Dec 18, 2018

Arvind Subramanian and Demonetization

Recently, a number of newspapers carried excerpts from Arvind Subramanian's new book, "Of Counsel: The Challenges of the Modi-Jaitley Economy." The book deals with a range of subjects from agriculture to climate change, banking to GST, Aadhaar to Universal Basic Income, and even Tennis - subjects that interested him when he served as the chief economic advisor to finance minister Arun Jaitley.



The News

However, for the media, one subject trumped them all: demonetisation. In fact there was some expectation that he will say something about it. More so, after the news about the book came out, because it was billed as part memoir and part analysis. Everyone was expecting he will say something new.


So, it was not surprising that all the excerpts were picked from the chapter on demonetisation. Most headlines chose to focus on one word that he used to describe it: draconian.


He has never used the term before - even though Economic Survey called demonetisation a 'major structural shock', which in certain academic circles might mean same as 'draconian'. But words have specific connotations. And his use of that word was seen as an indicator that he has changed his mind about demonetisation.


The Reactions

P Chidambaram had this to say:



Vivek Kaul, writing in news laundry, expressed a similar sentiment. 



So did Paranjoy Guha Thakurta, former editor of EPW.

And Prosenjit Datta, another dyed in the wool editor, tweeted thus.

The Numbers

We can build a narrative based on a single word, but we also need evidence to sustain it. Business Standard suggested that Subramanian changed his views on demonetisation's impact on growth.

Kapil Sibal, former cabinet minister, went on to put a specific number to it.


And Kapil Sibal's boss, Rahul Gandhi, made this contribution to the discussion: 

In short, this is the predominant narrative: Arvind Subramanian finally told the ugly truth about demonetisation.

~ 

The Two Puzzles

I have been following Arvind Subramanian ever since he became CEA mostly as a person interested in knowing what's happening to economy. I read the interviews he gave, attended his lecture in Bangalore, watched his speeches on Youtube, took his online course, and met him along with Charles at his office in North Block (over a fantastic cup of steaming south Indian filter coffee). 

With that perspective, I think, far from changing his mind or finding courage to tell what he always knew, he only restated, refined or elaborated (or a bit dramatised) what he has been telling all along. There has been no fundamental shift.


Demonetisation and GDP: Too early, too complex, and puzzling
In February 2017, when hardly a few months had passed since demonetisation, he had this to say: "There is going to be a short term cost, which is real and significant. There’s going to be an effect on GDP, let’s see how much." In other words, it was too early to talk about the impact on GDP.


More recently, in July 2018, when he spoke to The Hindu, assessing the impact on GDP had become too complicated. "In the latest Survey, we said that there was a slowdown and decoupling of the Indian economy, and one of the four reasons was demonetisation. It is very difficult to say how much was the contribution, but it certainly did contribute to the deceleration."

In the book he mentions those reasons again - “After all, many other factors affected growth in this period, especially higher real interest rates, GST implementation and oil prices.”

After the book was published he spoke to Times of India, and the first question was: Your description of demonetisation calling it massive, draconian has stoked a controversy. Why did you choose these words? His answer:
How do you describe 86% reduction in cash? Draconian is a connotation of being severe and it was meant to be bold and severe. If you take away 86% (cash) nobody would you call it mild, or soft? The important point there, which all of you seemed to have missed, is what I was saying was that there is a big puzzle here. I am implying almost opposite of what people are saying. The puzzle is that the action, severe, extreme, draconian, whatever you want to call it (was taken) but impact on GDP was muted.
Everyone thought the impact was going to be huge. Arvind Subramanian said Krugman told him so in as many words. Manmohan Singh said its impact would be 2%. Ambit Capital said GDP growth would crash to 0.5% between October 2016 - March 2017, from 6.4% in the previous six months.

In the book he explains why he thinks that was the case.

Demonetisation and UP elections

In April 2017, he spoke at Centre for Global Development in Washington.


In that, he made this interesting observation (Thanks Wire for the transcript)

Could it have been done better? I think that’s something I am going to leave for the historians and not for me to discuss in any great detail.
But it does raise some really interesting questions about… The thought that crosses my mind is that is there an analogy between what’ve you seen on demonetisation, in terms of the popular response, and the kind of thing we see here [in America]. Why is it that people vote for a party that is going to deprive it of medical assistance? Kind of the ‘What’s Wrong With Kansas?’ kind of thing. I think there is a kind of counterpart here [in India, with demonetisation] as well.
I think it’s ‘What’s Wrong with Kansas’ blown up. Because… if you think there was a cost, why is it that the popular reaction to this [demonetisation] has been so overwhelming? It’s certainly humbled me in terms of my understanding of Indian politics and even Indian economics to a certain extent.
The chapter on demonetisation in the book gives five reasons why. In many ways, even those reasons are something that he has been saying right from the beginning.

Check out his Feb 2017 ET interview again.


In that he said: "I do think the main objective and signal is that we will punitively and permanently increase the cost of illicit transactions. It is trying to signal a regime shift. And that’s the most important message from demonetisation."

And here's an extract from the book:
Hernan Cortes, the first conquistador, is said to have destroyed all his ships after landing in Mexico to motivate his fellow soldiers to fight boldly because there was no possibility of return.
By imposing near-universal costs, demonetisation could similarly have been a device to signal regime change against black money and the corrupt rich, more broadly. If a regime could incur such enormous costs, it could surely follow up through similar actions against corruption. To demonstrate that the measure was bold and hence more likely to be effective, the felt costs may have had to be high.

Here is a summary of the chapter.



Arvind Subramanian was in Bangalore last Thursday to speak at Bangalore International Centre. I would have loved to ask him a few questions, but there was a long queue waiting to get his autograph. I joined them, and have this to show.




~

Lessons for journalists

The entire episode says  a lot about how our mind operates. It uses new facts to fit into a narrative that we already believe in - even when it doesn't fit in. Remember, Arvind Subramanian had to say, "I am implying almost opposite of what people are saying."

Apart from that, it also holds some important lessons about how real world operates, and how economists think about it.

First, we tend to associate a single event with a single cause. In real world, all events tend to have multiple causes - some obvious, and some not obvious. Slowdown in growth was caused by demonetisation (which is not false in this case) Vs slowdown in growth was caused by demonetisation, oil prices, GST implementation, and interest rates.)



We make worse mistakes - the most common among them being mistaking correlation for causation. And sometimes, where three or four drivers - all of which are needed to cause something, we think one alone did it. The previous post on great leaders Vs big trends is one example.

Second, just like how there are multiple causes, there are also multiple consequences. The chapter highlights how it's not only difficult to predict the consequences accurately, it's difficult to explain the consequences after the event.

Henry Hazlitt defined economics as study of consequences. ("The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups")

Third, there are not only second order consequences, but often causes and consequences form a cycle, causes and consequences reinforcing each other. Newspapers highlight something in headline, celebrity politicians and analysts read only the headline, and respond to that, which becomes news, reinforcing inaccurate narrative. Here's an interesting illustration from The Fifth Discipline Fieldbook.



~

A bonus lesson comes from P Chidambaram. This is what he said.
Was Arvind Subramanian really in Kerala when Modi announced demonetisation? Given the high profile of P Chidambaram, I would have thought so. But this was how he started the chapter. "On 8 November, in a dramatic nationally televised speech that I watched in my room in North Block....".

Dec 11, 2018

The Great Man & The Big Trends

When I was going through my Twitter timeline recently, I came across this post by Hindol Sengupta, the author of a recently published biography of Sardar Vallabhai Patel.


Reading his tweet and the article he linked to, I thought it seemed like a good example of the fight between two schools of history: The Great Man School and The Big Trends School.

The Great Man School believes that events happen because of the vision, strategy, execution, wisdom, skills and charisma of a leader. It’s the kind of stuff that Steve Jobs spoke about in this video.



The Big Trends School
believes that events happen because of political, economic, social and technological forces. Often these are like force of gravity. These forces shape an event, make it inevitable. This speech, by former McKinsey chairman Dominic Barton, is a good example of The Big Trends School.




In the tweet I quoted above, Hindol Sengupta was responding to what Swaminathan Aiyar said in his recent column on Patel. Swami’s argument came from The Big Trends school. He wrote: “Unification of the princely states with India and Pakistan was inevitable, with or without Patel.” Hindol’s response was from The Great Man School. There was nothing inevitable about unification of princely states. Sardar made it happen. The title of his book on Patel reads: The Man Who Saved India.

Which is right? The Great Man School or The Big Trends School.

When Charles Assisi and I were working on our book on Aadhaar, we didn’t think we were writing a history of the project. It’s too recent to provide that perspective. Our book is a journalistic account of the project and its impact. (Journalism is sometimes called the first draft of history. Then our book would probably be Version 1.5 of that).

Even so, we faced the very same question. Manish Sabharwal one of the many people we spoke to during our reporting described these two schools this way. He said, “one was literature view of the world, and the other was sociology view of the world.”

It’s a great way to put it.

Literature is about stories. A story has a hero. The hero has an ambitious goal. But, he has to cross several obstacles before he can achieve it. He fights them with great intelligence and courage, and finally gets what he wants. As readers, we prefer literature view of the world. It’s easy to relate to. It’s intuitive to think in those terms. That’s why we love movies.

However, the real world is more complex. Big political, social, economic and technological forces can lay waste the best laid plans of most capable men. (Warren Buffett once said, “I happen to have a talent for allocating capital. But my ability to use that talent is completely dependent on the society I was born into. If I’d been born into a tribe of hunters, this talent of mine would be pretty worthless. I can’t run very fast. I’m not particularly strong. I’d probably end up as some wild animal’s dinner.”) But then again, without a strong leader, these forces might come and go without making any considerable impact on the world. Things move because of both.

Thus, to frame it as ‘Great Man Vs Big Trends’ is a false dilemma.

In our book, if you look for it, you will find examples of how it took both - leadership of people like Nandan Nilekani and big political and technological trends - to make Aadhaar happen. If Nilekani (who figures prominently in at least three chapters of the book) had taken up a similar unique identification project 20 years ago, instead of 10 years ago, I really doubt we would have had something like Aadhaar today. (As John Kingdon says, a policy window needs to open). Similarly, if the project was led by someone with different sets of skills and attitude, I doubt if it would have touched over a billion people. (It nearly went that way, as you would read in the book).

We often think that an event has a single cause - (and often we make that single cause a person: “Gandhiji gave us independence”, “Sardar Patel unified India”). But the fact is, events have multiple causes, and those causes in turn are triggered by many other causes. It’s a chain. Some of these causes have disproportionate influence. (Butterfly flapping its wings causing tornado, and all that). Similarly, an event has multiple consequences - intended and unintended, short term and long term, first order and second order. And to make things even more complex, these often form a loop. A influences B, B influences C and C in turn influences A.

When we watch movies or read books, stories fall within this paradigm.
 
PICTURE A


However, when try to understand how real world works, it looks more like this

PICTURE B


The challenge that Charles and I faced while reporting and writing the book was to convert what resembled PICTURE B (above) in our heads, and in our notebooks into something that resembled PICTURE A (below) in the book.

PICTURE A

Whether we succeeded or not, only you can say.

Dec 10, 2018

Writing an argumentative essay

I took a class for tenth standard students of Sri Sathya Sai Gurukulam, Rajahmundry on how to write an argumentative essay over Google Hangouts. Here is a version of what I told them - minus the exercises and discussions. 
~~~

Before we go into the how of writing an argumentative essay, let's spend some time thinking about why we should learn this skill in first place.


~ 1 ~

There are many ways to make your case. Tibetan monks use expansive gestures while arguing.

Why learn how to write an argumentative essay?

Often, when we are with our friends and family, we get what we want by just asking for it. We might ask our friend to help us with our homework. We might ask our parents to take us for a cinema or buy us an ice cream. If they ask why, all we have to do is to give a reason that comes on the top of our minds, and, let's accept it, if they want to do it, they will anyway do it. Just because we asked for it.

As a result, we don't consciously think about how to persuade others, how to make an effective argument or how to present our reasons in a well thought out, structured way. And, we certainly don't take some time off to sit in front of a desk to write it all down. We end up not developing this skill at all.

Yet, this skill is important because it will help us sharpen our thinking, communicate better, and above all persuade others.
We are learning this not just to get good marks in exams, but also because it's going to be useful for our life.

Let's look at the reasons one by one.

First, writing helps us to sharpen our thinking. Writing forces us to think logically. Writing forces us to weed out weak ideas. Writing clarifies our own thoughts. In fact, we learn by writing. We might be thinking that we learn only by listening to others, and by reading books. That's why we come to the classroom, carry our text books around and go to library. However, Peter Drucker, a management guru, says we also learn by writing. For some of us, a subject doesn't go into our heads, unless we write. You have all heard of Nobel Prize for medicine. It goes to scientists who have discovered new things, made amazing contributions. Now we might think that they all scored excellent marks in science subjects - biology, chemistry etc - in their school and colleges. Some of them did. But some of them did not. What they were consistently good at was in essay writing. Atul Gawande a very good cancer surgeon and an excellent writer says it's because writing essays forces you to think clearly, precisely, logically, creatively. And all these help in research.

Second, writing helps us communicate better. I am talking to you right now. Unless you are taking notes, by tomorrow, you are likely to remember only 50% of what I say. By day after tomorrow, you will remember only 20%. In a few days, you will probably remember only one or two points. Imagine, if I write it and give you a print out - even after a year, pretty much everything I say will be there. Even if I don't give you the print out, even if I am only talking to you, writing it down is better, because we saw that it helps us sharpen our thinking. To talk clearly, I must first think clearly. And writing helps us to do that.

Third, writing helps us to persuade others. Many universities these days ask you to submit essays. Sometimes, when you apply, you have to fill in a column that asks you give reasons for application. Your getting into a college of your choice might depend on it. Later, when you are applying for jobs, the interviewer might ask you, "why should we hire you." Your getting a job will depend on how well you communicate. May be some of you will do a startup. And for that you will need money. Writing clearly, precisely about your own business and why others should invest in it, will help you get the money.

You might argue that you can do many of these things even without writing. You can record the conversation, you can shoot a video, you can even draw a graphic novel. But, the basic building blocks are the same. Even those who take movies, write down the script first - the story, the screenplay, the dialogue. They write it all down.

Let me summarise.

You have to focus on learning how to write an argumentative essay, not just to get good marks in your exam. That's also important. But it will also help you achieve success in life, because your thinking will become clear and precise, you will be able to communicate better, and you will be able to persuade others effectively.

Let's now get into the how of writing an argumentative essay.

~ 2 ~ 

How to write an argumentative essay

We will first understand the broad structure of the essay, and see how to 'diverge' and 'converge' to write better.

Structure
Let's just pause and look at what I did so far. What I did without actually alerting you was to give an example of how you can structure an argumentative essay.

First, I spoke about a situation, that you are probably familiar with. (Getting what you want, just by asking)
Second, I introduced a problem that arises out of that situation. (We don't consciously think about how to persuade others; we don't sit down and draft an argument)
Third, I presented my thesis that addresses the issue. (You should develop those skills for three reasons)
Fourth, I expanded on those reasons in this format
  • Express the point
  • Expand it
  • Provide one or two Examples
Fifth, I summarised it - emphasising my thesis.

You can visualise it this way. (Click on the image to expand)



Structure is probably one of the most important things that you will ever learn in writing. You get it right, a lot of other things fall in place. It's good to be clear about the structure of your entire essay, and of the individual paragraphs. Once you have the structure in your head, you can write very fast.

But, writing itself involves two steps, and both are important.

The first is diverge, when you jot down all points for and against.
The second is converge, when you pick and choose good arguments - and get to actual job of writing.


Diverge


With the structure in hand, we will be tempted to start writing as soon as we get the topic. But we have to stop ourselves, and spend some time on preparation.

It doesn't matter what the question is. Is it right to keep animals in a zoo? Is it right to eat non vegetarian food? Should we give alms to beggars on the road? Should we ban cars on the road once a week? Was demonetisation good or bad for the country? Should India unilaterally destroy its nuclear weapons capability? The question doesn't matter, because the process is the same.

For now, let's take a question from 2012 ICSE question paper. It reads: "Every home should adopt a pet animal. Express your views either for or against this statement."

Don't start writing your essay yet.

The first step is to diverge, to broaden your perspective, to develop empathy, and to see things from others' perspectives. There are many ways to do this. But let's focus on a simple method now.

What am I doing? I am writing!


Take a sheet of paper, draw a line in middle.

Now, imagine that you badly want a dog or a cat, and you have to persuade your parents to buy you one. Close your eyes, and feel the want. List down all the reasons that you can think of, that will help you make a case for it. At this point, don't worry about whether the reason is strong enough, good enough. Just keep writing. One thought might trigger other thought, write that down too.

After you have finished doing that, imagine that your brother wants a dog, but you don't want one. Close your eyes and experience the feeling. Tell yourself, "No, I don't want the dog". Then, list down all the reasons that you can think of, that will help your persuade your brother and your parents not to buy a dog.

Once you are done with it, you will have a list of arguments for and against.  Doing this is very, very, very important. Remember, what we explored earlier. We are learning this skill not to score points or to win debates. We are learning this skill to think more clearly, to communicate better and to persuade others to take some action. That comes with responsibility.

In my profession, journalism, we give a lot of importance to this phase. We call it reporting. During this phase we deliberately seek out different perspectives, go everywhere with a very open mind, listen to people like how our mothers listen to us. We take down notes very sincerely. We diverge.

You can spend days doing it, or hours or minutes - depending on the topic. In your exam, of course, you will only have a few minutes. That's fine too. If you practice well, you can do it very fast. If you practice really, really well, you can even do this in your head.

You might already have an opinion on whether to have a pet or not. You should take this exercise as an opportunity to think about the opposing arguments, and see if you can address them. It's an opportunity to develop empathy. See things from others perspective. You might disagree with what they say. That doesn't matter. But you should try and understand all sides of the arguments.

When you diverge, be open.
When you converge, imagine you are giving away prizes to the best ideas.


Converge

Now, you have already seen all the arguments, you decide on the stand you want to take. If you are not sure, just go by what your heart says.

Then, you pick up two or three arguments that you think are the strongest. State them. Think of examples, quotes, facts, data that will bolster the point. Try to summarise the strongest argument against your position, and think of an appropriate response.

Now you are all set to write them down.

When you write, keep it simple. Try to use short words, instead of long words. Try to use words that are easy to understand. Try not to use technical terms. If you have to use some, explain what it is. Give examples.

When you write, tell yourself you enjoy writing. Sometimes it might be hard. But remember you can enjoy hard things too. Climbing a mountain is hard. But some people enjoy doing it.

After you finish writing, edit. It's always a good idea to take a quick look at what you have written. Everyone makes grammatical and spelling errors. Everyone leaves out something important. Editing helps you to fix them. You can do it even during your exams. After you have finished all your answers, and if you still have time, go back, and fix whatever errors you might find.

Finally, ask for feedback. Share what you have written with your teachers, friends, parents, brothers, sisters. Ask them to tell you what they liked about it, and how they think it can be improved. Everyone - and I mean everyone - gets better with feedback. That's the way to improve.

If you practice it, doing it in your exam will be a cake walk. 

That's about it.

In conclusion
Sathya Sai Baba says, "education is not for a mere living, it's for life". We should not think of what we did as merely a way to score more marks in exam - or even as a way to write impressive essays and get into college or get a job or get funding for a startup sometime in the future.

We should think of this as a way to expand our mind, develop empathy, understand other people's perspectives. In the process, we will find that we have sharpened our intellect. It will of course help us perform better in the school.

But we should always remember that the education we are getting here is for life.