Tuesday, January 22, 2008

Social stability index

I've been toying with the possibility of having a social stability index, and how it could impact economics. Let me explain.

The market -- stock/ commodities/ futures etc -- is essentially a mechanism for price discovery that relies on the wisdom of the traders to find the right price: the right price for wheat, for oil, for Google's share price, etc. The philosophy is that given access to complete information, the traders will rationally compute these prices. The prices then actually pave the path to progress, that is Indian wheat better than wheat from Kazakhasthan, or is Google better than Yahoo, etc. This is how I understand it.

Now, there are a couple of problems in accurate price discovery. This fact cannot be argued against because of overwhelming evidence. The sudden food price inflation is a supreme example -- had the price rise been gradual, it would have been much easier for the poor to cope with it. Human induced climate change is another example -- had the markets listened to the arguments of scientists 50 years ago, they could have induced heavier investments in research for renewable energy or carbon efficient car design etc. The problem I am trying to identify is the robustness of the path discovered by the markets. Evidence such as the sudden food price inflation and climate change show that the path computed by the markets is not robust.

So, why does this happen? My thinking is that robustness is not taken into account by the traders in the market. They should because if they do then they will not make such big mistakes. But maybe they are computationally starved to take such complex environmental and social stability factors into account. So, how can that be changed?

This is where the idea of a social stability index comes up. If we can devise an index using market mechanisms that is somewhat predictive of the social stability of society, then we can make it easier for stock / commodity / futures traders to take this information into account. The CPI (Consumer Price Inflation) index is one such example -- a high CPI signifies social instability, and an unstable society is never good for economics. So, suppose we allow traders to speculate on the CPI, and assuming that these speculators will be smart enough to predict CPI accurately, then their activities will have an effect on the market traders to invest more appropriately.

I think other indexes can also be designed by looking into research in sociology of societies and civilizations. Jared Diamond's book, Guns Germs and Steel, is a good example of an effort in this direction. He wants to look at societal progress in isolated cultures as experiments that tell us something about human behavior and progress on a macro scale of civilizations. Cues from research such as his could be used to design indexes that could be predictive of social stability, I think, and utilizing the wisdom of the crowds through market mechanisms to predict this index for different cities, states, countries, and the world in general, could serve as a source of guiding information for other traders that define economic investments on how the humans move forward as a society.

Any thoughts on this would be most appreciated.

Saturday, January 19, 2008

Open source speech recognition

An open source speech-recognition and text-to-speech software suite was recently released. This is clearly useful for disabled people, but it can also be put to good use in rural areas having high illiteracy. For example, microfinance transactions can be automatically recorded and verified by having people speak into a mobile device, or maybe even into a simple taperecorder that can be replayed and digitized later. A similar system can be used to record payments made in rural employment schemes, where much corruption happens because proper documentation is not maintained in electronic form so that it can be easily checked for discrepancies. Rural banking institutions are trying to do something similar, but it'll be great to have an open-source solution to all this.

Friday, January 18, 2008

Carnegie libraries

Such an amazing story, and I got to know about it only today when I was talking with Prof. Manuela Veloso, a robotics researcher from CMU! The rise from rags to riches of Andrew Carnegie is one of those stories that sound just too mythical to be true. He worked his way from working fulltime as a kid of 12 to support himself, all the way up to creating an industrial empire worth $400 million in the 19th century. And then he gave away almost all his wealth to the creation of over 2,000 libraries across USA, Canada, Australia, and many European countries. He strongly believed in meritocracy, and that if people had access to books and education, and if they were willing, then they could be successful. These ideals clearly resonate with many things. The children's library that Bakul has set up in Orissa, and the establishment of rural kiosks to provide information services to villagers, are two activities that are based on the same principles. Some more comments in the article are interesting. For example, a person who has access to education, and yet he prefers not to make use of it, essentially settles himself down for a lower status in society. Capitalism is also legitimized by saying that those are capable of leading, should be in positions of leadership, but they should eventually give back to society what they have earned, and that everybody should have an equal opportunity of training themselves to get into leadership positions.

Thursday, January 17, 2008

Health and education in India

These two excellent articles point out the woes of healthcare and education in India: A healthier future for India, and Education push yield's little for India's poor.

India has only 1.5 hospital beds per 1000 people, which is way lower than averages of 3-4 in most other developing countries. And only 0.6 doctors and 0.08 nurses per 1000 people, as compared to world averages of 1.2 and 2.6 respectively.

As for education, among the poorest 20 percent of Indian men, half are illiterate, and barely 2 percent graduate from high school, according to government data. Those who do go to school, hardly learn anything because of teacher absenteeism or poor quality of education. By contrast, among the richest 20 percent of Indian men, nearly half are high school graduates and only 2 percent are illiterate.

These figures are indeed disheartening. It is not only humanely wrong, but it is also hurting India economically. Most than 50% of the population is below 24, which means a terrible wastage of human resource if they are not well educated and healthy. How can this be corrected? The government is of course spending a lot of money on building hospitals and schools, and paying doctors and teachers to work in the villages. But the results have not been great. Corruption is surely to blame, but a lack of good leadership both at the government as well as at the local level, seem to be missing too. Corruption can potentially be corrected with electronic systems, social audits, RTIs, and the whole lot. But what about leadership? Given the largely mediocre civil services sector and the [cannot-find-a-single-adjective-for-this] politicians who are in no way capable of governing a nation of billion people, can we ever expect things to become good? This raises a lot of questions on the assumptions. Why is health and education supposed to be a public sector enterprise anyways? Is there a substitute for leadership, maybe better work ethics on part of the teachers or doctors or other concerned people? Can systems be structured such that they automatically promote better conduct and commitment to jobs? The answers may not be straightforward, but they may definitely be there somewhere only waiting to be discovered.

Animal power

I made a presentation in the Udai meeting about animal power. Draught animals such as horses, camels, oxen, and donkeys have been used since many centuries for transportation and farming. I will give examples of some non-conventional uses of animal power for tasks such as grain grinding and wood sawing, which are rarely seen today. Instead, there seems to be a tendency to rely on fossil-fuel or electricity powered equipment for these tasks, or else solely on manual labour. However, animal powered systems are a viable alternative, and probably a more appropriate technology for certain rural areas. We discussed how animal power can be popularized and made more efficient, and various issues that can come up in its usage. The bottomline is that to popularize animal power, the technology must be commercialized and the local people must be trained in the principles behind the technologies so that they can customize it for their needs.