takshashila – Pertinent Observations

Why I quit public policy

This is yet another of those posts that elaborates something I’ve put on twitter.

Some 10-15 years back I thought I was interested in public policy. Now I've lost all interest.

Sincere thanks to @TakshashilaInst and @acorn for allowing me to explore this interest in a low-cost manner (as a part-time "resident quant")

— Karthik S (@karthiks) August 19, 2020

I remember getting interested in public policy sometime in 2005. I think that was around the time when I stopped solely talking about gossip (and random “life issues”) on this blog, and started commenting about random “issues” here.

That was also the time when Madman Aadisht introduced me to his blog circle that he called the “libertarian cartel”. Reading blogposts by this cartel (included the likes of Ravikiran Rao, Amit Varma, Gaurav Sabnis (who was once a libertarian), Nitin Pai, etc.), I was hooked. I too wanted in on this “libertarian cartel”.

Soon enough, I started work and did one project that involved the study of some economic reforms. I soon quit that job but wrote about this, and other issues. I started getting into the “econ blogosphere”. Between the libertarian cartel, the opinion pages of the Business Standard (back when TN Ninan was the editor) and “econ blogs” (the likes of Marginal Revolution and EconLog), I got deeply interested in “policy issues”. And I thought I wanted to do public policy.

Of course, what public policy pays is nothing comparable to what post-MBA jobs pay, so I never explored it seriously as a career. I kept moving from one highly paid job to another, though I kept writing about “policy issues” on this blog, and then on Twitter (when I opened an account there in 2008). I even wrote on the “Indian Economy Blog”. And while the libertarian cartel never admitted me as a member, when they did form a mailing list, I got invited to join it soon enough (thanks to Aadisht once again).

“Policy work”, or “policy blogging” (which might be a more accurate term), in the late noughties was enjoyable because most people (at least those I bothered to read) were issue driven. So you had the aforementioned libertarians who analysed issues through a libertarian lens. You had leftists like the Jagadguru Krish and “Jihvaa”. You had right wingers like SandeepWeb. Each class largely evaluated each issue based on their own philosophies, and commented about them. People avoided being partisan.

And so, in 2011, when I quit full time employment and decided to lead a portfolio life, I decided that public policy should be part of my portfolio. And the Takshashila Institution was kind enough to appoint me as its “resident quant” (for the most part, there were no formal responsibilities for the role and I wasn’t paid. However, we mutually enjoyed it, I would like to think).

That was a fantastic opportunity. I didn’t have to commit that much time, but got the optionality to participate in a large number of fairly interesting discussions with fairly interesting people. I did some work here and there, doing some research and teaching and course designing and lecturing, and it was most enjoyable. More enjoyable, of course, was the set of people I met through this assignment.

Somewhere down the line, maybe in 2015 or 2016 (or maybe even earlier), things changed. Basically policy became partisan. Out went the libertarians and totalitarians and right wingers and left wingers. In came the “Congressis” and “bhakts”, and republicans and democrats.

Output of policy analysis everywhere, except in academic journals (which I can’t comment on since I don’t bother reading them), became a function of the author’s political preferences. One year, an author might be favourable to the BJP and everything he/she wrote would nicely tally with the BJP’s view of the world. And then maybe the author would change political preferences, and there was a 180 degree turn on most issues!

On twitter, on mainstream media, on blogs, even on Instagram – “policy analysis” became rather predictable. Once you knew a person’s political preferences and leanings, it became clear what their view on any topic would be – it was identical to the view of their chosen party at that point in time. This partisanship meant there was “no information content” in any of this writing.

And that is how I started getting disillusioned. And the disillusionment grew over time, until a point when I started actively avoiding policy discussions (I’ve even muted the word “policy” on twitter).

I’m happy living my life, and doing my work, and earning my money, and paying my taxes. In the spirit of 2020, I’ll “leave public policy to the experts”.

I delivered an NED Talk

When we finally implemented the NED Talks a year back, we took a policy decision that we wouldn’t be speaking ourselves, and instead remain content with organising, producing and anchoring the event.

With a year of NED talks (where we collected over fifty NED fellows over six episodes) done, there were the interesting situation today where the Takshashila Institution, which I’m associated with an many of whose fellows have delivered NED Talks, organised an NED Talks-like event (they acknowledged it as such) as part of their year-ending bash.

So they requested me to speak at the event and I agreed to talk about the Ramayana and its connection with the current civil war in Syria. I essentially paraphrased what I’d written in this post on this blog, and argued that Europe and the US should back Russia in supporting Bashar al-Assad’s forces.

The event was streamed live on Youtube, and you can find my talk here:

See and enjoy (my talk starts around the 15 minute mark).

PS: I had consumed two glasses of wine before this talk which “lubricated” things and enabled me to talk without feeling self-conscious. I must say this method works fairly well for short talks.

Brainstorming

I was never a big fan of “brainstorming”. I’m referring to those meetings where everyone gets together and thinks aloud, in order to converge to a solution. In the past, when I’ve been involved in such exercises, they’ve mostly come to nothing, and mostly ended with a list of to-dos which got never done (this was mostly in a corporate context). As a consequence, I started hating large meetings also (either most people wouldn’t add value or it would end up like a group discussion with everyone shouting), and have been trying to avoid them.

This time, though, it was different. The context was not corporate. The agenda did not involve an item of day to day work. None of us had a firm stand on the topic at the beginning of the meeting, with each of us having our own apprehensions of either stand (when people come with preconceived ideas and biases, there usually is nothing to storm our brains about).

And so we got together. And we talked. There were times when no one spoke. There were times when it actually turned out to be like a group discussion (I actually said, “ok I have ten points which I haven’t been able to make in the last one hour. I’ve written them down and let me shoot now”). But the situation never got out of hand. Mutual respect meant that cross-talk quickly died out, and we listened to each other. And it was extremely civil.

And then things started crystallising. Soon, some of us had an opinion. Later, others did. Some were ultimately not convinced, but had an opinion anyway. In a period of about twenty minutes somewhere in the third hour of the session, we all seemed to have an “aha moment” (apologies for that consultantspeak). But such moments occurred at different times for each of us.

And then we did the usual thing of “going round the table” for each of us to express our opinions. And then we did. And as each of us expressed our opinions, we discussed it further. Things crystallised better. And we ended the meeting asking everyone who was there to blog about it.

This is what I wrote:

given that these two internets are independent, the total value is $a^2 + b^2$ . Now, if we were to tear down the walls, and combine the two internets into one, what will be the total value? Now that we have one network of $(a+b)$ users, the value of the network is $(a+b)^2$ or $a^2 + 2 ab + b^2$ . So what is the additional benefit that we can get by imposing net neutrality, which means that we will have one internet? $2 ab$ , of course!

This is what Nitin wrote:

If the government opens up the telecom service market to greater competition, perhaps by issuing unlimited licenses, then there is a case to allow them the freedom to discriminate among customers. As the state-owned carrier, BSNL can provide a neutral internet. However, if the government does not open the sector to further competition, therefore shielding the telecom service providers from more competition, then mandating net neutrality provides a reasonable approach to promoting the public interest.

Varun wrote this:

the regulator’s two major tasks are to enhance social welfare by protecting the consumer interest and to create an environment that is conducive for business — that will further enhance social welfare. A neutral internet will definitely benefit the consumers interest; but since the regulatory framework is not conducive for business, it appears that net-neutrality is in conflict with business interests. The situation can change if the regulatory framework is eased and the markets are opened up.

And Pranay wrote this:

net neutrality as a principle must be upheld. This is because communication network providers should not have the unfair advantage of being able to price internet content differently. Once the communication networks are setup, costs do not change with consumers accessing different content. In any case, the communication service providers are free to have fair internet usage policies to prevent induced demand effects

Gautam went down approximately the same path as me, and wrote this:

This is exactly why I oppose Zero Rating as well, whether paid or unpaid – it tends towards creating pockets of disconnected users per telecom company and while this is valuable for the telecom company and the applications and sites that are zero-rated, it reduces the total utility of the public internet, as a whole.

Devika deviated a bit from the crowd. This is what she said:

That said, it does not mean that ISPs should be restricted from entering into contracts with content providers. If Flipkart wants to undertake a joint marketing initiative with Bharti Airtel, it should be allowed to so. For example, Flipkart can give benefits to Airtel from sharing their customer base. To be extremely clear, such collaborations should not hinder access to any other internet sites. This will maintain a level playing field for all content providers.

Anupam, too, differed, and argued that customers need to be given choice:

If a person runs his business solely based on international VoIP calls and doesn’t mind paying extra for ensuring reliability and speed, he should be able to access that privilege. Or, for that matter, a Facebook or Twitter addict who wants these apps to be quick such that they can post real time selfies, should be able to choose these apps over say, apps which give real time updates on political happening in Nicaragua. Thus, people can be given a choice as to which data packets have to be prioritized within their limited bandwidth

And Pavan argued that competition is alone not sufficient:

However, if the internet is a public good – will competition ever be sufficient to ensure the vibrancy of the network? Will competition be sufficient to improve the effective network size? I would argue that it might fall short of the mark. Thus, regulations that enforce net neutrality may be necessary to prevent ‘walled gardens’ from springing up.

As you can see, our opinions at the end of the meetings all differ. But you can also see that the posts are all well-argued, implying that at the end of the meeting we all had a reasonable degree of clarity. And that is what made it a brilliant brainstorming session.

Now if only all other brainstorming sessions were to be as good! Oh, and it’s a long post already but here are some #learnings on what makes for a successful brainstorming session:

Open minds on behalf of participants
Mutual respect, and giving everyone a chance to speak
No overbearing participants or moderators, leading to a freewheeling debate

As you can see, all these are similar to what makes a multiplayer gencu successful! But brainstorming has a specific agenda, so it’s not a gencu!

Me in Pragati on Civil Wars

Last week I wrote an essay in Takshashila Institution’s Pragati where I argued that Civil Wars don’t have a “good side”.

An excerpt:

Thanks to the efforts of individuals such as Pablo Picasso and George Orwell among others, the Spanish Civil War is often portrayed as a conflict between the ‘good’ (the socialist Republic) and the ‘bad’ (the Nationalist forces) – with the malicious Nationalists bombing the poor Republican people. The truth, however, is not so simple. Looking at other, more objective accounts, including Lowe’s, it turns out that it was a war fought between two evil sides (though it’s not clear if the sides were equally evil) – the Nationalists on one side and the Communists on the other, with the people of Spain being the real victims.

Raghuram Rajan replies to my Pragati article

At least I like to believe that! A couple of weeks back I’d published this article in Pragati (published by the Takshashila Institution, where I work part time as Resident Quant) slamming recent decisions by the Reserve Bank of India to make two factor authentication compulsory and to limit the number of free ATM withdrawals from non-home banks.

My criticism for both these decisions was that they were designed to take money out of the banking system, which would result in a reduction of money supply, and subsequent increase in borrowing costs, thus slowing down India’s economic recovery. I had some other criticisms, too, such as it being none of the RBI’s business to mandate what was essentially a pricing decision between the RBI and the customer, and the perverse incentives the rule created for banks seeking to set up new ATMs.

Could it be that the above regulations are a move by the RBI to curtail money supply without necessarily doing the politically tricky task of raising interest rates?

If it is (and it is a very remote possibility), we should commend the RBI for what will then amount to be a sneaky decision. If not, it must be mentioned that though noble in thought, the two decisions are completely bereft of economic and financial reasoning.

I had written.

So an article published an hour back in Mint quotes Rajan on these two policies, where he defends them. On the two factor authentication issue, he is surprisingly defensive, offering nothing more than a statement that banks and companies need to follow the rules and not try to circumvent them in the name of innovation. Rajan then added that he is looking into permitting transactions up to a certain limit that don’t need two factor authentication – something I had pointed out in my Pragati piece.

On the ATM issue, I (and other news organisations who I got my news from) seem to have got my information wrong. Apparently currently regulation exists that five ATM transactions per month from non-home banks are supposed to be free, and that is being cut down to three. Rajan clarifies (as reported in Mint today) that the new regulation only allows banks to charge customers beyond the first three transactions in a month, and they are not obliged to do so. He talked about the perverse incentives that the earlier regime (where banks were obliged to permit a number of free ATM transactions from non home banks) created.

My apologies for not reading the regulations correctly (of course a part of the blame has to go to the newspapers that reported it thus! 🙂 ). I admit I should have checked from multiple sources on that one.

Coming to the point of the post, why do I think that Rajan is responding to my Pragati piece? You might argue that it might simply be a case of correlation-causation – that it might be coincidental that Rajan has spoken about two issues that I had highlighted in that post. However, there are two reasons as to why I believe that Rajan was responding to my post.

The first has to do with the combination of subjects. While the two regulations (ATM withdrawals and two factor authentication ) were widely reported in the media, I haven’t seen any piece apart from mine which addresses these two issues together (I must admit my perusal of Indian media has dropped nowadays given my Twitter and Facebook sabbatical). Given that Rajan has chosen to address these two issues today, it is likely that he is responding to my piece.

The second reason has to do with the timing. The Takshashila Institution sends out a weekly “dispatch” which is a summary of commentary written by its fellows and employees and associates. This is an emailer which contains links to these articles along with short snippets, and a number of fairly influential people (within the government and outside) are on the list of recipients. The latest edition of the Takshashila dispatch went out this morning, and it has a link to my Pragati piece. Now, while Rajan is not on the mailing list (to the best of my knowledge), it is likely that an influencer on the list with access to him brought it up today (it could even be the Mint journalist who has reported the story – that would still count as Rajan, albeit indirectly, responding to my piece). This reaffirms my belief that he was responding to my piece in his comments today!

You might think I’m deluded. So be it!

In which I thulp the RBI

I’m still so pissed off with the Reserve Bank of India doing a Ramanamurthy that I’ve written a serious editorial in Pragati – the Indian National Interest Review (published by the Takshashila Institution). In this piece I take on measures by the RBI to limit ATM transactions and the thing on two factor authorization.

I claim that both these decisions are economically unsound and there is only possibly a farcical explanation for them:

There is perhaps only one idea (more a conspiracy theory) that possibly explains the above decisions from the RBI. Both these decisions, it might be noticed, help push up the usage of hard currency and decrease the levels of bank deposits. Less bank deposits means less money available for banks to lend out, which means that the cost of borrowing from a bank implicitly goes up. Could it be that the above regulations are a move by the RBI to curtail money supply without necessarily doing the politically tricky task of raising interest rates?

If it is (and it is a very remote possibility), we should commend the RBI for what will then amount to be a sneaky decision

Link

What is Takshashila blogging about?

As you might be aware, we run a large number of blogs on the Takshashila platform. I wouldn’t blame you if you might be confused about which blog talks about what. In order to ease your decision-making, we will look at “wordclouds” of each of our bloggers here. As you might be aware, a wordcloud is basically a pictorial representation of the frequency of various words. The more frequently a word appears, the bigger its representation in the wordcloud.

So without much ado, let us go ahead and look at the wordclouds of each of the Takshashila bloggers:

1. Nitin Pai