Shashi Tharoor in Project Syndicate
On November 8, Indian Prime Minister Narendra Modi announced that, at the stroke of midnight, some 14 trillion rupees worth of 500- and 1,000-rupee notes – 86% of all the currency in circulation – would no longer be legal tender. With that, India’s economy was plunged into chaos.
Modi’s stated goal was to make good on his campaign pledge to fight “black money”: the illicit proceeds – often held as cash – of tax evasion, crime, and corruption. He also hoped to render worthless the counterfeit notes reportedly printed by Pakistan to fuel terrorism against India. Nearly a month later, however, all the demonetization drive has achieved is severe economic disruption. Far from being a masterstroke, Modi’s decision seems to have been a miscalculation of epic proportions.
The announcement immediately triggered a mad scramble to unload the expiring banknotes. Though people have until the end of the year to deposit the notes in bank accounts, doing so in large quantities could expose them to high taxes and fines. So they rushed to gas pumps, to jewelry shops, and to creditors to repay loans. Long queues snaked in, out, and around banks, foreign-exchange counters, and ATMs – anywhere where people might exchange the soon-to-be-defunct notes.
But, upon getting to the front of the line, people were often met with strict withdrawal limits, because, in a display of shocking ineptitude, not enough new currency was printed prior to the announcement. Worse, the new notes’ design prevents them from fitting into existing ATMs, and their denomination – 2,000 rupees – is too high to be useful for most people, especially given that the government’s failure to print enough smaller-denomination notes means that few can make change.
India’s previously booming economy has now ground to a halt. All indicators – sales, traders’ incomes, production, and employment – are down. Former Prime Minister Manmohan Singh estimates that India’s GDP will shrink by 1-2% in the current fiscal year.
But, as is so often the case, the impact is not being felt equally by all. India’s wealthy, who are less reliant on cash and are more likely to hold credit cards, are relatively unaffected. The poor and the lower middle classes, however, rely on cash for their daily activities, and thus are the main victims of this supposedly “pro-poor” policy.
Small producers, lacking capital to stay afloat, are already shutting down. India’s huge number of daily wage workers can’t find employers with the cash to pay them. Local industries have suspended work for lack of money. The informal financial sector – which conducts 40% of India’s total lending, largely in rural areas – has all but collapsed.
India’s fishing industry, which depends on cash sales of freshly caught fish, is wrecked. Traders are losing perishable stocks. Farmers have been unloading produce below cost, because no one has the money to purchase it, and the winter crop could not be sown in time, because no one had cash for seeds.
Despite all of this, ordinary Indians have reacted with stoicism, seemingly willing to heed Modi’s call to be patient for 50 days, even though it could be much longer – anywhere between four months and a year – before the normal money supply is restored. The government’s assiduous public relations – which portrays people’s difficulties as a small sacrifice needed for the good of the country – seems to have done its job. “If our soldiers can stand for hours every day guarding our borders,” one popular social media meme asks, “why can’t we stand for a few hours in bank queues?”
But the sacrifice extends far beyond queues. Hospitals are turning away patients who have only old banknotes; families cannot buy food; and middle-class workers are unable to buy needed medicine. As many as 82 people have reportedly died in cash queues or related events. Furthermore, it seems likely that many of the short-term effects of the demonetization could persist – and intensify – in the longer term, with closed businesses unable to reopen. It could also cause lasting damage to India’s financial institutions, especially the Reserve Bank of India, whose reputation has already suffered.
Perhaps the worst part is that these sacrifices are not likely to achieve the government’s stated goal. Not all black money is in cash, and not all cash is black money. Those who held large quantities of black money seem to have found creative ways to launder it, rather than destroying it to avoid attracting the taxman’s attention, as the government expected. As a result, most of the black money believed to have been in circulation has now flooded into banks, depriving the government of its expected dividend.
On top of all of this, the government’s plan does nothing to control the source of black money. It will not be long before old habits – under-invoicing, fake purchase orders and bills, reporting of non-existent transactions, and blatant bribery – generates a new store of black money.
Many Modi supporters claim that the demonetization policy’s problems are a result of inept implementation. But the truth is that its design was fundamentally flawed. There was no “policy skeleton,” no cost-benefit analysis, and no evidence that alternative policy options were considered. Judging by the blizzard of policy tweaks since the announcement, it seems clear that no impact study was carried out.
Yet, rather than recognize the mounting risks of the non-transparent policy environment he has created, Modi has been discussing going even further, moving India to an entirely “cashless society.” Does he not know that more than 90% of financial transactions in India are conducted in cash, or that over 90% of retail outlets lack so much as a card reader? Is he unaware that over 85% of workers are paid in cash, and that more than half of the population is unbanked?
Modi came to power in 2014 promising to boost growth, create jobs for India’s youthful population, and encourage investment. His poorly conceived demonetization has made a mockery of these objectives, while bruising his reputation as an efficient and competent manager. How long it will take for India to recover is anyone’s guess.
Wednesday 7 December 2016
How to Criticize with Kindness: Philosopher Daniel Dennett on the Four Steps to Arguing Intelligently
Maria Popova in Brainpickings
“In disputes upon moral or scientific points,” Arthur Martine counseled in his magnificent 1866 guide to the art of conversation, “let your aim be to come at truth, not to conquer your opponent. So you never shall be at a loss in losing the argument, and gaining a new discovery.” Of course, this isn’t what happens most of the time when we argue, both online and off, but especially when we deploy the artillery of our righteousness from behind the comfortable shield of the keyboard. That form of “criticism” — which is really a menace of reacting rather than responding — is worthy of Mark Twain’s memorable remark that “the critic’s symbol should be the tumble-bug: he deposits his egg in somebody else’s dung, otherwise he could not hatch it.” But it needn’t be this way — there are ways to be critical while remaining charitable, of aiming not to “conquer” but to “come at truth,” not to be right at all costs but to understand and advance the collective understanding.
In Intuition Pumps and Other Tools for Thinking (public library) — the same fantastic volume that gave us Daniel Dennett on the dignity and art-science of making mistakes — Dennett offers what he calls “the best antidote [for the] tendency to caricature one’s opponent”: a list of rules formulated decades ago by the legendary social psychologist and game theorist Anatol Rapoport, best-known for originating the famous tit-for-tat strategy of game theory. Dennett synthesizes the steps:
How to compose a successful critical commentary:
You should attempt to re-express your target’s position so clearly, vividly, and fairly that your target says, “Thanks, I wish I’d thought of putting it that way.
You should list any points of agreement (especially if they are not matters of general or widespread agreement).
You should mention anything you have learned from your target.
Only then are you permitted to say so much as a word of rebuttal or criticism.
If only the same code of conduct could be applied to critical commentary online, particularly to the indelible inferno of comments.
But rather than a naively utopian, Pollyannaish approach to debate, Dennett points out this is actually a sound psychological strategy that accomplishes one key thing: It transforms your opponent into a more receptive audience for your criticism or dissent, which in turn helps advance the discussion.
Compare and contrast with Susan Sontag’s three steps to refuting any argument.
“In disputes upon moral or scientific points,” Arthur Martine counseled in his magnificent 1866 guide to the art of conversation, “let your aim be to come at truth, not to conquer your opponent. So you never shall be at a loss in losing the argument, and gaining a new discovery.” Of course, this isn’t what happens most of the time when we argue, both online and off, but especially when we deploy the artillery of our righteousness from behind the comfortable shield of the keyboard. That form of “criticism” — which is really a menace of reacting rather than responding — is worthy of Mark Twain’s memorable remark that “the critic’s symbol should be the tumble-bug: he deposits his egg in somebody else’s dung, otherwise he could not hatch it.” But it needn’t be this way — there are ways to be critical while remaining charitable, of aiming not to “conquer” but to “come at truth,” not to be right at all costs but to understand and advance the collective understanding.
In Intuition Pumps and Other Tools for Thinking (public library) — the same fantastic volume that gave us Daniel Dennett on the dignity and art-science of making mistakes — Dennett offers what he calls “the best antidote [for the] tendency to caricature one’s opponent”: a list of rules formulated decades ago by the legendary social psychologist and game theorist Anatol Rapoport, best-known for originating the famous tit-for-tat strategy of game theory. Dennett synthesizes the steps:
How to compose a successful critical commentary:
You should attempt to re-express your target’s position so clearly, vividly, and fairly that your target says, “Thanks, I wish I’d thought of putting it that way.
You should list any points of agreement (especially if they are not matters of general or widespread agreement).
You should mention anything you have learned from your target.
Only then are you permitted to say so much as a word of rebuttal or criticism.
If only the same code of conduct could be applied to critical commentary online, particularly to the indelible inferno of comments.
But rather than a naively utopian, Pollyannaish approach to debate, Dennett points out this is actually a sound psychological strategy that accomplishes one key thing: It transforms your opponent into a more receptive audience for your criticism or dissent, which in turn helps advance the discussion.
Compare and contrast with Susan Sontag’s three steps to refuting any argument.
Tuesday 6 December 2016
How airlines and Uber rip you off
Arwa Mahadwi in The Guardian
Flighty prices: many airlines employ ‘dynamic pricing’ – and the practice is growing. Photograph: Getty Images/iStockphoto
Even rocket scientists, I would wager, are befuddled by airline pricing. One minute, a flight you’re looking at costs £400; 30 seconds later it has increased by £100. Panic sets in; you buy a ticket before it ascends out of your price range.
I experienced this fluctuation frustration recently while trying to buy a ticket home to London from New York for Christmas. After about a gazillion visits to British Airways’ website, I decided finally to book something. Immediately, the price went up. That’s OK, I thought, trying to console myself. I read on Twitter that London has gone all Islamic anyway and Christmas has been banned. Probably nothing to go home to any more, just ritual stonings and sharia. Then I remembered a rumour that clearing your browser cookies could get you a cheaper flight. I gave it a go and, voila, the flight reverted to its earlier, cheaper price.
The thinking behind the cookies trick is that airlines can tell from your browser history when you’re particularly interested in a flight – and thus willing to pay a higher price – and take advantage of this. Whether this is true is known only to a few (when the Guardian asked BA about this in 2010 they said they didn’t use cookies this way). What is clear, however, is that airlines – and many other companies – are increasingly moving towards “personalised pricing”. Sometimes called “differential pricing” or “price discrimination”, this means charging customers different prices for the same product based on how much they think people are willing to pay.
Price discrimination, to be clear, is not the same as “dynamic pricing”. Airlines have practised dynamic pricing for a long time: there are a set number of prices available, and you get a different fare based on factors including when you book and the availability of seats on the flight. Prices, however, are starting to get more personal. In 2014, a US regulator approved an industry-wide system, the implementation of which started only recently, that allows airlines and travel agencies to collect personal data – information such as marital status, address and travel history – and use that data to offer you “more agile pricing and more personalised offerings”. So, if an airline can see that you live in a fancy neighbourhood and regularly fly business-class, it may offer you a higher fare than it would someone whom it believes is more price-sensitive. As technology grows more sophisticated, companies may be able to serve you higher prices based on factors such as your emotional state.
Businesses are already using customised pricing online based on information they can glean about you. It is hard to know how widespread the practice is; companies keep their pricing strategies closely guarded and are wary of the bad PR price discrimination could pose. However, it is clear that a number of large retailers are experimenting with it. Staples, for example, has offered discounted prices based on whether rival stores are within 20 miles of its customers’ location. Office Depot has admitted to using its customers’ browsing history and location to vary its range of offers and products. A 2014 study from Northeastern Universityfound evidence of “steering” or differential pricing at four out of 10 general merchandise websites and five out of five travel websites. (Steering is when a company doesn’t give you a customised price, but points you towards more expensive options if it thinks you will pay more.) The online travel company Orbitz raised headlines in 2012 when it emerged that the firm was pointing Mac users towards higher-priced hotel rooms than PC users.
Price discrimination doesn’t happen only online. Supermarkets have used personalised pricing based on information gleaned from loyalty cards and shopping habits. Broadly speaking, economists tend to think of price discrimination as a good thing for businesses and customers. Essentially, it is algorithms robbing from the rich to subsidise the poor, all while growing a company’s market.
There is the potential for this to go further still and for customised pricing to help reduce some of the inequities in society. In Finland, speeding tickets are linked to income, a system known as progressive punishment. Could we not have progressive pricing, a system where the cost of necessities such as bread and milk is linked to your ability to pay for them?
However, it seems more likely that companies will exploit the increasing amounts of data they have about us to our detriment. Take Uber, for example. Its much-hated “surge pricing” is an example of dynamic pricing: prices change according to supply and demand. They don’t change according to how desperate you, as an individual, are to get a cab, but this may not be the case for long. Uber knows a hell of a lot about you – including, for example, how low the battery is on your phone. It also has data that shows people are more likely to pay surge pricing when their phone battery is low. “We absolutely don’t use that ... but it’s an interesting kind of psychological fact of human behaviour,” a behavioural economist at Uber said earlier this year. This may be true, but why do you think Uber employs behavioural economists? It is not simply to marvel at the psychology of human behaviour.
As airlines become more adept at gathering and exploiting data, I shudder to think what “interesting facts” of human behaviour they will start to factor into their pricing strategies. Fares will stop being linked to variables such as seats already sold and start fluctuating according to how many times your mum has texted you to ask if you’ve bought your ticket yet, and how guilty you feel that you haven’t. Good luck trying to clear your cookies to fix that.
Even rocket scientists, I would wager, are befuddled by airline pricing. One minute, a flight you’re looking at costs £400; 30 seconds later it has increased by £100. Panic sets in; you buy a ticket before it ascends out of your price range.
I experienced this fluctuation frustration recently while trying to buy a ticket home to London from New York for Christmas. After about a gazillion visits to British Airways’ website, I decided finally to book something. Immediately, the price went up. That’s OK, I thought, trying to console myself. I read on Twitter that London has gone all Islamic anyway and Christmas has been banned. Probably nothing to go home to any more, just ritual stonings and sharia. Then I remembered a rumour that clearing your browser cookies could get you a cheaper flight. I gave it a go and, voila, the flight reverted to its earlier, cheaper price.
The thinking behind the cookies trick is that airlines can tell from your browser history when you’re particularly interested in a flight – and thus willing to pay a higher price – and take advantage of this. Whether this is true is known only to a few (when the Guardian asked BA about this in 2010 they said they didn’t use cookies this way). What is clear, however, is that airlines – and many other companies – are increasingly moving towards “personalised pricing”. Sometimes called “differential pricing” or “price discrimination”, this means charging customers different prices for the same product based on how much they think people are willing to pay.
Price discrimination, to be clear, is not the same as “dynamic pricing”. Airlines have practised dynamic pricing for a long time: there are a set number of prices available, and you get a different fare based on factors including when you book and the availability of seats on the flight. Prices, however, are starting to get more personal. In 2014, a US regulator approved an industry-wide system, the implementation of which started only recently, that allows airlines and travel agencies to collect personal data – information such as marital status, address and travel history – and use that data to offer you “more agile pricing and more personalised offerings”. So, if an airline can see that you live in a fancy neighbourhood and regularly fly business-class, it may offer you a higher fare than it would someone whom it believes is more price-sensitive. As technology grows more sophisticated, companies may be able to serve you higher prices based on factors such as your emotional state.
Businesses are already using customised pricing online based on information they can glean about you. It is hard to know how widespread the practice is; companies keep their pricing strategies closely guarded and are wary of the bad PR price discrimination could pose. However, it is clear that a number of large retailers are experimenting with it. Staples, for example, has offered discounted prices based on whether rival stores are within 20 miles of its customers’ location. Office Depot has admitted to using its customers’ browsing history and location to vary its range of offers and products. A 2014 study from Northeastern Universityfound evidence of “steering” or differential pricing at four out of 10 general merchandise websites and five out of five travel websites. (Steering is when a company doesn’t give you a customised price, but points you towards more expensive options if it thinks you will pay more.) The online travel company Orbitz raised headlines in 2012 when it emerged that the firm was pointing Mac users towards higher-priced hotel rooms than PC users.
Price discrimination doesn’t happen only online. Supermarkets have used personalised pricing based on information gleaned from loyalty cards and shopping habits. Broadly speaking, economists tend to think of price discrimination as a good thing for businesses and customers. Essentially, it is algorithms robbing from the rich to subsidise the poor, all while growing a company’s market.
There is the potential for this to go further still and for customised pricing to help reduce some of the inequities in society. In Finland, speeding tickets are linked to income, a system known as progressive punishment. Could we not have progressive pricing, a system where the cost of necessities such as bread and milk is linked to your ability to pay for them?
However, it seems more likely that companies will exploit the increasing amounts of data they have about us to our detriment. Take Uber, for example. Its much-hated “surge pricing” is an example of dynamic pricing: prices change according to supply and demand. They don’t change according to how desperate you, as an individual, are to get a cab, but this may not be the case for long. Uber knows a hell of a lot about you – including, for example, how low the battery is on your phone. It also has data that shows people are more likely to pay surge pricing when their phone battery is low. “We absolutely don’t use that ... but it’s an interesting kind of psychological fact of human behaviour,” a behavioural economist at Uber said earlier this year. This may be true, but why do you think Uber employs behavioural economists? It is not simply to marvel at the psychology of human behaviour.
As airlines become more adept at gathering and exploiting data, I shudder to think what “interesting facts” of human behaviour they will start to factor into their pricing strategies. Fares will stop being linked to variables such as seats already sold and start fluctuating according to how many times your mum has texted you to ask if you’ve bought your ticket yet, and how guilty you feel that you haven’t. Good luck trying to clear your cookies to fix that.
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