Monthly Archives: May 2015

Let them farm

Tim Gowers recently lectured on the possibility and reality of machines proving theorems. Higher mathematics is one of the human endeavors that we think defines us as a species and hold it dear. Increasingly though it appears we may not be as special as we thought we were.

While Gowers stands at the edge of human thought, the real impact of machines on our political economy was detailed by Andrew McAfee in his book Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy. McAfee’s basic point is: this time it’s different. And that unlike all technological progress of the past which resulted in greater prosperity and more jobs eventually, the coming automation will actually kill jobs. An odd thing for an Economist to claim. He even proposes the masses rendered unemployed thus be paid salary for doing nothing. His arguments, whether or not true for mankind, have a very important bearing on India

India’s problems, Mihir Sharma’s analyses in Restart: The Last Chance for the Indian Economy suggest, stem from factor markets and bad laws governing them. Sharma then goes on to suggest reform in these areas to address said problems. That’s accurate if the next 30 years are similar to the past 30 years. But what if the option that was available to China is no longer available? Whether there can be another export/manufacturing driven large country is a question for Economists. But a simpler question that the rest of us have is: the imperative for moving manufacturing to low wage destinations becomes moot if humans are no longer needed to perform semi-skilled or even skilled factory jobs, does it not? What then? How does labor reform matter when productivity doesn’t depend on people?

Even Computer Scientists can’t predict what will be automated in economically viable ways in the near or medium term. Politicians stand no chance. So to invest in skill development programs that train people for semi-skilled jobs when those jobs may well be done by a machine in the next 10 years seems a worse option than subsidy for fossil fuel.

What does a politician  in India then do? Tell the populace its strength is the over-educated upper caste/class which will at least participate in the global economy unlike in some other countries? And that the lower caste/class farmer in an unproductive piece of land with almost no access to education might as well stay that way? What we can say with reasonable certainty is: elections are going to be difficult and anti-incumbency is likely to be an explanation for many future election cycles in India.

How did Tamil Nadu get richer than Gujarat?

In their recent book The Paradox of India’s North–South Divide, Samuel Paul and Kala Sridhar discuss how and why Tamil Nadu and Uttar Pradesh have diverged quite significantly over the past 30 years. While their aim was to establish factors that primarily improve per capita incomes of the southern states, the book is limited to those two states largely. And was almost asking the reader to do a wider analysis for oneself. So, let’s look at a wider set of states. Let’s also include what one thought was an important factor that was missed in the analysis: population growth of each state.

Let’s consider 16 large states and their per capita incomes in 1961 and 2012[1].

State Per Capita Income (1960) Relative Rank in 1960 Per Capita Income (2012) Relative Rank in 2012 Movement in Relative Ranking
Kerala 278 10 88527 5 +5
Haryana 359 5 119158 1 +4
Tamil Nadu 344 7 98628 3 +4
Orissa 226 15 49241 12 +3
Jammu & Kashmir 267 13 52250 11 +2
Rajasthan 271 12 59097 10 +2
Andhra Pradesh 314 8 78952 7 +1
Karnataka (Mysore) 292 9 76758 8 +1
Bihar 216 16 27202 16 0
Gujarat 380 4 96976 4 0
Maharashtra 419 1 103991 2 -1
Uttar Pradesh 244 14 33616 15 -1
Madhya Pradesh 274 11 44989 13 -2
Punjab 383 3 84526 6 -3
West Bengal 386 2 61352 9 -7
Assam 349 6 42036 14 -8

50 years is a reasonable time frame. And the data is quite remarkable. Kerala and Tamil Nadu had per capita incomes that were almost the same as that of Madhya Pradesh and Assam respectively in 1960. In 2012, Kerala had a per capita income that’s about twice that of Madhya Pradesh; Tamil Nadu had a per capita income that was well over twice that of Assam in 2012. Maharashtra and Gujarat have held on to their relative wealth. Andhra Pradesh (including Telangana for the purpose of this analysis) and Karnataka continue to be stuck in the middle. While West Bengal, apart from Assam, has seen a collapse in its relative wealth; Punjab, still wealthy, has lost its position a bit.

The relative movement, interesting in terms of challenging our political conceptions, does not tell us much. A far more interesting comparison is to look at growth rates of per capita income and compare it to actual NSDP growth.

State Per Capita Income CAGR NSDP CAGR Population Growth Rate(1961 – 2011)
Haryana 11.81% 14.76% 1.40%
Kerala 11.72% 13.58% 0.99%
Tamil Nadu 11.50% 13.25% 1.07%
Karnataka (Mysore) 11.31% 13.62% 1.23%
Gujarat 11.25% 13.89% 1.32%
Andhra Pradesh 11.21% 12.06% 1.15%
Maharashtra 11.19% 13.82% 1.30%
Punjab 10.94% 13.36% 1.20%
Rajasthan 10.91% 13.85% 1.41%
Orissa 10.91% 13.26% 1.16%
Jammu & Kashmir 10.68% 13.71% 1.43%
Madhya Pradesh 10.31% 12.34% 1.34%
West Bengal 10.24% 12.54% 1.24%
Uttar Pradesh 9.94% 12.37% 1.26%
Bihar 9.75% 11.71% 1.32%
Assam 9.65% 11.90% 1.24%

The two data tables taken together for the states of Tamil Nadu and Gujarat tell a very important story: while Gujarat’s NSDP was growing slightly faster than Tamil Nadu’s, the latter had a faster growth of per capita income. Simply because it had a lower rate of population growth. So, in 1960, Gujarat had a higher per capita income compared to Tamil Nadu. And in absolute terms, its economy grew slightly faster than Tamil Nadu in the past 50 years. Yet, at the end of those 50 years, the average Tamil is richer by about 1,652 rupees.

Kerala and Tamil Nadu, thus, aren’t growing faster than others. Just that they are growing just as well as others with fewer babies. Tamil Nadu has a TFR of 1.7 and Kerala’s is 1.8; Gujarat’s TFR was 2.5 in 2010. This story repeats itself with a far greater growth dampening effect in the case of Madhya Pradesh and Bihar. Both states had TFRs greater than 3 in 2010.

On the other hand, fewer babies isn’t a sufficient condition for doing well. West Bengal with a TFR of 1.7 sadly explains that. If we treat per capita income as an independent variable, the relative weights between NSDP growth and population growth is still skewed towards the former as shown the chart[2]. But among relatively well governed states, the difference in growth is negligible while that in TFR isn’t.

Predictors

The other factor that’s implied by Paul and Sridhar is that States with a greater share of services in their NSDP tend to break out compared to states that have a higher contribution of agriculture or manufacturing. This combined with low fertility is likely to open the advantage of states with high literacy and low TFR even further. Whether this adds a cleavage towards secession in the future will be worth watching.

 

[1] – The data for 1961 per capita income, NSDP figures was from these statistical tables. The data for 2012 NSDP Figures were found here; and the Per Capita Income was from Planning Commission. None of the figures have been adjusted for inflation. I assume because they are compared and relative movement is what’s used for analyses, that’s reasonable. If you think otherwise, please let me know. Madhya Pradesh, Bihar and Andhra Pradesh have been treated as undivided states. I calculated Population Growth Rates using Census Data of 1961 and 2011.

[2] – The details of regression and relative weights from R are as follows,

regpci