Wednesday, September 26, 2007

The Idea of Choice

Back in my undergrad days, when we were taught the concepts of dynamical systems (it is about how a point's position is varying over time), I first heard about the idea of bifurcation points in physics, which is a point beyond which two paths are the possible for trajectories for the same point. I found it a very interesting concept then because to me it represented some unknown conditions leading to two or more possibilities for the future.

Later when I was reading the Indian philosophical books, Bhagwad Geeta and Upanishads, again and again I found the mention of an obvious phenomenon that choices an individual makes define the future. For the westerners, I would say, in the movie Matrix and its sequels we find this idea being thrown to us quite often. Of course one can find that a lot of work has been done on this topic of choice by many philosophers, epistemologists, economists and science fiction writers etc (broadly speaking, people who want to figure it all out :-).

And recently, while working a paper for my research I had to include some aspects of investment decision making (FYI: as a student I try to do some research also for living and its focus is on economics of innovation or technological change, this is what gives me the money for food :) I have a long list of other research areas also where once in a while I try to write some course paper or do some general readings, it includes: Information and Communication Technologies for Development (ICT4D), environmental sustainability, economic development, evolutionary economics, industrial organization). So the point I wanted to make is, everyone says the same thing that choices made today shape your future tomorrow. Statistically and philosophically these choices do get defined by the interplay of the forces of evolutionary pull and historical past. By the use of words "historical past" I mean that the change which happens over time is path dependent (in simple words, nothing changes suddenly) and evolutionary pull is the evidence of the fact that we are alive, thinking and have desires to change things, and for that at times we do anything required.

This is getting longer and sounding more and more confused now, so I will try to cut short and maybe say precisely what I want to say (which I believe I don't know now). So we find that since the beginning of civilized societies intellectuals have been talking about the importance of choice, we can find many developments in mathematics and economics (evolutionary game theory, decision trees, options theory, etc.) which try to mathematically explain and model this phenomenon. Obviously math as of today can not model this fully but all this just shows the convergence of thoughts over different disciplines, which emphasizes the fact that choice is something very powerful. On a optimistic note, we know that whatever the odds are, we are the ones who make our choices.

Therefore at the level of a simple discussion to share knowledge, so far my understanding of all this in relevance to our everyday lives is a very simple and obvious fact. We need to have a sense of direction in life, or know what we want (the biggest question :-) but in order to acheive that doing our best in present is the best thing we can do. This will decide and lead us to the whichever next set of choices we will have. Hence taking us to the next bifurcation point of our life, from where again different paths are possible. No matter what your choices would be, it is the doing your best in the moment which will make the changes possible. I guess the Bhagwad Geeta's one of the most famous verse puts this idea across in the best possible manner, ""Karmanya Vadhikaraste Ma Phaleshu Kadachana, Ma Karmaphalahetur Bhur Ma Tey Sangostva Akarmani". It means, we can take action so we should do that in best possible way, following results is not what we should be doing and we should never fall for the idea of inaction, that won't take us anywhere.

Tuesday, September 11, 2007

Micro-Finance in Urban Areas

Micro finance has not been successful so far in helping urban poor due to many reasons. Obviously just giving money is not THE SOLUTION. We need a lot many other support structures/reforms so that the poor people can exploit the opportunities better. A big list of such support structures and reforms could be made, but most of those things will be under the control of government. Here in order to just think of a market based solution for making these initiatives successful, I would like to address a specific problem which micro-finance institutions (MFIs) face in urban areas.

When we consider the incentive for MFIs to go an lend money to poor people in urban slums, they have a big discouraging obstacle, i.e. repayments. Repayments in micro-finance are dependent on factors like how stable (location-wise) the population under the experiment is, community ties, shame factor within neighborhoods etc. Urban slums in India and probably everywhere in the world would score badly on these indicators. Population is very dynamic, as in many new people keep coming in to the cities from rural areas looking for jobs and many leave to go to other cities or their villages or somewhere else within the city. Social or community ties are very weak because most people are recent acquaintances only and otherwise also they are not relatives or close family friends since decades as it would be the case in villages. Hence people have no shame in defaulting loans because they don't care about their neighbors.

All these reasons are expected to lead to a very low repayment rate in urban slums for MFIs. Hence they would not like to roll out their operations in these areas. One possible solution for this could be to invest in human capital or people. What I mean to say here is, the micro-credit loans should be given to learn new skills to start a small service or to look for jobs. Borrowers should be required to make a PAN (social security card equivalent) in order to qualify for the loan. And most importantly, a accreditation and job-search assistance service should be run along with. So even if someone wants to take loan and work as maid at any middle-class family's house. MFI can confirm on receiving a call that their new employee belongs to the MFI's borrower network and hence can be trusted relatively more than any other person. This is a good incentive for the borrower to stay connected and make repayments on time as her/his livelihood becomes more certain.

Similarly, because an MFI can start and manage a job-search assistance service, if they do so (or outsource that), they give the borrowers all the more reason to remain a part of the network by keep repaying the loans on time. Additionally an insurance premium could be added to the interest rate in order to cover the borrowers from unfortunate circumstances where they don't get any jobs or are not able to sell their services, due to which they won't be able to repay the loans.

This idea is not in perfect shape but it definitely provides a good line of thought to approach this problem. There are some catches and I am sure innovative solutions for those could be thought of. Anyways, urban poverty is a fast and steadily increasing phenomena everywhere and we need to come up with new ideas to tackle this problem. I hope this could be one way to think about it, because at the end of the day these poor people come to big cities in order to earn more than what they could earn in their villages. So we should probably just focus on how we can help them achieve their goals and in return they need to just repay their loan, which enables them to remain in the network which opens door to more opportunities and a possible support mechanism in their unexpected bad times in future.

Monday, September 10, 2007

Hereditary Lineage in Indian Politics

Recently I was having a discussion over how good or bad having Hillary as the next president of US would be considering the fact that her win will mean that US would become a country ruled by the members of two families for at least 24 years. US will then have a whole generation which can imagine only either some Bush or Clinton as their president. I intend no offence to Hillary's capabilities or doubt her competence to govern the country, but this idea of continuous 24 or 28 years of US presidency shared by two families sound depressing. These two families may represent two opposite ways of thinking prevalent in US but probably anyone can imagine that there is a fair chance that they don't represent enough new or fresh thoughts. George Washinton didn't go for a third term in order to set a precedent for coming generations so that fresh thoughts from new people can keep coming into the Whitehouse. However capable or great a leader is, he/she will tend to think the same way and for a nation to stay ahead new thoughts and ideas should keep coming from the leadership. Having these two families rule US for so long doesn't seem to be in sync with that fundamental belief of George Washington and US.

Anyways, this led me to think about India where since my grandfather's time one Nehru-Gandhi family has ruled the country for most of the time. I admire Nehru even though I feel he made some wrong decisions. I guess his decisions could be justified in the context those were taken. His descendents have done both blunders and some wonderful things for India but its the same family and however different these individuals maybe, finally they end up thinking in similar ways. So the next obvious question which came to my mind was how prevalent the family lineage system is in Indian politics? It's not just about the Gandhi family, I felt maybe all over India in small cities too we can this failure of Indian democracy to bring new people with fresh ideas.

So I thought why not try to look for empirical evidence for this phenomenon because I felt there would be many interesting patterns of succession in leadership varying across regions, religions, economic status, gender and education levels etc. Hence I started to look for data on this and I found that Election Commission of India's (ECI) website has the data online for who all were the Members of Paliament (MP) and Members of Legislative Assembly (MLA) since 1977 but no data on their blood relationships with other MPs or MLAs. I asked two prominent Indian political scientists Dr. Pratap Bhanu Mehta and Yogendra Yadav also about how can I collect this data. Dr. Mehta didn't know and referred me to Prof. Yadav, who told me that he has data on all MPs since the first Indian general election in 1952 but he does not know of any source for data on their blood relationships.

This makes the problem more interesting and challenging, so I thought of an idea for collecting this data. Just to reiterate, the core research idea is to match the ECI data on all MPs and MLAs since 1977 with the information on whether there were or are any blood relatives of these MPs who were either a MP or MLA before or after, in their own constituency or some other constituency with the information on the caste, religion, region, gender, income and education levels of these MPs and MLAs etc. I believe this could make a decent research paper based on inductive reasoning. Additionally we will try to collect information on any natural calamities or crisis (riots) etc during the tenure of these public representatives, their campaign focus and public perception of corruption levels during their tenures.

The idea for collecting this data which I thought is to get the voluntary submissions by general public about their local MPs on some internet website, something like a wiki. It would be like an open-source research project :). I feel it is an interesting idea to try, though I am not sure whether it would be successful or not. And even if I am able to get all or even 90% of the data this way over the time period of an year or so, then also there will be all kinds of reliability issues with that data. I dont care if this kind of data is deemed unreliable and I can't publish the results in a journal, but I strongly feel that if this can be done then it would be an interesting experiment for collecting data in social sciences.. :) I guess the idea is not something new, specially in this information age but its application and operationalization in this context is definitely a new and challenging thing and hence it is worth trying. In fact about 40% of data has been collected representative results could also be shown on the web and updated regularly.

I will try to put up the link for the website which will collect this data here as soon as possible. I will then hope and pray that this experiment becomes a success. It probably could also provide evidence that all over India people accessing internet are interested in politics. And if it happens, then more such experiements will spin-off to collect the data which is otherwise very hard to collect and can provide us some meaningful insights about our own society. Insights which probably would make people think whether what they observe is right or not and what can they do change things which they deem wrong.

Sunday, September 09, 2007

Micro Study-loans for Deserving Youth Back Home

This is one more of my for-profit ideas for development to start:
Basically we propose/recommend to make a micro-credit system for youngsters from poor communities in urban areas to pursue college degrees or any sort of education which provides them skills to make their own living. It’s not for courses like engineering etc, but for sciences, accounting, vocational education, and other similar stuff. These youngsters will be provided counseling support, support for finding jobs, and accreditation or references etc. These kids will be selected on the basis of their previous school performance and background etc. They will be given Rs. 3000-5000 a month for the period of their studies, so that they can support their family and pay tuition of their courses etc while they are in college/vocational school. Focus would be on providing skills for jobs or for opening a small service shop (for repairing stuff etc), but not a merchandise shop.

Money given is a loan which these guys are expected to return so that repayments can be used again for expanding the operations. It’s not a charity idea but a for-profit idea, like micro-credit but non-profit in nature as we don’t distribute the money amongst the people who run the operations but plough it back into the operations for further growth and sustainability of the initiative.

To raise the funds, other than organizations and government in India we can approach people in US and other countries. These individual supporters can make monthly commitments for this from their salaries. Many firms double such contributions of their employees by adding equal amounts so it could become something $140 or $70 per month for a person in US.

It is somewhat similar to adopt an orphan kind of idea in some sense, where individuals and organizations could sponsor a kid's education in India. Ideally, we should provide a website where these individual can select whom they want to sponsor from a list of profiles and then they can remain in touch with these kids directly also. It’s a simple idea and good for the able youth in India who miss opportunities to further their education due to the lack of money or other socio-economic reasons. Among the perceived problems, biggest would be to ensure that this scheme is not being misused.