The Non-Econometrician's Lament

This poem was brought to our notice by Professor Nachane: "While going through the references for one of my articles on Business Cycles, I came across this gem of a poem from Sir D.H.Robertson, an economist of an earlier generation (and for those of you who may not have heard of him, he was at one time a friend and rival of the great Lord Keynes)." Sir Dennis H. Robertson who also contributed a lot to Monetary theory and of course with Pigou 'Those Empty Boxes'. But, for now read on "The Non-Econometrician's Lament."

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"As soon as I could safely toddle
My parents handed me a Model;
My brisk and energetic pater
Provided the accelerator.
My mother, with her kindly gumption,
The function guiding my consumption;
And every week I had from her
A lovely new parameter,
With lots of little leads and lags
In pretty parabolic bags.

With optimistic expectations
I started on my explorations,
And swore to move without a swerve
Along my sinusoidal curve.
Alas! I knew how it would end:
I've mixed the cycle with the trend,
And fear that, growing daily skinnier,
I have at length become non-linear.
I wander glumly round the house
As though I were exogenous,
And hardly capable of feeling
The difference 'tween floor and ceiling.
I scarcely now, a pallid ghost,
Can tell ex ante from ex post:
My thoughts are sadly inelastic,
My acts invariably stochastic."
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Sir Dennis H. Robertson (Presented at the International Economic Association Conference on Business Cycles, Oxford, 1952 and published in the proceedings edited by Erik Lundberg, Macmillan 1955)

I would like to reiterate the last two lines.

"My thoughts are sadly inelastic,
My acts invariably stochastic."

They add icing to the cake. They are like diamond studs in the necklace made up of gems.

Poverty and Agrarian Distress in Orissa

Poverty and Agrarian Distress in Orissa is the title of my recent working paper. A summary of the paper is given below.

The relatively lower reduction of poverty in Orissa, 0.2 percentage points per annum from 48.6 per cent in 1993-94 to 46.4 per cent in 2004-05, has been a matter of concern. The current exercise attempts to analyse whether part of the explanation lies in the state of affairs in agriculture.

An analysis for 2004-05 shows that incidence of poverty is 47 per cent for rural and 44 per cent for urban Orissa. The vulnerable sub-groups are southern (73 per cent rural, 55 per cent urban) and northern (59 per cent rural, 43 per cent urban) across National Sample Survey (NSS) regions, the scheduled tribes (76 per cent rural, 65 per cent urban) and scheduled castes (50 per cent rural, 75 per cent urban) across social groups, the agricultural labourers (65 per cent) and other labourers (52 per cent) in rural areas and casual labourers (56 per cent) in urban areas across household type, and marginal and small farmers (51 per cent) across size-class of land possessed in rural areas.

What is even worrying is a much greater incidence of calorie poor (79 per cent rural and 49 per cent urban). This reflects a gap in the poverty line and the calorie that it is supposed to represent and a seeming nutritional crisis even among the groups that resorts to hard labour that includes among others marginal and small farmers and landless households – the hands that grow food.

The agrarian scenario is in dire straits. Per capita per day returns from cultivation, based on the situation assessment survey of 2002-03, is less than four rupees, a pittance. What is more, in 1990s, agricultural value addition and growth in production has been negative across all crop groups and paddy production, the main crop, shows a decline in all districts. It is this poor showing in agriculture that does partly explain the slow reductions of poverty in the 1990s in Orissa.

The predominantly tribal southern region comprising the undivided Kalahandi, Koraput and Phulbani districts brings into mind the picture of starvation deaths, growing Naxalism and communal clashes. All these are independently important concerns, but their links with widespread poverty cannot be denied.

The regularity with which the state is exposed to natural calamities also needs further probing from the climate change perspective. The call of the hour is people-centric planning that revives the livelihood bases of the farmers and agricultural labourers.

Want to read more about the paper, read on IGIDR Working Paper Series: WP-2009-006. Your comments are welcome.

An Independence Day Thought for Farmers

Today, on 15 August 2009, we commemorate 62 years independence, the 63rd independence day. The first one after the new government has taken office in May 2009 (see Congress Comeback and Expectations), the first one after the global financial crisis that started in the latter half of 2008 (see Financial Crisis, Mental Health and ..., Economics Needs a Scientific Revolution: A comment, and Surviving the Recession), the first one after the terror attack in Mumbai (see Mumbai...Lives On), the first one after Indian is exposed to the global pandemic of A (H1N1) influenza (see Swine Flu in India), and also happens to be a year when the country is facing a severe drought. The latter is particularly worrisome because the state of Indian agriculture is already under stress (see Indian Agriculture in Doldrums, Agrarian Crisis and Farmers' Suicides in India, Agrarian Crisis in India, and Hunger and Undernutrition). Some of these concerns have been raised in the Prime Minister's speech (see its Highlights) and I would leave it at that. However, with the looming drought-like scenario, I would like to raise some issues with regard to the farmers.

Debt waiver or for that matter postponing the date of payment is not the answer. Debt waiver is a book-keeping exercise that helps the banks reduce their Non-Performing Assets (NPAs); for the farmers, at the most, it reduces a mental burden and makes them eligible for fresh loans. The moot question is that there are no mechanisms to address risks in non-repayment that arise because of reasons that are beyond the control of the farmers, that is, for non-willful default. Rather, a blanket waiver clubs the wilfull default with the non-wilfull ones.

More over, debt waiver is a temporary measure. The global financial crisis saw a lot of money being pumped in by different governments in the name of stimulus, and hence, there is nothing wrong in providing stimulus for the Indian farm sectory. However, it has to go beyond the debt waiver and address more fundamental issues so that it enhances returns to cultivation and improves livelihood (including education and health requirements) of those dependent on agriculture.

Another limitation of the debt waiver exercise is that it did not address the loan burden of farmers from the informal sources. These loans are likely to have a greater interest burden. What is more, the small and marginal farmers have a greater dependence on them.

Delaying repayment of current loans does not provide much solace. It will rather add to the interest burden, as it has to be paid for a longer time period. There is no appraisal done on whether loans for two sucessive crops can be paid from returns from a single crop. A reasoanable guestimate sugests that it is not possible, that is, if there will be a good monsoon/crop the next year/season it will not be possible for the farmer to repay the loans. The repayment will still be non-wilfull, but even then he/she will still be a defaulter who would be denied access to future loans from formal sources. Thus, increasing his reliance on the informal sources. With the kind of information and communication technology that we have today, the government and banks should come up with a system to identify wilfull from non-wilfull and devise mechanisms to mitigate risks for the latter group.

A note of caution. In providing risk mitigation they should avoid the plethora of products that claim financial innovation, which in practice add rather than reduce risks from a farmers point of view.

There has been a goal of four per cent annual growth in agriculture. This, one presumes, is with regard to gross value addition. However, if one has to plan for an increase in value addition, it becomes dificult becasuse we are not aware of the future prices. Thus, in practise the planning boils down to increase in production and perhaps giving emphasis on crops with a greater value addition. The latter increases the vulnerability to price fluctuations and also compromises the farmer's ability to meet food security requirements during years of crisis. More importantly such targets forces upon the planning mechanism a top-down approach, which is totally contrary to the bottom-up approach being envisaged through the district agricultural plans.

Getting back to drought, one feels that the National Rural Employment Guarantee Scheme (NREGS) can play a great role, both in building assets as also providing employment. This is the least that we can do for the risk-taking enterprising farmer. Jai Kissan! Jai Ho!

Quantitative Approaches to Public Policy

Quantitative Approaches to Public Policy - Conference in Honour of Professor T. Krishna Kumar (QAPP-TKK), which Sushanta and I have been working on for more than a year is now finally over. This took place at Indian Institute of Management Bangalore (IIMB), under the aegis of the Centre for Public Policy and as an independent tract of the Fourth Annual International Conference on Public Policy and Management.

Just before the conference we were little worried because Professor T. Krishna Kumar in whose honour this was being done was not be able to come because his wife was unwell. However, through some web link a contact was made he could participate in some of the proceeding.

One issue that came up is that there was not much time for discussion. True, but as the purpose was to honour Professor T. Krishna Kumar and we decided in favour of bringing together more scholars as against fewer papers with more time for discussions. In any case, we have already requested participants to send in their comments to the authors. The authors can also forward the link of their papers to others requesting comments. I hope that this helps the authors in revising the papers. We also have plans of peer reviewing selected papers for possible publications.

At the end of the day, the conference went off well. The taste of the pudding was yummy!

Swine Flu in India

The first swine flu death in India of Rida Shaikh a 14 year old school going girl in Pune has initiated a public health debate. As of 31 July 2009, World Health Organization in its 60th update indicates that there have been 1,62,380 cases and 1,154 deaths. The news reports of 5th August 2009 indicate that in India there have been 574 cases of which 470 have been discharged and there was one death. There have been 154 cases in Maharashtra of which 104 are from Pune and 22 from Mumbai/Thane.

In this pandemic, there is a demand that private hospitals be allowed to treat. This is a public health problem and whether you like it or not, its treatment is available at designated public facilities. The moot question is the quality of care (state of hygeine) is not good in these facilities. This leads to another pertinent question. Why has this happened? If you create a system where people who can act as a pressure group to ensure quality have nothing to do with this system then it would degenerate. Let us not wait for such epidemics to set our house in order. We should have a stronger public health system.

Another point that emerges is are the care providers of Rida Shaikh, who was first taken to a private clinic and then to the public facility where again there was delay because the first blood test report was done at a private hospital. One may not hold the providers neglecting the child's care, but it does call for some systemic evaluation and improvement.

This incident, as in all health related ailments, reiterates two things. We do not know when we will fall sick. If sick, we do not know when we can get better. It is for this that unregulated private care givers is definitely not the answer.

A state of epidemic has been declared in Pune and Satara districts of Maharashtra. As per this, the state can enforce treatment on people unwilling. It can also seas premises like schools and other public places to prevent the spread of diseases.

The World Health Oragnization has a Swinflu portal Pandemic (HINI) 2009 that is updated regularly. There are guidelines for individuals, communities, and national authorities. The most important being the frequently asked questions on What can I do?

To protech yourself:


• avoid touching your mouth and nose;
• clean hands thoroughly with soap and water, or cleanse them with an alcohol-based hand rub on a regular basis (especially if touching the mouth and nose, or surfaces that are potentially contaminated);
• avoid close contact with people who might be ill;
• reduce the time spent in crowded settings if possible;
• improve airflow in your living space by opening windows;
• practise good health habits including adequate sleep, eating nutritious food, and keeping physically active.

It is difficult to distinguish between a common seasonal flu and swine flu. The typical symptoms are fever, cough, headache, body aches, sore throat and runny nose. In India, there are specified public hospitals where this can be treated. The only place in Mumbai (which is 160 kilometers from the epidemic declared area) is Kasturba Hospital on Arthur Road - Phone: 230 83901/92458/00889). This can be treated, but it should be done under medical advise. DO NOT PANIC.

If you think that you have the illness then:

• stay at home and keep away from work, school or crowds;
• rest and take plenty of fluids;
• cover your nose and mouth when coughing and sneezing and, if using tissues, make sure you dispose of them carefully. Clean your hands immediately after with soap and water or cleanse them with an alcohol-based hand rub;
• if you do not have a tissue close by when you cough or sneeze, cover your mouth as much as possible with the crook of your elbow;
• use a mask to help you contain the spread of droplets when you are around others, but be sure to do so correctly;
• inform family and friends about your illness and try to avoid contact with other people;
• if possible, contact a health professional before traveling to a health facility to discuss whether a medical examination is necessary.

Meta-analysis: A research tool

In medical sciences (particularly, epidemiological and evidence-based medicine), meta-analysis is an accepted method. It is said that famous statisticians like Karl Pearson (to overcome power of reduced statistical power in small sample studies, 1904), RA Fisher (idea of cumulating probability values because the insingnificant results of a number of indipendent studies may give a lower picture from probabilty then one would obtain by chance, 1944), WG Cochran (in his discussion on averaging of means across independent studies laid down the statistical foundation through inverse variance weighting and homogenity testing) among others contributed towards this (see, Meta-analysis in Wikipedia and Practical Meta-Analysis by David B Wilson).

It was Gene V. Glass who first made use of the term in its statistical sense in a seminal paer Primary, secondary, and meta-analysis of research, Educational Researcher, 5 (10), 3-8, 1976, JSTOR link. To quote from this paper:

"Primary analysis is the original analysis of data in a research study. It is what one typically imagines as the application of statistical methods."

"Secondary analysis is the re-analysis of data for the purpose of answering the original research question with better statistical techniques, or answering new questions with old data."

"Meta-analysis refers to ... the statistical analysis of a large collection of analysis results from individual studies for the purpose of integrating the findings. It connotes a rigorous alternative to the casual, narrative discussions of research studies which typify our attempts to make sense of the rapidly expanding research literature."

I have been aware of this technique because of my research interests in the public health domain. But, what caught my attention very recently the paper by Derek D. Headey and Andrew Hodge, 'The Effect of Population Growth on Economic Growth: A Meta-Regression Analysis of the Macroeconomic Literature' Population and Development Review, 35 (2), 221-248, 2009. The study explores how differences in the method could account for differences in results.

The meta-regression technique is as follows. In the first step, one has to rely on the independent original studies on a particular theme. In these studies the regressions will have a dependent variable (like economic growth, Yi) and an independent variable (like population growth, Xi) and there may be a set of control variables (Z), which are likely to be different for different sutdies.

(1) Yi=a0+a1Xi+ajZj+ei (j>1)

To know the impact of population growth on economic growth, the relevant coefficient is a1. Its statistical significance depending on its standard error, s1; that is, if the t-stat=(a1/s1)>|2|.

In the second step, the main task for the meta-regression, one the t-stat of the k studies (t1k) on the (el, l) number of methodological dummies.

(2) tk=b0+blDl+uk

The methodological dummies could refer to alternative measures of economic growth (Gross Domestic Product (GDP) per capita, Gross National Product (GNP) per capita, GDP per worker), alternative measures of population growth (total population, young population, working population) or because of alternative techniques used (control set includes health indicator, sample is developing land-poor countries, sample is developing countries, sample is for a prticular time period, the econometric method uses weighted least squares and so on and so forth). Of course, the more number of dumies one can use would depend upon the more number of studies that already exist.

Some of the problems with meta-analysis identified in literature are the following.
The studies that one is likely to have access (read published) are the ones that would have reported significant results. In other words, unpublished studies that showed negative or null findings are difficult to find.

Another problem that comes from critiques of the approach is th 'Apples versus Oranges'. Is it proper to compare the different studies together. But, the independent studies are also comparing something. It is true that one should be careful and know what one is comparing than doing away with comparision altogether.

There is also the 'Flat Earth' criticism. That an analysis of averages may not do justice. Yes, and one should use meta-analysis judiciously to explore that also (for instance, in the use of methodological dummies). There are many others that one would come across, as one reads on more.

A good read is Meta-analysis at 25 by none other than Gene V Glass. Researchers in other disciplines should explore this method. Go head on!

Budget 2009: After Masima, Jethu's Bari

In the railway budget of 2009, Masima had her say. In Budget 2009, Jethu (Shri Pranab Mukherjee) had his say (If I was twenty years younger I would have addressed him as Dadu) while sipping water in between. The first message that has to be read between the lines is that the Indian National Congress (INC) as also Trinamool Congress are aiming at the state elections of West Bengal in 2011. There is also a medium term target of Uttar Pradesh in 2012. The Left Front, Bahujan Samaj and Samajbadi better watch out.

The budget is also a way of saying thank you to all those who voted the United Progressive Alliannce back to power. The increased expenditure under the National Rural Employment Guarantee Scheme (NREGS) and National Rural Health Mission (NRHM) is on expected lines. The National Rural Livelihood Mission (NRLM) that would restructure the existing Swarnajayati Gram Swarojgar Yojana (SGSY) and integrating with Self-help groups and other initiative are welfare programmes that show promise.

What worries most is the increasing expenditure without commensurat receipts leading to an increase in fiscal deficit. Jethu is not too much bothered about this becaue of the global financial crisis. He will wait for the fruit to ripe.

Politically, the immediate concern would be Maharashtra elections later in the year. With delayed monsoons, will the Vidarbha task force, debt waiver and urban storm water drains help. Only time will tell.