Gram-Vaani is a winner in the prestigious Knight News Challenge!

Our proposal to enable media services in rural areas of India by using community-radio has been accepted for funding in the Knight News Challenge! This is great news for me and my team. The project is called Gram-Vaani, standing for voice-of-the-village. Do take a look at the website and give your feedback. We are also looking for a lot of volunteer help to get us started -- so, do take a look at the volunteer openings.

Rising inflation in India

7% inflation, riding on the back on rising food prices, is of grave concern. Not only can it lead to social instability, it is quite inhumane that the poor are finding it more and more difficult to feed themselves. It is very frustrating to see that such smart economists like we have in the cabinet, resort to populist measures and stupid policies, rather than tackle the core problems of agriculture in India -- irrigation, power, education, transportation, commodity exchange points, etc. I am a firm believer that scientifically formulated policies that solve these problems will gain the respect and votes of people, rather than short term populist measures which are easily forgotten.

National rural employment guarantee act, India

Niraj gave an SJC today on the National Rural Employment Guarantee Act in India. The slides are available at: http://floatingsun.net/udai/files/SJC_NREGA.pdf

As is common with almost any other government scheme, NREGA has produced mixed results. The usual story: 101 different ways in which corruption happens, local needs are not understood, poor execution because the government staff is not adequately trained, etc, etc. All is not dark though, it does work in a few cases. And implementations are in progress using smart card based accounting systems to prevent corruption.

However, the very premise of this scheme is under doubt. There are already government programs for building roads, improving watersheds, etc. And NREGA is funding very similar activities. Therefore, either NREGA is just a different name for these programs, or it is giving more funds to these programs. Essentially, it is not doing anything really different, and it is not trying to solve the major problems of corruption and bad planning with which all government programs suffer. Instead, it complicates program management by adding an extra parameter of giving job cards to people to guarantee 100 days of employment per year.

All of this sounds pretty much like a broken record. Bad policies, bad management, missing channels of accountability, inadequate transparency, ignorant people who do not question authority...

This somehow brought our discussion to a very abstract level of what an ideal governance structure should look like. In general, systems decentralized politically and administratively all the way to the Panchayats, with transparency in their functioning, would work much better. Decentralization has however been very slow to come about. There is clearly an incentive against decentralization because those in power do not want to let it go. This recent article from The Economist talks about it quite well:
http://www.economist.com/opinion/displaystory.cfm?story_id=10804248

In the next month of so, we are planning to study some papers about governance structure, and how it influences the success of development/ welfare programs. If you know of some good resources, hopefully those that go beyond anecdotal examples, then please let us know.

The limits of leapfrogging

A very insightful article from The Economist about why only a few new technologies are able to diffuse in developing countries. New technologies not only rely on the existence of appropriate infrastructure and prior technologies, but also on the ability of people to "absorb" the technology.

This can help explain the mixed success of ICTs, especially kiosks, in rural areas. For example, one of the most successful example of ICT is that of the ITC e-Choupals, which succeeded not only because ITC provided VSAT connections in villages to get real-time mandi prices, but also because the infrastructure for commodity exchange points was set up in the villages. This is missing in other projects such as the e-marketplace being pushed by aAqua. Selling wheat or cows or goats online is not that simple, because an entire team of field staff is required to ensure that the transactions are actually carried out in practice, and appropriate infrastructure needs to be available so that these commodities can be shipped across.

Related World Bank report.

And the one single figure that captures the essence of the arguments.

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.

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.

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.