Curbing the invisible hand.

The name of Adam Smith generates intense respect for one and all in the academia. The father of economic theory who propounded the theories of free trade and the principle of the invisible hand. In The Wealth of Nations and other writings, Smith demonstrated that, in a free market, an individual pursuing his own self-interest tends to also promote the good of his community as a whole through a principle that he called “the invisible hand”. This principle has the basic conditions of free market and presence of rational individuals pursuing his own self-interest. But in a modern democratic society both of these conditions are compromised to some extent. The first condition of free market gets defeated in the various criss-cross of policies and permits inside and outside the country. And when we talk about rational individuals, not every one has an equal say in the affairs of economics. People who have more power, lead the way and when such beings choose not to act in a selfish manner, the equilibrium that we call economics can collapse.
The biggest and most powerful individual that we can imagine who controls lots of aspects of our life is the government that we choose. Yes, with its long list of bureaucrats and politicians we can imagine the sovereign government to be a pantagruelian monster which affects a significant portion of our life. And it is this monster that sometimes takes irrational decisions which can affect the state of economy and curb the invisible hand.
Take the recent case of increase in oil prices that is affecting the country and pulling down the much acclaimed growth story of India. The finance minister throws his hand in the air and says "great injustice" was being done to developing countries as a result of the volatility in oil prices.

While I would agree that oil prices are moving more north than expected, but there are a lot of things that the government can still do to check the impact of this volatility in oil prices. The prime thing being reduction in the cost of refining. If we compare the refining margins between the nationalized and private Indian refiners, we find a wide gap. The margins of private refiners is close to one and half times that of the government refiners like IOC, BPCL and HPCL. Shouldn't the government look into this anomaly? We are spending thousands of crores of taxpayers money into issuing oil bonds for the government owned oil companies. Can't we spend a few hundred crores into improving efficiency of these refineries.
Also, any refinery consumes approximately 6% of its total refining volume. When we say that the refining margin is low it means that the oil companies themselves consume a big chunk of the oil that they were supposed to supply to the office goer. This chunk has to be imported and this further increase the trade deficit. Both these instances leave a big hole in the fabric of economy. This hole needs to plugged by improving technology asap, or else the boat will sink.
Another options could be to also provide a level playing field to all the refiners in India by providing all of them equal subsidy irrespective of whether they are public or private. Private Indian refiners have one of the highest refining margins in the world. Therefore at a time when oil has become so costly why should we continue to waste so much of oil in refining it? Provide subsidy to all companies and let the best refiner win. The competition will ensure that the all refiners tighten their belt.
The government should raise the oil price at petrol pumps. This will trigger a effort among all citizens to save oil. Remember, by exhorting the virtues of austere living you cannot achieve results. It is only when you show them benefits can you make them do what you expect them to do.

Let common sense prevail !!

Corporate myopia.

I had written a post some time back citing issues with cost cutting. You can find the link here.
The same view find space in today's ToI. Here. (I think I should take credit for this article assuming that the reporter was inspired to write the article after taking inspiration from my post.)
Even though the article is more of an informative than opinionated but I believe that the author is trying to point out that these approaches to cost cutting do more harm than good. As it mentions 'Tissue paper rolls have disappeared from most gents toilets. Women colleagues say their toilets still have them, although the quality has dropped' , I wonder what kind of savings will a company make when it goes for such kind of cost cutting in a reckless manner. Even in our office the paper rolls were replaced by the heat convector sot of thing which was cheaper to operate, took some time to dry off your hand and only one person could use at a time. I wonder how would that bring about a saving given the capital cost incurred on buying the convector and the cost of electricity but it definitely created a problem for a lot of employees.
Every company stands on three pillars of strength. The first is capital, which comes in form of machinery and infrastructure. The second is customers who are the purchasers of the company's endeavor. The third and the most important one is the human enterprise that comes in form of employees. It is only when all the three are given equal importance that the stability of the company can be guaranteed. Lose one, lose all. And in IT and BPO companies, the employees ARE the machinery. (Can you expect a computer to work by itself?) So here we have two of the pillars combined to form one and people see the apathy of HR. In such a circumstance the only thing that will happen is people will start leaving the company and badmouthing the company.

G.O.D

Rediff has an interesting article on the idiosyncrasies of India Inc. Here.

A similar article had come some time back that tracked that a significant chunk of the scientist community had belief in God. Here.

There has been a lot of heated discussion between the theory of natural selection and intelligent design and both of these theory don't have any proof. So for the time being they are only hypothesis. After all no body has seen God till now and neither has somebody lived through ages to see natural selection in action and vouch for it. Therefore it is fruitless to talk about whether god exists or not. The only question I would like to put across is, does having faith in a power beyond imagination have any repercussions on the conduct of human being in general and scientists & business men in particular?
To answer this question let me take two scientists who are equal in every respect except for their belief in god. One is religious (test) and the other is an atheist (control). Will one's career graph be better over the other? GOD will definitely not come and tell the secrets of nature in the ears of our religious guy. And since both of our gentlemen are scientists we can assume that the have equal scientific temperament. The only thing that I see might differ in the life of the two gentlemen is of having patience at work! (Research is definitely more about brains but is also about the level of persistence on can show in the face of obstacles.) Under the trying situation when years of your work have left you with nothing but written crap, the hope of some supernatural being seeing you will give the hope to persist. The hope to take the one extra step. As one of my professor used to say 'People just give in when they are at the door step of success!'

The same thing I believe goes with the businessmen. Optimism and persistence are the key to survival in any cut throat business. And it is belief that a businessman reposes in God that gives him the strength to get up every morning.
But just having faith in God and doing nothing else will not make you successful. If that had been the case India would have been the most prosperous nation given the bounty of hermits that we have. The optimism that comes to a spiritual person cannot compensate for hard work. It can only act as an adjuvant.