Two paradoxes — that of value and choice — in economic and psychological decision-making are quite different yet similar. At the intersection of economics and psychology — called behavioral economics — lie these paradoxes.
The ‘paradox of value’ and the ‘paradox of choice’ came about decades apart in economic and sociological history. While the paradox of value derives from an observation made by Adam Smith in his book The Wealth of Nations in 1776, the paradox of choice comes from Barry Schwartz’s book by the same name — The Paradox of Choice: Why More Is Less — in 2004.
The paradox of choice means that freedom to choose can sometimes lead to frustration and anxiety among those who face the task of making a decision. Be it those high school graduates choosing the college…
The article unveils the missing middle phenomenon or the lack of medium-sized enterprises in the industrial sector of developing economies.
Industries are said to be the backbone of an economy. The growth trajectory of any economy starts with agriculture, leading to industrial development and, finally, the emergence of a service sector. Industries, thus, provide a forward and a backward linkage to services and agriculture, respectively.
The history of industrialization suggests that technological advancements have facilitated employment opportunities for the masses. This renewal of labor demand in emerging industries has engineered the process of urbanization. However, there is a gap between the concentration of industries, compared by firm sizes, in the developed and developing economies. …
When do the free markets cease to be self-correcting? The article charts the evolution of economic thought, from traditional laissez-faire to modern-day free market economies.
A long time ago, the forefathers of economics set the stage for what came to be known as the free market economy. It all started with Adam Smith’s classical work, titled An Inquiry into the Nature and Causes of the Wealth of Nations, that laid the foundation of ideas of freedom and efficiency. This eighteenth-century classic revolutionized the way we look at economies today and inspired the economics textbooks taught at universities today.
Free market economics, driven by the infamous invisible hand, promotes production processes within an economy without any government intervention. The demand of goods by consumers and supply…
This explainer expands on the labor demand and supply in a monopsonistic labor market, exploring the effect of collective bargaining by trade unions on such a market structure.
Remember playing the board game — monopoly — with your friends or family on that long weekend afternoon. Everyone has had such an experience, at some point in their lives, most likely during the pandemic-induced lockdown. Some played to collect more and more properties, reach Broadwalk or Mayfair — the most expensive properties (in USA and UK version, respectively) on the board, and build houses and hotels along the squared path. Others discovered the art of managing assets, rents, mortgages, and loans, to eventually emerge as a monopolist.
Monopsony lies on the other extreme of the spectrum of distribution of…
While life expectancy in the United States fell from 2015 to 2017, we could observe a similar trend in the post-pandemic world but due to distinct reasons.
Despite a robust healthcare system, life expectancy in the United States is low compared to other high-income developed countries. Some of the reasons for such a trend are obesity, excessive use of drugs, alcohol consumption, and suicides.
According to World Development Indicators, reported by the World Bank Group, in 2018, the life expectancy at birth was 78.54 years in the United States, whereas 78.89 years in the North American region and an average of 80.66 years within high-income countries. Using the same database, the life expectancy at birth for males was 76.1 years, and for females was 81.1 years in…
In 2001, Shoshana Zuboff coined the term ‘surveillance capitalism’ for what once was a panacea in the wake of the dot-com bust, which now has emerged as a form of capitalistic accumulation of behavioral data.
As history repeats itself, capitalism reinvents itself in different shapes and forms. Capitalism, as defined by Marx, is a socio-economic relation between the proletariat and the bourgeoisie. It was not only the exchange of commodities but the advancement of capital to generate profits.
Although Marx believed that capitalism, due to its internal contradiction, will stagnate and eventually be replaced by socialism, history has witnessed capitalism reinvent itself over and over again. In its present form, capitalism has yet survived on our behavioral data as its capital and the tech giants, Google, Facebook, Microsoft, Amazon, Apple, to name a few, as…
Human capital accumulation is equally essential to the production process in an economy, as is physical capital formation. The article outlines the evolution of economic growth theory — from homogeneous labor to human capital.
For long, economic growth theories and models centered on physical capital accumulation, ignoring human capital and its contribution to the production process.
Human capital formation is an essential factor of not only economic growth but development. Not to forget, the Asian miracle of economic transformation of nations like Japan, South Korea, Taiwan, and China relied on human capital formation.
The neoclassical growth theory, pioneered by Solow Model (1956), assumed competitive markets and excluded externalities. The economic value of factors of production — the marginal product — equaled their social value. Although it included physical capital, labor remained a homogenous commodity…
A Universal and Unconditional Basic Income is a disincentive to employment and financial sovereignty that ought to do more harm than good in the long run.
The idea of a Universal Basic Income is to provide unconditional universal cash transfer without having to fulfill any qualifications. It is an income for all, irrespective of one’s income, education, or work. This idea has entered the public discourse, now and then, due to rising inequalities between the developed and developing nations.
The proposal resembles Milton Friedman’s idea of negative income taxation, according to which citizens earning below a threshold receive a cash transfer instead of paying taxes. The Universal Basic Income contrast with this idea as it does not exclude anyone from its ambit.
An unconditional income to…
Sparing the technical details of what happened, the article draws lessons from the GameStop frenzy and comments on the growing financialization of the world economy and its implications on the state of present-day capitalism.
And it happened yet again.
When a group of Reddit-obsessed amateurs short-squeezed hedge funds and billionaire investors, an investing company, Robinhood conveniently restricted stock purchases. The firm, though, in doing so, does not stand up to its name. Robinhood, the heroic outlaw in those long-lost folktales, used to rob the rich and provide for the poor.
However, present-day Robinhood ensures prosperity and power remain concentrated in the hands of wealthy investors and funds. When smaller investors use the same techniques, these methods become inappropriate (let’s say, inadvertent for the market-makers). On the face of it, capitalists have monopolized finance leading…
A theory to explain causal pathways of anticipated impact after initiating an intervention, used in monitoring and evaluation methods, in development economics.
To conduct experimentation in development economics, practitioners use the method of monitoring and evaluation. These processes involve administering interventions to a target sample to measure impact after a pre-determined period. The theory of change is a tool used to define the research hypothesis for experimental or non-experimental studies. It is a mechanism that would cause the initial conditions to change.
While correlation is a relationship between the initial conditions and outcomes, causation — the theory of change — specifies ‘how’ and ‘why’ these interventions lead to impact. It is the initial conceptualization, a roadmap, or a blueprint for development research.
