It’s the economy, stupid!

Illustration: M Dinesh

ABOUT THE worst thing you can say about Vivek Dehejia’s and Rupa Subramanya’s delightful little book is it reminds you of Freakonomics. True, there are undoubted similarities, from the title to the manner in which economic principles are applied to everyday life. Nevertheless this book would possibly have been written regardless of a nomenclative predecessor.

It is a quintessentially Indian book and opens a window to India — what makes it tick, what makes it err, what makes it succeed, what makes it gamble, literally and metaphorically. What makes the book so remarkable is that besides being a quirky introduction to India, it also doubles as a quirky introduction to economic theory. In the best traditions of reading, Indianomix is just never dull.

An example would be illustrative. In a chapter called ‘The Human Factor’, the authors study the Indian — or human, really — propensity for risktaking, whether in buying lottery tickets or going to a Las Vegas casino or crossing the railway tracks in Mumbai. The third would seem extremely foolish. After all, as the authors point out, “Every year, 15,000 people die on railway tracks throughout India, of which 40 percent, or about 6,000 deaths, takes place in Mumbai alone, on the suburban railway network. This means that on an average, about 15 people a day are killed in Mumbai trying to cross the tracks.”

INDIANOMIX  Vivek Dehejia and Rupa Subramanya Random House 248 pp; Rs 399
Vivek Dehejia and Rupa Subramanya
Random House
248 pp; Rs 399

Dehejia and Subramanya break up and analyse this problem in the context of economic choices, opportunity costs and cost-benefit calculations. Could the authorities build a plethora of foot over-bridges (FOBs) at very short distances? Would this create an infrastructure oversupply — even if it would possibly save lives — and mean “resources [are] taken away from other public goods, such as schools, hospitals, roads, flyovers, and so on”.

Could the person crossing the tracks avoid risk-taking behaviour and instead walk the two miles or more to the nearest FOB or legal crossing? For a daily wager, “it might mean the difference between eating that day or going hungry”. As such he reckons “it’s better to run a small risk of being killed for certain reward of a day’s earnings”. To his mind, then, crossing railway tracks illegally is a perfectly rational action.

To the authors, the daily wager in their archetypal Mumbai story is guilty of “cognitive biases and failures all humans are prone to, of which we ourselves are unaware, and [that] can affect our perceptions and actions at a very deep level”. They link this to the War of 1962 and Jawaharlal Nehru “filtering out warning signals on the eve of war with China”. Later, Nehru was to say, “We were living in an artificial atmosphere of our own creation.” Does the daily wager on that Mumbai rail track experience the very sentiment as he realises the train is going to be too quick for him? It’s a piquant thought.

Dehejia and Subramanya discuss much else about India — why taxi drivers refuse passengers so often; the role of chance in determining the course of a society so sold on fatalism (“There’s the spectacular randomness of being at the right place at the right time, like at a particular Greek restaurant in Cambridge, England, on a particular day in 1965”); whether India’s malnutrition burden is exaggerated just as its HIV-AIDS projections were overstated in the mid-1990s; the US$ 1 trillion worth of gold owned by Indian households, and if solar and lunar eclipses have an impact on investment decisions.

Each of those tells a story and provokes a theory. To say more would be to say too much.

How does one categorise this book? At one level it’s popular economics but that description would be limiting. It’s a snapshot of India (or of several Indias) but that is hardly the name of a genre of literature. In the end, this book is about two students of economics having fun. Read it, so will you.

Ashok Malik is Contributing Editor, Tehelka. 
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Contributing Editor

Ashok Malik has been a journalist for 20 years and is contributing editor at Tehelka. He focuses on Indian domestic politics, foreign/trade policy, and their increasing interplay. In 2011, Ashok co-authored a paper: India’s New World: Civil Society in the Making of Foreign Policy, published by the Lowy Institute for International Policy, Sydney. It looked at the influence of Indian business, news media and overseas communities on the Ministry of External Affairs in New Delhi. In 2012, Ashok’s book, India: Spirit of Enterprise (Roli Books) was published. It encapsulates the story of the growth of India’s leading private sector industries since 1991, and their role in the Indian economy.