Our Problem is Not Predatory Pricing, But the Predatory State

This is the 29th installment of The Rationalist, my column for the Times of India.

There is a delightful saying in Hindi that goes, ‘Ulta chor kotwal ko daante.’ The thief accuses the policeman. I am reminded of this every time someone in government uses the term ‘predatory pricing’, as if lowering prices for consumers is a terrible thing. Amazon has recently been accused of this, and the government has threatened to take action. That would be a big mistake.

Here’s the typical narrative that has been built around predatory pricing. A big company comes into a market and lowers prices. Sometimes it willingly incurs losses while doing so. This drives its competitors out of the market, as they can’t match those low prices. Local jobs are lost. Having thus secured a monopoly, the big company raises prices. Consumers suffer. Lost jobs remain lost.

This narrative is simple, and thus attractive. But it is wrong at several levels. Let me unpack some of them.

One, assume that a company does manage to drive all its competitors out, and is a monopoly. It then raises prices higher than what they were at the start. Immediately, competitors will rush in attracted by the high prices. The only situation in which this won’t happen is if the state imposes barriers to entry. That cronyism, that predation by the state, would then be the problem. In a free market, with no barriers to entry, you cannot stop competition from coming in.

Indeed, I can’t think of a single example of a company that has done predatory pricing, chased away competitors and then raised prices again in a free market. Yes, Jio cornered a big chunk of the telecom market by lowering prices – but prices remain below earlier levels, and their ‘predatory pricing’ has empowered millions of ordinary Indians. Similarly, Amazon has used low prices for customer acquisition since the 1990s. Where has it then used its market power to raise prices again?

Two, we often define monopolies too narrowly. For example, Facebook and Twitter may seem to be monopolies if we define their market as a certain kind of social media. (Personal updates and micro-blogging respectively.) But they are both competing with the millions of ways in which people can spend their time. Tomorrow, if Facebook and Twitter get carried away by their alleged monopoly status and start charging exorbitant fees, users will simply spend less time on those platforms. Everything else that you can do with your time is competition for them.

This is not relevant to Amazon, of course,which I maintain can never even be a retail monopoly in a free market. But there is so much alarmism about the alleged monopoly of tech companies that it is a point worth making.

Three, people talk about the local jobs lost when competitors shut down, but that is the Seen Effect. The Unseen Effect is that the money saved by consumers goes back into the economy and generates more jobs. We must remember that markets exist to satisfy the needs of ordinary people. We should be focussed only on consumers. Whoever gives value to consumers thrives. Whoever cannot compete gets out of the way, and their resources are deployed elsewhere. That is the process by which societies prosper.

When the government gets in the way of anything that benefits consumers, such as ‘predatory pricing’ or ‘dumping’ or international trade, think about what it is doing. It is redistributing wealth from ordinary people to rich interest groups. It is taking from the poor and giving to the rich.

This is why I object to the misleading term, ‘predatory pricing’. When Amazon gives you these incredible sales, it is doing you a favour, not preying on you. It should be called ‘philanthropic pricing’. If the government gets in the way of your getting low prices, then it is the government that is predatory, not the company.

Why is there so much rhetoric against ‘predatory pricing’ then? Politics. It is in the interest of those small retailers affected by Amazon to get together and lobby the government to help them. This comes at the cost of the common citizen. Small retailers form a large part of the base of multiple political parties in the country. They contribute election funds to those parties. Obviously, a quid pro quo is expected. It comes at our cost.

The campaign against ‘predatory pricing’ seems like a trivial thing to outrage about. But it is one among countless illustrations of the cancer at the heart of our democracy: the vicious circle of money and power in politics. Money chases power so that power can generate money. That happens at our expense. That is why we should beware of the predatory state.

Enabled by technology, young Indians show what it means to be a citizen

This is the 28th installment of The Rationalist, my column for the Times of India.

What does it mean to be a citizen? I have had reason to think a lot about that term recently, in all its different shades of meaning. At one level, citizenship is a legal status. Our government has tried to sharpen its definition with the Citizenship Amendment Bill (CAB). At another level, citizenship denotes a package of rights that we possess, and a set of duties we have towards society and our fellow citizens. We saw a heartening demonstration of this deeper, richer kind of citizenship this week.

Young people across the country led protests to defend their shared idea of India, which was under threat from the state. I think of us as an apathetic people, quick to normalise oppression – but millions of Indians rose up this week in a manner that would make our freedom fighters proud. And, surprise surprise, technology and social media played an important role in bringing us together, instead of tearing us apart.

I have written before on these pages about the role that social media has played in dividing society and polarising our discourse. A quick recap: One, innovations like the Facebook ‘like’ button and the Twitter retweet increased the ways in which we could be validated online, one notification at a time. Chasing these dopamine rushes, we began to posture more and more, to get likes and RTs and raise our status in our in-groups. Two, this led to what the legal scholar Cass Sunstein calls group polarisation, as we divided into ideological tribes with firm boundaries. We took comfort in echo chambers, and all discourse was snark, abuse and lies.

Three, the innate bigotry and sexism of our society was validated by the discovery that many others shared these traits, which led to what sociologist Timur Kuran called preference cascades. We could express these feelings openly, instead of being sheepish about them. Our politics became polarised, and the rise of right-wing populism was enabled by social media.

But now, technology has come to the rescue to take us in the opposite direction.

I tear up easily, and I felt waves of emotion this week on reading about the bravery of ordinary citizens on social media. The slender women who saved their male friend from uniformed thugs, shielding him as they held up their fingers in the face of lathis. The Malayalee Hindu girl named Indulekha who went to protest in a hijab as a response to Narendra Modi’s jibe about how you could identify miscreants by their dress. The young girl with the cat meme on her t-shirt who offered a rose to a bashful policeman. It was Gandhianism for the 21st century, against a state as brutal as the one the Mahatma battled.

These protests were spontaneous bottom-up protests, not instigated by any political party – the entire opposition is inept and cowardly – but driven largely by students. In dozens of cities across 24 states, cutting across boundaries of religion and caste and class, the students gathered. This was heartfelt and fearless. Facing up to lathi charges is not posturing. 100,000 people in the streets of our cities is not an echo chamber.

During the Mumbai protests, a 94-year-old freedom fighter was quoted as saying that there were more people in August Kranti Maidan now than when the Quit India Movement was launched in 1942. How can one not be inspired?

The state has fought back. It has fought back with lathis. It has fought back with disinformation. It has the legal monopoly on violence, and more coercive force than the people at large. But coercion only gets you so far. A video that circulated on Twitter showed the frail, 61-year-old historian Ramachandra Guha being dragged away by three burly uniformed cops. But it was Guha who has the power of ideas with him – and the state that is scared. The more it lashes out, the more we smell that fear.

There have been great student uprisings before in India, most notably in 1973-74, which was followed by the imposition of emergency. Students were beaten, politicians and intellectuals went to jail, though there was no internet to shut down then. There is now – but shutting it down won’t work. The blunt tools of censorship and internet shutdowns cannot stop us from connecting to one another. There is a preference cascade in play, to use Kuran’s words, to show that our unity comes not in spite of our diversity but because of it.

I have been cynical for years, but this last week has filled me with hope. Our economy is going to hell, our society is polarised. And yet, the people of our country, led by the young, have stood up to say that they will no longer be subjects, and must be counted as citizens. Is this our demographic dividend?

Why Abhijit Banerjee Had to Go Abroad to Achieve Glory

This is the 27th installment of The Rationalist, my column for the Times of India.

In the early 1960s, my father studied economics under Abhijit Banerjee’s father in Presidency College, Kolkata. He tells me that Dipak Banerjee was an outstanding professor, and that the Presidency economics department was a class apart. The younger Banerjee himself went to Presidency a decade-and-a-half later, and then to JNU, another institution with a stellar record. There is much celebration in both these places this week, and rightly so – but I would argue that the next step Banerjee took, going to Harvard for his PhD, was the necessary step that set him on the path to greatness.

It is a trivial fact that many of our finest thinkers need to go abroad to reach their full potential. Why is this so? One answer, interestingly, comes from Banerjee’s fellow Nobelist, Michael Kremer. ‘The O-Ring Theory of Economic Development’, Kremer’s seminal 1993 paper, is packed with insights on economic development, inequality, the market for talent – and the phenomenon of brain drain.

The paper gets its title from the 10-dollar O-ring that caused the failure of the US$ 3.2 billion Challenger Mission in 1986. When a complex task depends on many components to work together, the failure of any one can lead to failure. But the paper is about far more than that folksy cliché about a chain being only as strong as its weakest link.

Kremer looks at the interplay between talent, productivity and wages. Imagine a task that requires ten people to fulfill certain functions. Let us say that each of them functions at a high overall skill level of .99 (where 1 is perfect.) The overall level of the task can then be quantified at 9.04. If they all perform at .95, though, the overall level drops to 5.99. If they perform at .9, it drops to 3.49. If the task requires 1000 people instead of ten, the differences are far higher. (This illustration is from a lucid video on the subject by Marginal Revolution University.)

The upshot, in Kremer’s words, is that “small differences in worker skill create large differences in productivity and wages.” This is true especially when you cannot substitute quantity for quality – two mediocre novelists working together cannot produce better work than one excellent one. This is also true of complex tasks, with more links in the chain, where the demand for quality is higher.

What are the implications of this? One, talent tends to congregate in clusters. Two, capital chases quality, and thus gravitates to the clusters of talent. Three, the rewards for talent are outsize. Go back to my earlier illustration, and it will be clear why a worker with a skill level of .99, just slightly ahead of the .95 guy, could get many times the salary.

The O-Ring Theory explains why elite universities like Harvard draw the best students, and why industry pays a premium for students from there. But talented students like the young Banerjee of the 1980s don’t go West only because they will eventually get paid more. They also learn more and enhance their own skills, mingling with better peers than they would otherwise have had. I bet Banerjee, Kremer and Esther Duflo, geniuses all, would attest to how much they made each other better.

What are the lessons this has for Indian policy makers? I can think of at least three. One, make it easy for private players to invest in education. We cannot replicate an education ecosystem like that of the US overnight, and we certainly cannot design it in a top-down way. Remove the restrictions that exist for educational entrepreneurs – things can only get better. In my view, Ashoka University is already producing fine work in the social sciences. Enable a hundred Ashokas to flourish.

Two, in a broader sense of our whole economy, since capital already has incentives to be elsewhere (where the skill is), create other incentives to draw it here. This is why ease of doing business, the rule of law and clear tax laws are so important.

Three, minimise trade restrictions. The O-Ring Theory explains the inequalities that exist between countries. One way of lessening the impact of that is through free trade, with positive-sum transactions that leave both sides better off. This is why, as Kremer says in his paper, “trade restrictions cause large welfare losses.”

Kremer’s paper has many more insights and implications than the ones I mentioned here, and you should read it yourself. While many columns have been written this week on the Nobelist trio’s work on randomised control trials, I would also urge you to check out Banerjee’s early theoretical work, some of which is beautiful for its clarity and elegance. His papers on herd behaviour and the propagation of rumours explain a lot about our modern times — but that is a subject for a whole different column.

GDP Is a Flawed Measure – but It Matters

This is the 26th installment of The Rationalist, my column for the Times of India.

A group of statesmen sat around a table 100 years ago to hammer out an agreement. World War 1 had just ended, and the Treaty of Versailles, signed in June 1919, was meant to make the loser pay for starting the war. Germany would have to disarm, give up territory and pay reparations to the winners. The amount came to 132 billion marks – which would be US$442 billion today.

Germany did not have anywhere close to that kind of money. Their only way out was to print the money. Printing money, of course, leads to inflation. Germany printed so much of it that it led to hyperinflation: a loaf of bread that cost the equivalent of 26 cents in 1919 rose to US$100 billion by the end of 1923. This was not just a tax on the poor, as inflation always is, but a war on the citizens of Germany. Out of the resultant  bitterness and anger rose Nazism, Adolf Hitler and the Second World War: the unintended consequences of a poor treaty and bad economics.

Some people saw it coming. John Maynard Keynes wrote a book called The Economic Consequences of the Peace in 1919, in which he explained why those clauses of the treaty would lead to disaster. He also pointed out one problem that economists of that time faced: they did not have a measure for national income. The concept of the Gross Domestic Product – or GDP as we know it – did not then exist.

There are two points I want to make in telling you this story. One, economics has humanitarian consequences. Two, metrics matter.

The original impetus behind measuring national income was a statist one. The state needed to know how much money it could extract from its subjects, often for the purpose of fighting a war. There had been efforts made to calculate nation income from the 17th century, but this task gathered momentum during the Great Depression of the 1930s. President Franklin Roosevelt planned to revive the economy through increased government spending – but there needed to be a way to measure it first. A group of economists led by Simon Kuznets got to work, and the metric was formalised just as the Second World War approached. Keynes approved, as the title of his 1940 pamphlet indicated: ‘How to Pay for the War.’

The creation of the GDP has been described as “The Manhattan Project of economics,” but its utility extended beyond the war, for reasons beyond economics. It became important in geopolitics, where the optics of the Cold War led the two sides to fight over whose was bigger. (The Soviets used a different measure, and the CIA had a team dedicated to poking holes in it.) Any metric can be gamed, and there were ample geopolitical incentives to game the GDP: a high GDP could get you entry into exclusive groups like G8 and G20, and a low GDP could get you more foreign aid.

As far as domestic politics was concerned, how does one measure the economic performance of a government? The GDP is the obvious measure, which explains why arguing over the GDP has become, as the Greek economist Andreas Georgiou pointed out, “a combat sport.”

There are many things wrong with the measure. Its pioneer, Kuznets, felt that any measure of national income should measure welfare and not just output. He was opposed to government spending being counted in GDP, but was over-ruled by the US administration. That meant that bombs and biscuits are both counted in the GDP, even though one often leads to destruction of wealth. The predatory state can divert money from productive uses in its citizens hands to unproductive ones in its own. Government spending, even if it leads to a net loss for society, will still be counted in the only metric we use, creating an illusion of progress.

Besides this, there is the question of what GDP cannot measure, summed up so well by the Widower Paradox: If a widower marries his domestic help, and thus stops paying her, the nation’s GDP goes down. GDP also cannot measure many of the intangible ways in which our lives are better: I might buy a cheaper mobile phone today than I did 20 years ago, but the value I derive from it is so much more because of technology.

There have been recent efforts to come up with alternatives to GDP, such as the Human Development Index, introduced by the UNDP. The GDP more or less correlates with these. Even if it is not an accurate measure of human welfare, it is a good indicator of it. For that, though, it needs to be measured accurately.

In India, GDP measurement has been shady. Firstly, the informal sector is most of our economy, and measuring this is hard. Secondly, the methodology the government uses is opaque, even arbitrary, and cannot be independently verified. We have to take the government’s word for it – and all governments in a democracy have an incentive to lie. If, despite all this, our GDP growth rate has dipped so much recently, that is a cause for alarm.

Economics has consequences. Bad economics kept millions in our country poor for decades. The liberalisation of 1991, partial and incomplete though it was, showed us the power of GDP growth. Today, we know that every one percent of GDP growth takes over two million people out of poverty. Thus, a falling growth rate is not just an economic problem but a moral failure.

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Also check out:
Demystifying GDP — Episode 130 of The Seen and the Unseen

Price Controls Lead to Shortages and Harm the Poor

This is the 25th installment of The Rationalist, my column for the Times of India.

Indulge me with a thought experiment. One morning the ruler of our country, Dear Leader, decides that India’s poverty is unbearable to him. The people must be made rich. What is a metric of wealth? The automobile! Everyone should have a car! More people will then buy petrol and the economy will recover!

Dear Leader goes on his evening podcast and announces to the nation that henceforth, there will be a price cap on cars. All cars will have to be sold at the very affordable price of Rs 1 lakh only. What will happen?

You don’t need to know economics to answer this. Common sense will do. All manufacturers will stop making cars that cost more than Rs 1 lakh, for why would they sell at a loss? Existing inventory will be disposed of on a first-come-first-serve basis – or in the black market to those privileged with wealth and access. Eventually, there will be no new cars at all.

This seems like a dystopian scenario, but thought experiments can shed light on everyday principles by dressing them up in outrageous garb. The everyday principle here is this: price controls always lead to shortages. And yet, our politicians do not understand this.

The government recently announced that they are planning to put a cap on the prices of some hygiene products. This is a terrible idea. In any competitive market, producers are already driven by competition to sell at the lowest price point they can afford. If you set a price cap that is below this mark, they will have to stop manufacturing. The price cap will not offer any additional benefit to consumers – and will reduce the choices available to them.

How do prices work? Why do price caps hurt? I like to illustrate this with the example of Uber’s surge pricing. This mimics markets, with prices responding in real time to supply and demand. It has also caused much outrage, with users often complaining about Uber’s exploitative pricing during peak hours. Perfect example.

Imagine a miniature Uber world in which, at a specific moment, there are 50 available cars for 100 customers. There’s a mismatch between supply and demand, and Econ 101 tells you that the price should go up. But Dear Leader puts a price cap. What will happen?

Two things. One, the 50 available cars go to customers on a first-come-first serve basis, and 50 customers are left stranded. Some of those who are left stranded may have urgent needs, like catching a flight or going to hospital in an emergency. They would value the ride more. They would be willing to pay more. Some of those who do get cars may have a trivial need, and would gladly not take the trip if the price was too high. (They could use public transport or Netflix-and-chill at home.) First-come-first-serve doesn’t distinguish between the two. A surge price would reflect the scarcity of the ride, and signal its true value.

There is a second effect that is deeper than this allocation effect. A high price sends a signal to the marketplace. It incentivises Uber drivers taking a break to make themselves available. More cars get on the road. More needs get served. Over the long term, the money in driving Ubers might even incentivise people to move from less profitable professions to driving taxis. In a free market, prices carry the information that push people towards deriving the best value from their skills. Price caps stop this information. They perpetuate imbalances between supply and demand, which the market would otherwise sort out.

Whenever a ban on Uber’s surge pricing has been tried out in India, it has led to shortages.  A friend of mine actually missed a flight in Delhi when the government there experimented with it. What if she had a medical emergency at that time?

Another example: A few months ago, the government imposed price caps on stents. As you’d expect, it resulted in shortages, as all advanced stents that cost more than the cap became unavailable. This reduced the choices available to patients. How can this be good?

Economists agree on how prices work the same way physicists agree on the law of gravity. There is no ideological disagreement. Why, then, do politicians keep imposing price caps?

The cynical view is that politicians don’t care about whether price caps work economically, as long as they work politically. Price caps signal compassion. “I care about you,” the politician signals, “and how expensive you find everything.” Voters often do not have the economic literacy to figure out that good intentions often lead to bad outcomes, and policies meant to help the poor can hurt them instead.

It is also possible that our economically illiterate politicians have genuine faith in their powers. They suffer from a ‘God Delusion’. They believe that legislation can change reality. This is delusional. It leads me to wonder, given the scarcity of sensible netas, what would be the value of a good politician?

For this Brave New World of cricket, we have IPL and England to thank

This is the 24th installment of The Rationalist, my column for the Times of India.

Back in the last decade, I was a cricket journalist for a few years. Then, around 12 years ago, I quit. I was jaded as hell. Every game seemed like déjà vu, nothing new, just another round on the treadmill. Although I would remember her fondly, I thought me and cricket were done.

And then I fell in love again. Cricket has changed in the last few years in glorious ways. There have been new ways of thinking about the game. There have been new ways of playing the game. Every season, new kinds of drama form, new nuances spring up into sight. This is true even of what had once seemed the dullest form of the game, one-day cricket. We are entering into a brave new world, and the team leading us there is England. No matter what happens in the World Cup final today – a single game involves a huge amount of luck – this England side are extraordinary. They are the bridge between eras, leading us into a Golden Age of Cricket.

I know that sounds hyperbolic, so let me stun you further by saying that I give the IPL credit for this. And now, having woken up you up with such a jolt on this lovely Sunday morning, let me explain.

Twenty20 cricket changed the game in two fundamental ways. Both ended up changing one-day cricket. The first was strategy.

When the first T20 games took place, teams applied an ODI template to innings-building: pinch-hit, build, slog. But this was not an optimal approach. In ODIs, teams have 11 players over 50 overs. In T20s, they have 11 players over 20 overs. The equation between resources and constraints is different. This means that the cost of a wicket goes down, and the cost of a dot ball goes up. Critically, it means that the value of aggression rises. A team need not follow the ODI template. In some instances, attacking for all 20 overs – or as I call it, ‘frontloading’ – may be optimal.

West Indies won the T20 World Cup in 2016 by doing just this, and England played similarly. And some sides began to realise was that they had been underestimating the value of aggression in one-day cricket as well.

The second fundamental way in which T20 cricket changed cricket was in terms of skills. The IPL and other leagues brought big money into the game. This changed incentives for budding cricketers. Relatively few people break into Test or ODI cricket, and play for their countries. A much wider pool can aspire to play T20 cricket – which also provides much more money. So it makes sense to spend the hundreds of hours you are in the nets honing T20 skills rather than Test match skills. Go to any nets practice, and you will find many more kids practising innovative aggressive strokes than playing the forward defensive.

As a result, batsmen today have a wider array of attacking strokes than earlier generations. Because every run counts more in T20 cricket, the standard of fielding has also shot up. And bowlers have also reacted to this by expanding their arsenal of tricks. Everyone has had to lift their game.

In one-day cricket, thus, two things have happened. One, there is better strategic understanding about the value of aggression. Two, batsmen are better equipped to act on the aggressive imperative. The game has continued to evolve.

Bowlers have reacted to this with greater aggression on their part, and this ongoing dialogue has been fascinating. The cricket writer Gideon Haigh once told me on my podcast that the 2015 World Cup featured a battle between T20 batting and Test match bowling.

This England team is the high watermark so far. Their aggression does not come from slogging. They bat with a combination of intent and skills that allows them to coast at 6-an-over, without needing to take too many risks. In normal conditions, thus, they can coast to 300 – any hitting they do beyond that is the bonus that takes them to 350 or 400. It’s a whole new level, illustrated by the fact that at one point a few days ago, they had seven consecutive scores of 300 to their name. Look at their scores over the last few years, in fact, and it is clear that this is the greatest batting side in the history of one-day cricket – by a margin.

There have been stumbles in this World Cup, but in the bigger picture, those are outliers. If England have a bad day in the final and New Zealand play their A-game, England might even lose today. But if Captain Morgan’s men play their A-game, they will coast to victory. New Zealand does not have those gears. No other team in the world does – for now.

But one day, they will all have to learn to play like this.

Farmers, Technology and Freedom of Choice: A Tale of Two Satyagrahas

This is the 23rd installment of The Rationalist, my column for the Times of India.

I had a strange dream last night. I dreamt that the government had passed a law that made using laptops illegal. I would have to write this column by hand. I would also have to leave my home in Mumbai to deliver it in person to my editor in Delhi. I woke up trembling and angry – and realised how Indian farmers feel every single day of their lives.

My column today is a tale of two satyagrahas. Both involve farmers, technology and the freedom of choice. One of them began this month – but first, let us go back to the turn of the millennium.

As the 1990s came to an end, cotton farmers across India were in distress. Pests known as bollworms were ravaging crops across the country. Farmers had to use increasing amounts of pesticide to keep them at bay. The costs of the pesticide and the amount of labour involved made it unviable – and often, the crops would fail anyway.

Then, technology came to the rescue. The farmers heard of Bt Cotton, a genetically modified type of cotton that kept these pests away, and was being used around the world. But they were illegal in India, even though no bad effects had ever been recorded. Well, who cares about ‘illegal’ when it is a matter of life and death?

Farmers in Gujarat got hold of Bt Cotton seeds from the black market and planted them. You’ll never guess what happened next. As 2002 began, all cotton crops in Gujarat failed – except the 10,000 hectares that had Bt Cotton. The government did not care about the failed crops. They cared about the ‘illegal’ ones. They ordered all the Bt Cotton crops to be destroyed.

It was time for a satyagraha – and not just in Gujarat. The late Sharad Joshi, leader of the Shetkari Sanghatana in Maharashtra, took around 10,000 farmers to Gujarat to stand with their fellows there. They sat in the fields of Bt Cotton and basically said, ‘Over our dead bodies.’ ¬Joshi’s point was simple: all other citizens of India have access to the latest technology from all over. They are all empowered with choice. Why should farmers be held back?

The satyagraha was successful. The ban on Bt Cotton was lifted.

There are three things I would like to point out here. One, the lifting of the ban transformed cotton farming in India. Over 90% of Indian farmers now use Bt Cotton. India has become the world’s largest producer of cotton, moving ahead of China. According to agriculture expert Ashok Gulati, India has gained US$ 67 billion in the years since from higher exports and import savings because of Bt Cotton. Most importantly, cotton farmers’ incomes have doubled.

Two, GMO crops have become standard across the world. Around 190 million hectares of GMO crops have been planted worldwide, and GMO foods are accepted in 67 countries. The humanitarian benefits have been massive: Golden Rice, a variety of rice packed with minerals and vitamins, has prevented blindness in countless new-born kids since it was introduced in the Philippines.

Three, despite the fear-mongering of some NGOs, whose existence depends on alarmism, the science behind GMO is settled. No harmful side effects have been noted in all these years, and millions of lives impacted positively. A couple of years ago, over 100 Nobel Laureates signed a petition asserting that GMO foods were safe, and blasting anti-science NGOs that stood in the way of progress. There is scientific consensus on this.

The science may be settled, but the politics is not. The government still bans some types of GMO seeds, such as Bt Brinjal, which was developed by an Indian company called Mahyco, and used successfully in Bangladesh. More crucially, a variety called HT Bt Cotton, which fights weeds, is also banned. Weeding takes up to 15% of a farmer’s time, and often makes farming unviable. Farmers across the world use this variant – 60% of global cotton crops are HT Bt. Indian farmers are so desperate for it that they choose to break the law and buy expensive seeds from the black market – but the government is cracking down. A farmer in Haryana had his crop destroyed by the government in May.

On June 10 this year, a farmer named Lalit Bahale in the Akola District of Maharashtra kicked off a satyagraha by planting banned seeds of HT Bt Cotton and Bt Brinjal. He was soon joined by thousands of farmers. Far from our urban eyes, a heroic fight has begun. Our farmers, already victimised and oppressed by a predatory government in countless ways, are fighting for their right to take charge of their lives.

As this brave struggle unfolds, I am left with a troubling question: All those satyagrahas of the past by our great freedom fighters, what were they for, if all they got us was independence and not freedom?

Trump and Modi are playing a Lose-Lose game

This is the 22nd installment of The Rationalist, my column for the Times of India.

Trade wars are on the rise, and it’s enough to get any nationalist all het up and excited. Earlier this week, Narendra Modi’s government announced that it would start imposing tariffs on 28 US products starting today. This is a response to similar treatment towards us from the US.

There is one thing I would invite you to consider: Trump and Modi are not engaged in a war with each other. Instead, they are waging war on their own people.

Let’s unpack that a bit. Part of the reason Trump came to power is that he provided simple and wrong answers for people’s problems. He responded to the growing jobs crisis in middle America with two explanations: one, foreigners are coming and taking your jobs; two, your jobs are being shipped overseas.

Both explanations are wrong but intuitive, and they worked for Trump. (He is stupid enough that he probably did not create these narratives for votes but actually believes them.) The first of those leads to the demonising of immigrants. The second leads to a demonising of trade. Trump has acted on his rhetoric after becoming president, and a modern US version of our old ‘Indira is India’ slogan might well be, “Trump is Tariff. Tariff is Trump.”

Contrary to the fulminations of the economically illiterate, all tariffs are bad, without exception. Let me illustrate this with an example. Say there is a fictional product called Brump. A local Brump costs Rs 100. Foreign manufacturers appear and offer better Brumps at a cheaper price, say Rs 90. Consumers shift to foreign Brumps.

Manufacturers of local Brumps get angry, and form an interest group. They lobby the government – or bribe it with campaign contributions – to impose a tariff on import of Brumps. The government puts a 20-rupee tariff. The foreign Brumps now cost Rs 110, and people start buying local Brumps again. This is a good thing, right? Local businesses have been helped, and local jobs have been saved.

But this is only the seen effect. The unseen effect of this tariff is that millions of Brump buyers would have saved Rs 10-per-Brump if there were no tariffs. This money would have gone out into the economy, been part of new demand, generated more jobs. Everyone would have been better off, and the overall standard of living would have been higher.

That brings to me to an essential truth about tariffs. Every tariff is a tax on your own people. And every intervention in markets amounts to a distribution of wealth from the people at large to specific interest groups. (In other words, from the poor to the rich.) The costs of this are dispersed and invisible – what is Rs 10 to any of us? – and the benefits are large and worth fighting for: Local manufacturers of Brumps can make crores extra. Much modern politics amounts to manufacturers of Brumps buying politicians to redistribute money from us to them.

There are second-order effects of protectionism as well. When the US imposes tariffs on other countries, those countries may respond by imposing tariffs back. Raw materials for many goods made locally are imported, and as these become expensive, so do those goods. That quintessential American product, the iPhone, uses parts from 43 countries. As local products rise in price because of expensive foreign parts, prices rise, demand goes down, jobs are lost, and everyone is worse off.

Trump keeps talking about how he wants to ‘win’ at trade, but trade is not a zero-sum game. The most misunderstood term in our times is probably ‘trade-deficit’. A country has a trade deficit when it imports more than what it exports, and Trump thinks of that as a bad thing. It is not. I run a trade deficit with my domestic help and my local grocery store. I buy more from them than they do from me. That is fine, because we all benefit. It is a win-win game.

Similarly, trade between countries is really trade between the people of both countries – and people trade with each other because they are both better off. To interfere in that process is to reduce the value created in their lives. It is immoral. To modify a slogan often identified with libertarians like me, ‘Tariffs are Theft.’

These trade wars, thus, carry a touch of the absurd. Any leader who imposes tariffs is imposing a tax on his own people. Just see the chain of events: Trump taxes the American people. In retaliation, Modi taxes the Indian people. Trump raises taxes. Modi raises taxes. Nationalists in both countries cheer. Interests groups in both countries laugh their way to the bank.

What kind of idiocy is this? How long will this lose-lose game continue?

Population Is Not a Problem, but Our Greatest Strength

This is the 21st installment of The Rationalist, my column for the Times of India.

When all political parties agree on something, you know you might have a problem. Giriraj Singh, a minister in Narendra Modi’s new cabinet, tweeted this week that our population control law should become a “movement.” This is something that would find bipartisan support – we are taught from school onwards that India’s population is a big problem, and we need to control it.

This is wrong. Contrary to popular belief, our population is not a problem. It is our greatest strength.

The notion that we should worry about a growing population is an intuitive one. The world has limited resources. People keep increasing. Something’s gotta give.

Robert Malthus made just this point in his 1798 book, An Essay on the Principle of Population. He was worried that our population would grow exponentially while resources would grow arithmetically. As more people entered the workforce, wages would fall and goods would become scarce. Calamity was inevitable.

Malthus’s rationale was so influential that this mode of thinking was soon called ‘Malthusian.’ (It is a pejorative today.) A 20th-century follower of his, Harrison Brown, came up with one of my favourite images on this subject, arguing that a growing population would lead to the earth being “covered completely and to a considerable depth with a writhing mass of human beings, much as a dead cow is covered with a pulsating mass of maggots.”

Another Malthusian, Paul Ehrlich, published a book called The Population Bomb in 1968, which began with the stirring lines, “The battle to feed all of humanity is over. In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now.” Ehrlich was, as you’d guess, a big supporter of India’s coercive family planning programs. ““I don’t see,” he wrote, “how India could possibly feed two hundred million more people by 1980.”

None of these fears have come true. A 2007 study by Nicholas Eberstadt called ‘Too Many People?’ found no correlation between population density and poverty. The greater the density of people, the more you’d expect them to fight for resources – and yet, Monaco, which has 40 times the population density of Bangladesh, is doing well for itself. So is Bahrain, which has three times the population density of India.

Not only does population not cause poverty, it makes us more prosperous. The economist Julian Simon pointed out in a 1981 book that through history, whenever there has been a spurt in population, it has coincided with a spurt in productivity. Such as, for example, between Malthus’s time and now. There were around a billion people on earth in 1798, and there are around 7.7 billion today. As you read these words, consider that you are better off than the richest person on the planet then.

Why is this? The answer lies in the title of Simon’s book: The Ultimate Resource. When we speak of resources, we forget that human beings are the finest resource of all. There is no limit to our ingenuity. And we interact with each other in positive-sum ways – every voluntary interactions leaves both people better off, and the amount of value in the world goes up. This is why we want to be part of economic networks that are as large, and as dense, as possible. This is why most people migrate to cities rather than away from them – and why cities are so much richer than towns or villages.

If Malthusians were right, essential commodities like wheat, maize and rice would become relatively scarcer over time, and thus more expensive – but they have actually become much cheaper in real terms. This is thanks to the productivity and creativity of humans, who, in Eberstadt’s words, are “in practice always renewable and in theory entirely inexhaustible.”

The error made by Malthus, Brown and Ehrlich is the same error that our politicians make today, and not just in the context of population: zero-sum thinking. If our population grows and resources stays the same, of course there will be scarcity. But this is never the case. All we need to do to learn this lesson is look at our cities!

This mistaken thinking has had savage humanitarian consequences in India. Think of the unborn millions over the decades because of our brutal family planning policies. How many Tendulkars, Rahmans and Satyajit Rays have we lost? Think of the immoral coercion still carried out on poor people across the country. And finally, think of the condescension of our politicians, asserting that people are India’s problem – but always other people, never themselves.

This arrogance is India’s greatest problem, not our people.

Can Amit Shah do for India what he did for the BJP?

This is the 20th installment of The Rationalist, my column for the Times of India.

Amit Shah’s induction into the union cabinet is such an interesting moment. Even partisans who oppose the BJP, as I do, would admit that Shah is a political genius. Under his leadership, the BJP has become an electoral behemoth in the most complicated political landscape in the world. The big question that now arises is this: can Shah do for India what he did for the BJP?

This raises a perplexing question: in the last five years, as the BJP has flourished, India has languished. And yet, the leadership of both the party and the nation are more or less the same. Then why hasn’t the ability to manage the party translated to governing the country?

I would argue that there are two reasons for this. One, the skills required in those two tasks are different. Two, so are the incentives in play.

Let’s look at the skills first. Managing a party like the BJP is, in some ways, like managing a large multinational company. Shah is a master at top-down planning and micro-management. How he went about winning the 2014 elections, described in detail in Prashant Jha’s book How the BJP Wins, should be a Harvard Business School case study. The book describes how he fixed the BJP’s ground game in Uttar Pradesh, picking teams for 147,000 booths in Uttar Pradesh, monitoring them, and keeping them accountable.

Shah looked at the market segmentation in UP, and hit upon his now famous “60% formula”. He realised he could not deliver the votes of Muslims, Yadavs and Jatavs, who were 40% of the population. So he focussed on wooing the other 60%, including non-Yadav OBCs and non-Jatav Dalits. He carried out versions of these caste reconfigurations across states, and according to Jha, covered “over 5 lakh kilometres” between 2014 and 2017, consolidating market share in every state in this country. He nurtured “a pool of a thousand new OBC and Dalit leaders”, going well beyond the posturing of other parties.

That so many Dalits and OBCs voted for the BJP in 2019 is astonishing. Shah went past Mandal politics, managing to subsume previously antagonistic castes and sub-castes into a broad Hindutva identity. And as the BJP increased its depth, it expanded its breadth as well. What it has done in West Bengal, wiping out the Left and weakening Mamata Banerjee, is jaw-dropping. With hindsight, it may one day seem inevitable, but only a madman could have conceived it, and only a genius could have executed it.

Good man to be Home Minister then, eh? Not quite. A country is not like a large company or even a political party. It is much too complex to be managed from the top down, and a control freak is bound to flounder. The approach needed is very different.

Some tasks of governance, it is true, are tailor-made for efficient managers. Building infrastructure, taking care of roads and power, building toilets (even without an underlying drainage system) and PR campaigns can all be executed by good managers. But the deeper tasks of making an economy flourish require a different approach. They need a light touch, not a heavy hand.

The 20th century is full of cautionary tales that show that economies cannot be centrally planned from the top down. Examples of that ‘fatal conceit’, to use my hero Friedrich Hayek’s term, include the Soviet Union, Mao’s China, and even the lady Modi most reminds me of, Indira Gandhi.

The task of the state, when it comes to the economy, is to administer a strong rule of law, and to make sure it is applied equally. No special favours to cronies or special interest groups. Just unleash the natural creativity of the people, and don’t try to micro-manage.

Sadly, the BJP’s impulse, like that of most governments of the past, is a statist one. India should have a small state that does a few things well. Instead, we have a large state that does many things badly, and acts as a parasite on its people.

As it happens, the few things that we should do well are all right up Shah’s managerial alley. For example, the rule of law is effectively absent in India today, especially for the poor. As Home Minister, Shah could fix this if he applied the same zeal to governing India as he did to growing the BJP. But will he?

And here we come to the question of incentives. What drives Amit Shah: maximising power, or serving the nation? What is good for the country will often coincide with what is good for the party – but not always. When they diverge, which path will Shah choose? So much rests on that.