by Rs. 10000. And considering a 10% marginal tax rate (ignoring cess, surcharges, etc.) your tax payable comes down by Rs. 3000. So effectively, you have donated ONLY Rs. 7000 to this charity and forced the government to pay the balance Rs. 3000.

Do you see the catch in this tax-break scheme? Essentially the government is forced to pay money to charity at the behest of a single citizen! By granting this “tax free status” to a charitable organization, the government is making itself liable to commit unlimited funds to this particular charity (of course I suppose that it isn’t easy to get such breaks for your organization, and considerable greasing of palms is involved. But considering that a small charity run by my extended family gets 50% tax break it may not be very hard after all).

So yeah, I’m sure the numbers will be available somewhere but i’m too lazy to find it. But I’m interested in finding out the aggregate deduction sought by all taxpayers put together under this section 80G (the one where you get tax exemption for donations). And then see where the government’s forced charity is headed!

Orators and Writers

Yesterday I was reading an op-ed in Mint when it struck me was that this particular columnist never argues – in the sense that he never constructs an argument using inductive or deductive logic. His method or argument is to say the same thing over and over again – in different ways, using different metaphors. He hopes to make his point by way of reinforcement, and considering his popularity and his ubiquity across the media, I’m sure it works for a lot of people (though not for me).

Then I started thinking about people who are known to be “great orators”, mostly from the Indian political space. I started thinking about Vajpayee, about Chandrashekhar and several other similar people. I discovered the same thing about them. That they seldom construct an argument using deductive or inductive logic. Their way of getting the point across is the same as the Mint columnist’s – to say the same thing forcefully and in several different ways.

And thinking about it, it seems quite logical. When you are addressing a large audience, you will need to take everyone along. You will need to ensure that everyone is clued in on what you are speaking on. And when you speak, there is no way for the listener to take a step or two back if he/she misses something you said. Unlike text, the speech has to be interpreted in one parse. So if you are to be a great orator, you need to make sure that you take the audience along; that you construct your speech in such a way that even if someone gets distracted for a few words they can join back and appreciate the rest of the speech. Hence you are better off indulging in rhetoric rather than argument.

A writer, on the other hand, has no such compulsions. It is easy for his reader to go back and forth and parse the essay in whatever order he deems fit. As long as he keeps the language simple, the reader is likely to go along with him. On the other hand, if the writer indulges in rhetoric, the reader is likely to get bored and that could be counterproductive. Hence, writers are more into argument than into rhetoric.

Which brings me back to the Mint columnist I was reading yesterday who, as far as I know, has been a prolific writer but not as much as an orator (or maybe he is but I wouldn’t know since he lives abroad). And I’m puzzled that he has settled on a rhetorical style rather than an argumentative style. I’ve happened to meet him and even then he was mostly using rhetoric rather than reasoning in his arguments.

So yeah, the essence is that there are two ways in which you can construct arguments – by logical reasoning which is mostly preferred by writers and by rhetoric which is preferred by orators. I’m not sure how successful you can be if you interchange styles.

The other side of the long tail

There are several people who talk about how the advent and the popularity of the internet has resulted in markets in many a long tail. Without loss of generality, let us just take the market for writing here. Several niches which were earlier not served since there wasn’t enough of a dedicated audience in a particular geographical area for a certain set of articles and so no one bothered to write and disseminate them.

For example, it is unlikely that there was enough of a “market” for a series of posts on the Studs and Fighters Theory in the days before the internet – a market big enough for a newspaper or a magazine or a journal to bother publishing. Now, the internet not only allows me to publish it without effort or cost, but also lets me know that there is enough of a market for this kind of a series for me to bother publishing it rather than just explain it to a few friends in a smoky bar or cafe.

Now, the funda is that sometimes the long tail can exist in geographically coherent markets and not online! For example, all of yesterday, while at work i was frantically searching for sources to follow the BBMP election results. Everyone led me to this TV9 video streaming but it didn’t open on my office network and I couldn’t find any other live sources that were constantly updating the results. I had had similar problems following the results of the Karnataka Assembly elections two years back.

It was then I realized that the “traditional market” can itself be the long tail! For example, the amount of information I found about the elections in this morning’s papers was really impressive – in fact, the much ridiculed ToI had pretty good coverage of the polls, as did the Deccan Herald or the New Indian Express. Earlier in the morning, yesterday, too there were the Kannada channels which focused exclusively on the election results.

What I’m saying here may be fairly obvious, but just wanted to point out that long tail need not refer exclusively to the new media, or new channels. When you look at it in certain ways, several of the traditional media are also catering esssentially to a long tail, though when there was only the traditional media, no one really used the term.

Talking of BBMP elections, take a look at this graphic that was presented in the Deccan Herald today. Don’t you see a pattern in this?

Bangalore Map

The TDS Scam

Tax Deducted at Source. TDS. A wonderful measure by the government to hide from us what they are taking away from us. The concept that there is a substantial difference between your “cost to company” and your “take home pay” has been ingrained in all off us, and so we don’t question the diffference. This way, it makes it easy for the government to take away large amounts of money as tax, without really making the taxpayers feel it.

I’ve messed up. Due to a combination of reasons I haven’t yet filed my tax returns for last year (2008-09) and now my tax advisor tells me I have two weeks to do it. And calculating the tax payable for the umpteenth time, I now notice that there has been an error in all my previous calculations. And the additional tax that I need to pay (has to be paid along with a fine for paying late) is not insubstantial.

TDS is a necessary system in order to enforce compliance and putting in checks and balances into the system. It helps the government get its finances on time and save a large part of trouble in revenue collection. What it does, however, is to obscure the amount of tax that is being deducted. A clever method, I think, devised by governments to take away a large part of your money from you without you noticing it!

Of course this is accompanied by this ritual called filing tax returns when you do get a chance to see how much the government has taken away from you, but considering that for most people most of their taxes would’ve been accurately deducted, most people would just go through the process mechanically and few would actually look carefully at the numbers!

The next time you are doing your returns, I strongly urge you to look at the numbers carefully. Look at how much you have actually earned, and how much of it is being taken away by the government without you really noticing it! Open the calculator in your mobile phone and calculate the proportion of time you work every year for someone else – for someone called the sarkaar. There’s a good chance you’ll start demanding more from the government after that.