Tag Archives: New York Times

Saif Ali Khan Is Right About Genetics And Nepotism

When I worked with a fourth-rate magazine in a run-down building in South Delhi, an “editor” asked me why I brought up “adoption studies” in an article on income inequality. I said intelligence and conscientiousness are the biggest predictors of success. These traits are highly heritable. That dunderhead said he couldn’t see what bearing “adoption studies” can have on all this.  He just couldn’t see the relationship. For the life of me, I still can’t figure out how someone can fail to understand such an obvious argument. I was young, and didn’t suffer fools gladly, as I do now. I asked him to get brains. He drove me out. I said, “You’re not a man.”, and he said, “But see what I just did.”

Idiot.

I’m sure the lame toddler who once barged into office crying “Shiphony Didi”, with his funny footwear and computer sketches will soon prove me right. That was his son.

Twin adoption studies study identical and fraternal twins separated at birth, and raised in separate homes. By adulthood, identical twins turn out to be strikingly similar, but fraternal twins aren’t so similar. Adopted children have more in common with their biological parents than with the parents who raised them. They’ve done this repeatedly over many decades, with the same results. It’s undeniable genes are the biggest factor in play here. On fundamentals, there is virtually no disagreement among researchers who professionally review such literature.   Continue reading

The Kerala Myth

kerala-backwaters-thumbnailThe discussions about poverty and prosperity in India almost never mention IQ.  But, IQ matters more than almost anything.  

Manu Joseph in the New York Times:

Much of Kerala’s wealth comes not from within, but from a work force spread across the country and the rest of the world, chiefly in Middle Eastern nations. But the fact is that, because Kerala has invested in education and health care, it has ensured that a large proportion of its population, and not just its elite, could pounce on opportunities wherever they sprang up.

I do not trust the statistical data collected by Indian researchers. I do not respect the tendency to base one’s opinions on the statistics collected by government bodies in third world countries. But, let me accept these figures for the sake of an argument.

Now, Think. In 1951, Kerala had a literacy rate of 47% when the national average was only 18%. Many economists have argued that Kerala has not made spectacular progress after the Independence. True. Many states like Himachal Pradesh have radically improved the literacy rate. Kerala’s performance is by no means extraordinary. But, this is not the argument I wish to focus on here. Consider the argument that the remittances from abroad do not fully explain the high income level and development indicators in Kerala.  But, if Kerala’s literacy rate was nearly 3 times of that of the national average, and nearly twice of that of the second most literate state, Maharashtra, why is it so hard to assume that Malayalis have, on average, higher intelligence? Though no one has really done a study, I will be very surprised if this is not true. Isn’t it true that for this reason alone, we should expect Kerala to be far more prosperous and literate than the other parts of the country? Intelligence and other positive traits are correlated. So, isn’t it possible that Kerala would be far ahead of other states in health indicators too?

Remember. My point, still, is NoT that Keralites have a higher average intelligence. My question is: Why did such an obvious possibility escape the countless researchers who had praised or denounced the Kerala model? And, if all this is true, what needs explanation is not Kerala’s success in improving its people’s lot, but its failure. 

Ignoring IQ is like ignoring the elephant in the room. From Lynn’s “IQ and the Wealth of Nations”:

“Per capita income has been positively correlated with national IQs since 1820. The correlation between national IQs and per capita income increases from .540 (the average of the Pearson and Spearman correlations) in 1820 to .720 in 1997 to 1998 (the average of six Pearson correlations). Thus, national IQs explain 29 percent of the variance in per capita income in 1820 and 52 percent of the variance in per capita income in 1997-1998. The average of six Spearman correlations in 1997 to 98 rises to .833 and the explained part of variation rises to 69 percent. We conclude that differences in national intelligence provide the most powerful and fundamental explanation for the gap between rich and poor countries.”

The Writer’s Hell

0406sharmaSUB-articleLarge“SEVEN years into writing a novel, I started to lose my mind. My thirty-seventh birthday had just come and gone, the end of 2008 was approaching, and I was constantly aware of how little I had managed to accomplish. I would sit at my desk at 2 in the morning, unable to sleep, and drink pot after pot of tea and try to write. The panic attacks came then. I would be staring at the screen, examining a paragraph that I had already rewritten 170 times. Suddenly the screen would start to ripple, as if I were peering through water, and I would feel a pain like a punch in the chest. Months passed this way. My chest felt constantly bruised. One December morning, the crisis finally came. I had lain down on my living room sofa and found I could not get up. The idea of another year ending with the book not done overwhelmed me.”

I read this in a New York Times article of Akhil Sharma. I find it hard to write over long periods of time, but only when I write against a deadline—whether self-imposed or not. I have never had a panic attack. I have never experienced sleeplessness. I was never really depressed, except for a short phase in my early 20s.

But, I wonder whether this has something to do with age. Male writers find it hard to write after an age. Testosterone levels start declining from the age of 30. Men do not have the strong urge to be creative, or take risks after the birth of the first child—even though they do not know why something is gone, and gone forever. It is evolutionary psychology that convinced me that I should finish my novel before I reach my early 30s— because it is now or never.  Continue reading

Clamor For Protectionism

We have seen the cross of fixed exchange rates in fiat money. A few years back, Indian exporters were taking a hit as the Reserve Bank of India (RBI) didn’t allow Indian Rupee to freely fluctuate against other currencies. The Rupee, which was overvalued, appreciated considerably against the Dollar. This happened not just in India. As Henry Hazlitt noted in “Will Dollars Save the World?”, this was the policy followed by most European countries. Mostly Governments overvalued their currency, which led to a surplus of the overvalued currency and a shortage of the undervalued currency. This is an illustration of the often misunderstood “Gresham’s Law”. Gresham’s law states that “artificially overvalued money drives out of circulation artificially undervalued money”.(The definition that bad money drives out good is misleading, to say the least) The end result is commonly known as a “Dollar shortage”, accompanied with cries for dollar aid and rationing of imports. This policy has changed in course of time. Some countries follow the exact opposite policy-undervaluing their currency.

Paul Krugman, in his New York Times column, has pointed our attention towards China, which has pegged its currency at about 6.8 Yuan to the Dollar. China has a currency peg for a long time. This, Krugman says, is predatory leaving the Chinese manufacturers with a large cost advantage over its rivals, leading to huge trade surpluses. Krugman calls for protectionism to deal with the Chinese policy. The Yuan is undervalued, which makes price of exports low in terms of dollar. Foreigners find imports less expensive and exports more expensive. The Yuan, however, floats against other currencies.

It is important to see why it happens. Imagine that a good sells at 35 Yuan in China when the free market rate for Yuan is 3.5 Yuan. On a free market, that good would cost 10 Dollars. But, as a result of controls, one has to pay only 5 dollars. This makes exports from China cheaper for American consumers. The price is lowered by nearly 50%. So, it should be obvious that the Americans would want to import more from China in such a situation. In the same way, a good that costs $10 in the United States has a free market price of 35 Yuan. But, as a result of controls, the Chinese will have to pay 68 Dollars. That’s an increase of nearly 100%. As a result the Chinese would want to import less from the United States. It is almost as if in China, an import duty of around 100% is levied on American products. Who would want to buy American products at such a high price? This helps the exporting community in China at the expense of Chinese consumers and certain American producers.

Sounds economics tells us that if the Chinese government allows Yuan to appreciate, it would put a break on the inflationary boom. It would contain domestic inflation in China. It would also bring down the pressure on the US government to erect protectionist barriers. It is in the self interest of China,  to change its policies for good. Contrary to what Krugman wrote, China’s policies don’t pose a threat to the world. China is not “stealing” other people’s jobs. This is not to say that China’s currency policy is good. It unfairly punishes Chinese consumers, to whom the prices of American products appear high. Probably, things will change in the near future. Some economists, including Surjit Bhalla, had predicted that China’s exchange rate will appreciate significantly starting 2010. Bhalla expects a first year appreciation to about 6 Yuan per dollar from the present 6.8 level.

Krugman is of the opinion that China doesn’t act like other major economies in its currency policy. This is a half truth. It is true that most major currencies float against each other. But, most countries peg their currency against some major currencies. Moreover, Yuan floats against many other currencies, which has caused both appreciation and depreciation in the recent past. It should also be said that Yuan is stronger against the dollar than when China put a rein on its appreciation. Is Krugman justified in his claim that Chinese policy causes unemployment in the United States? It is true that some people in the US will lose jobs as of a slackening in exports, but a reduction in overall employment will be brought about only by coercive labor policy. Some producers might make losses, but it will be largely offset by the gains of consumers, which they will save or spend.

Donald Boudreaux has written a wonderful piece on “Freeman”, attacking the protectionist position. Protectionists, he says, abhor the fact that Americans are importing more from China. The policies of foreign countries make them uncomfortable. He rightly points out that the low priced Yuan will make Chinese products cheaper to American consumers. This doesn’t help the Chinese and harm Americans. Quite the contrary, in fact! It harms the Chinese economy, and helps the United States and other countries which trade with China. Protectionism would only prevent goods from being produced in a cost-effective manner. The theory of comparative advantage tells us that free trade would lead to resources being used in the most efficient way. Boudreaux illustrates the principle with a simple example. His elementary school used to sell tickets in a fund raising fair. These tickets could be exchanged for various items students want to purchase. What if the school had undervalued the tickets? Would it help the school? Obviously not! It would have helped the students at the expense of the school. Students would be able to buy more items at a lower price. So, things should be obvious by now.

Krugman doesn’t see anything necessarily wrong with the policy other than that the Chinese Government has fixed an unreasonably rate. He is wrong there too. The issue has become too contentious that there are more than two sides to it. One side believes in Government’s supreme wisdom to set the exchange rate. The other sides, mostly monetarists call for a free market in exchange rates. “Why should the Government fix the price of gold?” they ask. While freely fluctuating currencies are better than fixed exchange rates in fiat money, to call for a free market as a final solution is absurd. Advocates of a gold standard rightly understand that gold lies in the vault of the central bank, and to denationalize it, the Government should set a value so that it is possible to exchange it, one for one, for the currency claims on gold.

Exchange rates are, ideally, not to be arbitrarily set by the government, or to be left to the market to decide. Each currency should be strictly defined in terms of gold, and fixed permanently that it is interchangeable and redeemable at that weight. When done so, each and every currency would be anchored to each other at a fixed exchange rate, that seasonal fluctuations wouldn’t wreak havoc on the export or import communities. The maintenance of fluctuating exchange rates and protectionism would only reduce the incentives to innovate and hence impede it.