Sunday, January 20, 2008

Nano Thoughts

Since no one outside Tata Motors has so far driven the Nano one can surmise that looks, features and above all, the price have carried the day. Ride, handling, pick-up and reliability remain largely unknown quantities so far. A lesser mortal than Ratan Tata would probably have been castigated for the rather disingenuous way (calling it the dealers’ price and excluding commission, transport and a host of other charges) of keeping the price at Rs. 100,000. It is likely to cost Rs. 130,000-150,000 for the very basic, no-frills variant.

The car may be most suitable for relatively slow-moving, intra-city travel though that is unlikely to deter people from taking it on highways. It may also be more of a threat to the auto-rickshaw rather than to the 2-wheeler, given the relative price and running costs.

Reactions have been expectedly laudatory though the more sensible pieces (see here for S Aiyar’s take and here for D Mohan’s) situate the Nano and other cars – both big and small – within the larger issues of pollution, congestion and economics of transport systems.

Dinesh Mohan argues that the Nano is not as cheap as it seems. That is true but lots of people buy and keep cars for weekend use, for family outings and to take it occasionally to the office and not for daily commuting. Hence, they keep their monthly expenses far lower than what he assumes. And a new car has a premium all of its own. So the Nano may sell (as do other cars) but not run!!!

People do end up paying a lot in fixed (opportunity) costs (the unavoidable interest costs, depreciation, insurance) but economise on the variable. Add convenience and flexibility to the status value. Think of the abysmal public transport and the less than satisfactory cabs and auto-rickshaws and the small car is a winner.

So car ownership should go up but lots of car owners will continue to use 2-wheelers, public transport and company-provided transport for daily commutes.

Authors of both articles cited above make several useful and pertinent suggestions about pricing of fuel, parking space and charges for the several externalities that cars (not only the Nano) cause in general.

Mr Aiyar argues that free or near free parking is the biggest and the least visible subsidy accruing to car owners. He rightly argues for hefty parking fees.

He mentions that in parts of Tokyo one needs to own parking space as pre-requisite to owning a car. A similar phenomenon, albeit in a small way, is underway in India as well, though largely unappreciated at the present.

In apartment complexes (the so-called gated communities) that are now sprouting all over India one has to purchase slots for car parking. These charges are usually explicit but sometimes implicitly built into the price of the apartment. Covered parking costs twice as much as open parking and even the latter runs into tens or hundreds of thousands of rupees. So people already pay what adds a considerable amount to the price of a car. Private builders recognise all too well the opportunity cost of land.

On private individual residences land is allocated to building garages but of course, most people continue to park for free on public land.

The true cost of owning a vehicle is thus more than usually perceived and is rising.

However, Mr. Aiyar is right to point out the absurd practice of charging low parking fee or providing it free in the most heavily used parts of our largest cities. Raising parking fee is one option but since such parking contracts are frequently auctioned it would be sensible to lift the cap on parking charges and let contractors charge as much as they can. The public authorities should design the auction process to capture a large part of the economic rent that would accrue.

Public parking is not the only place where parking is free. Offices – both government and private - provide free parking as a perk. In fact, till sometime back parking used to be free even to visitors though this is now reduced due to space constraints. Parking even for employees of such offices spills over to public roads and even footpaths.

In private offices the usual practice, apart from reservations for the seniors, is a first-come, first served system which can degenerate into a free for all. There is no reason why fee for parking slots can’t be charged on parking places within private offices. However, a system by rotation or a lottery may be more palatable, though not necessarily the most efficient. However, the important thing is not to permit encroachment on public spaces. And the same applies to space in government offices and for that matter educational institutions and even non-profits.

Swami Aiyar wants the revenue collected from fees and charges to pay, among things, for elevated or underground mass transport systems. However, I am not so sanguine about this. As Prof. Mohan has argued at many places (see here as an illustration) such systems are very expensive and frequently fail to meet their own projections about revenues, profitability and number of passengers carried. They need enormous subsidies of their own. His suggestion on mass rapid transit using buses deserves more consideration and support.

There remains the matter of what to do with charges collected for parking in private offices and the government. If such monies were used for staff welfare – a monthly bash – one can expect support and buy–in from those who don’t bring cars to the office.

More Unintended Consequences

Stephen Dubner and Steve Levitt write about how landowners respond to well-intentioned policies to save endangered species and their habitat by clearing land and thus making it unsuitable for the species in question.

Do we have something similar happening closer home?

One possibility is what happened with sandalwood (Santalum album).

Since for all practical purposes the government owns all trees, controls the manner of its harvesting and puts onerous reporting burden on whose land it grows the response of people has been not to let saplings thrive, in fact uproot them as soon as possible.

An added negative, of course, is that the criminals too covet the valuable trees.

The consequence is that sandalwood has nearly disappeared from private land and on public land it survives precariously.

In most cities of India cutting a tree (irrespective of the species) even on private land requires justification and prior permission. Those who violate the law face prosecution. So people cut trees on the sly, on weekends and on national holidays or let the tree die (pour cement around it or not take care of a parasite attack). I also wonder if people increasingly are reluctant to plant trees instead making do with shrubs and bamboos and creepers. They get the greenery without the hassle.

Saturday, December 22, 2007

Random Readings

On the rhetoric of Climate Change.

Unintended consequences are everywhere. This particular report is about combating the "big" health problems in Africa.

Sunday, December 9, 2007

Green Food

An article in the New York Times on why eating local or organic food may not necessarily be green or carbon-friendly, an echo of what Tim Harford wrote a while ago. Also how difficult it is for consumers to make informed decisions. Helpfully, Tim Harford, in another article points out the way forward.

Wednesday, December 5, 2007

More on Suicides by Farmers

In an earlier post I wrote that the percentage of suicides committed by farmers has been more or less constant at 15% of the total number of suicides during 1998-2005. I also remarked that as the proportion of farmers in the total population is declining this understates the population adjusted suicide rate for farmers.

A superior way is to calculate the Farmers’ Suicide Rate (FSR), which is the number of suicides per 100,000 farmers. Dr Nagaraj has done that. P Sainath writes that the FSR of about 12.9 is higher than the General Suicide Rate (GSR) of above 10. The latter is the number of suicides per 100,000 population.

However, it is methodologically incorrect to compare the GSR with the FSR. This is so because the size of the work (labour) force is much smaller than the total population. While calculating GSR one takes the total number of suicides and divides it by the total population of the country. The total population includes, for example, all sub-adults including infants and children who are not part of the work force. The percentage of population below the age of 14 is about 33% (2001 census) and if one were to exclude this the GSR would jump to 16.

But while calculating FSR one takes only those (adult farmers) numbers who are part of the labour force. This is a much smaller number. Census of India 2001 classifies 400 million or approximately 40% of the population as workers. Hence FSR ought to be compared with the suicide rate for other professions and not the general population. Or FSR should be compared over time.

Also note that the Census of India definition of workers (see here and here) is different from the NCRB category of professional status of suicide victims, the latter includes the unemployed and housewives.

Dr Nagaraj also argues for making adjustments for one, the exclusion, by the NCRB, of non-title holders who are actually cultivators from the category of farmers and two, for the distinction between marginal and main workers in the Census categories. Both these matters are debatable and it is a moot point if such adjustments ought to be made. Even if done these adjustments are likely to change the suicide rate but not the variation in them over time. And even after making such an adjustment the FSR increases to 15.8 which is lower than the 16 (GSR) that I calculate excluding children from the count.

Monday, December 3, 2007

Suicides by Farmers

P Sainath has written extensively on the subject of suicides by farmers and thinks it is an indicator of economic distress in rural areas. Most of his stories are reports from the ground (See here and here). Of late, he has written some pieces (see 1, 2 and 3) based on analysis done by Dr. K. Nagaraj of MIDS, who in turn has used data collected by the National Crime Records Bureau (NCRB). See here for an interview with Dr Nagaraj.

Sainath's dramatic headlines - 1.5 lakh farmer suicide during 1997-2005 and a farmer's suicide every 30 minutes seem to suggest very high incidence.

Let us look at the evidence. Here is a table from Sainath's own piece:

During 1997-2005 there were 1.5 lakh suicides by farmers, as he says. But during the same period there were a total of 1 million suicides in the country. If there was a suicide every 30 minutes by a farmer there was one every 4-5 minutes by the general population.

Obviously these absolute figures have to be put in context. As the table suggests:

1) The overall incidence of suicides (suicide rate) for the country is stable at just over 10 per 100,000 population (i.e. ten suicides per lakh of population per year).

2) Suicides among farmers are also more or less constant at about 15% of the total suicides in the country.

Thus, there is hardly any increase in the proportion of suicides committed by farmers in the nine-year period.

(There is an inexplicable jump in the number of farmer suicides from 1997 to 1998, which may be a data issue as data on farmers as a category started being collected from 1995 and several states reported late. Also strictly speaking we should account for the likely declining proportion of farmers to total population but nine years is not that long a period, nevertheless the stated numbers would understate the farmers' suicide rate).

Curiously, Dr Nagaraj and P Sainath make no mention of the causes of the suicides that are part of the NCRB statistics. The NCRB data suggests that a mere 6% or so suicides are due to poverty and bankruptcy, the majority being due to illness (22%), family problems (22%), other causes (28%) and unknown (15%).

I don't have the breakdown by reasons for farmers but it can hardly be that these other reasons are absent as a cause for suicides by farmers.

If true, that just like for the general population the reasons for committing suicides by farmers are predominantly non-economic, then the whole hypothesis of Sainath and Nagaraj would take a severe knock.

Four states – Maharashtra, Karnataka, Andhra Pradesh, and Madhya Pradesh (including Chattisgarh) – have accounted for more than 60% of farmer suicides during 1997-2005. Dr. Nagaraj relates this to several factors such as the lack of support from government, aridness of the regions and relying on cash crops and bought-out inputs. He also groups the various states in several categories. See the articles above for details.

However, the patterns don't quite hold. For example, if the affected states are arid so are Gujarat and Rajasthan which have low number and incidence of suicides. Kerala has one of the highest suicide rates, both overall and among farmers but it is not arid, but quite wet. Chattisgarh and Madhya Pradesh are not arid either.

If cash crops are a factor, then one would expect Gujarat to be on the high suicides by farmers list, but it is not. And Chattisgarh hardly grows any “cash crops” and is a high suicide state. And certainly rice and wheat are cash crops for Punjab, Haryana and Uttar Pradesh but the incidence of suicides is low in these states. These states are also high-input using ones.

Tamil Nadu too is arid in many parts and the agriculture is quite “commercial” but the incidence of farmers' suicides is low though overall suicide incidence for the population is much higher than the national average. Communist ruled West Bengal has a high rate of overall suicide rate but not so for farmers.

One hardly sees a pattern, certainly none that fits the neat hypothesis of Sainath and Nagaraj.

A perusal of Sainath's field reports and other media reports suggest that farmers who took their lives are land owners (not landless), had frequently leased-in additional land, invested in irrigation and had borrowed sums which by Indian standards were not inconsiderable – several lakhs of rupees in many (most?) cases. Note, that the suicide-prone are not marginal farmers and landless labourers who one would expect to bear the brunt of agricultural distress. Also note that relatively poorer states like Bihar and Orissa have much lower rates of suicides than the four most seriously affected.

Finally, distress doesn't translate automatically and immediately to suicides. It takes a lot more than distress for a person to commit suicide. Why it happens at all and why so in select parts of India is beyond the scope of this blog and my competence. Some clues can be found in the book - The Tipping Point by Malcom Gladwell – who points out the “locally contagious epidemic” nature of suicides once a few have occurred.

P Sainath and Dr Nagaraj also point out that there are limitations to the data. I agree that there could be severe deficiencies but it is not at all certain, a priori, as to what direction revised statistics would take.

The stories, data and analysis presented of suicides by farmers are at present far from convincing.

Sunday, December 2, 2007

Cats vs. Birds or People vs. People

The New York Times carries a story about cat lovers pitted against those trying to conserve birds, illustrating the trade-offs and the difficult choices that have to be made.