Behavioural economics and government interventions

I tend to subscibe to a 'libertarian' outlook in life i.e. I believe that both governmental and non-govermental agencies (such as your friendly neighbourhood gangs like Bajrang Dal etc) should butt out of people's lives, socially but also economically. That is to say, I abhor the license raj system that is the norm in India. But at the same time, I am not convinced (even with long discussions with my dad) that a completely free market system is the best way either. Some things like providing a basic welfare society (making sure everyone has access to food, shelter and health care) and ensuring that education is available to everyone is, IMHO, in the sphere of the government. I just read an article in the New York Times about Behavioural Economics which seemed to make a lot of sense. The main thrust of the article was that people don't always make rational decisions (economic or otherwise) and therefore understanding the irrational behaviour is important while deciding if 'market forces' should be allowed free reign or some intervention is needed. From the article

"And yet most economic models and the public policies they inspire still assume that human beings behave like Mr. Spock of “Star Trek.” According to the models, people are guided in their decision making by a consistently rational and highly reliable sense of their own best interest."

I think this is a very interesting point. The authors goes on to discuss the new Pension Laws in the US, whereby an employer can automatically enroll all his/her employees into a 401K plan. The choice for person is not lost, he/she can choose to opt-out, but since it is human tendency to remain in status quo, once the money starts going directly into your 401K, on average people would not tend to opt-out. This law was brought in because of the absymal savings rate of Americans (it's actually negative i.e. they consume more than they earn) to encourage people to start saving for their retirement. Now if we compare the scene in India, where all salaried employees are forced to contribute to the Provident Fund, we see 2 glaring differences - (1) you cannot opt-out - I think this is important, if someone needs to use more currently due to whatever personal problems, he/she should be able to defer contributing to the PF till they are in a position to do so. (2) You have no choice of providers or of rates of return. In a typical 401K (based on the experience that I have had) you find offerings from several mutual funds. which allows you the freedom to structure your investment in the manner which you want. A caveat - some companies do have 401Ks which have only their stock for purchase, Enron was one such company and when the company collapsed, so did the savings for all the employees but this is a rare case. In fact most 401K plans suffer from the opposite problem that of too much choice i.e. too many options between mutual funds, bonds etc. The new law has tackled the 'decision paralysis' behavioural problem also by

"So the pension law instructed the Department of Labor to issue guidance to employers on how to craft a standard investment option for employees who don’t want to choose among various funds. Offering automatic investment in a balanced, diversified fund ameliorates decision paralysis and, in the bargain, advances the public policy goal of making a financially-secure retirement attainable for workers."

Food for thought, indeed.

Happy Valentine's Day

It's Feb 14, Valentine's Day and I am not home, sob! This seems a regular pattern with us, I think we have spent only 1 Valentine's Day together in our 5 years of dating & marriage. Oh well, the next year will be better (I keep hoping!) ...

In the latest Valentine news, here is an article of how romantic love has very similar effects on the brain as taking cocaine .... hmmm, I feel better now about my seemingly boring life, I have been on a cocaine high all these years! ;) And isn't it soooo interesting that they prove that love and lust activate very different parts of the brain. The last part about the pain we feel when love doesn't work out was poignant, though I never had a relationship go sour on me, a few bad crushes (that I imagined were love) were devastating enough.

The next 'love' based article is about scientists in love or the two-body problem which is a contributing factor to the poor representation of women in the Physical sciences. Of course women scientists face the two-body problem even if the spouse is not in academia but I can imagine it would be much harder to find faculty positions in the same city especially if it is a small city. In fact, all the young (under 35) married female scientists that I know (about 15) have/used to have commuter marriages. I guess, the real change has come in the male attitudes. Yay for good husbands (mine included!).

And finally we come to the nuisance news of Shiv Sena/Bajrang Dal et al protesting for the umpteenth time the desecration of Hindu culture. I am so tired of these moralizing do-gooders, most of who don't have an arm's length knowledge of culture, leave alone Hindu culture. This yearly excercise of forcing people to conform to their norms of 'good' behaviour is just a nauseating way to show that they still have muscle-power. So what if they were voted out (or in the case of Bajrang Dal, never voted in), they still have the power to harass you on the streets, in cafes and any public places you may want to visit. That they dare to do so, year after year, in India's uber-metropolis Bombay is nothing but failure to police effectively and a muddle-headed idea of what is and what isn't the government's business.

Once again - a new year 2007

Of course, since it is the middle of the second month of this year, it can hardly be called a new year. But I am still getting used to the year and it feels new enough to me. Sort of like how a dress worn only twice feels new to a kid who doesn't have too many clothes to begin with!

It feels weird reading my own blog and realising that almost a year has gone by with me writing a word ... 2006 actually proved far worse than 2005 ever was - my father who fought so bravely against his diagnosis 'only 6 months' finally lost to pancreatic cancer on April 10th. Luckily for me, I had gone home to be with him in time. Those 19 days were the most bittersweet days of my life, hoping against hope and praying when I don't even believe! As my father got worse, it seemed like Death was mocking us; for every step forward we took, it dragged us two steps backward. Cancer is such a terrible disease, eating you from the inside out, changing my father from a strong, vital, thinking person to a shadow, a shell of his former self. When Death came, his face seemed calm, handsome even (he had been so handsome before the big C) and so much more at peace. That death was a relief to my father underlines the suffering caused by the disease, my father who LOVED life and living.

The days & months following this were filled with undescribable sorrow, my sister's illness took a turn for worse. She had to undergo surgery. While the greater family, aunts and uncles and cousins, rallied around and helped out, outsiders have to go home after all. The essential family unit, unlike the story-book families, did not unite under grief. We vented our pain & frustuations at each other and thus caused ourselves more pain. Even after all this time, we are only slowing making our peace with each other.

I guess it is ironic that this blog is titled 'Surviving Life' since most of last year I felt that I was barely keeping my head above the water, that I was one misstep away from coming to the end .... so I guess, I survived. I have come to terms with all that has happened and have come to realise that I MUST work to be happy. From September 2004 to September 2006 I barely did any astrophysics research - most of the time I was a Teaching Assisant and did just enough to get by. But between May & Sept 2006, I did nothing at all, just vegated at home. That pushed me deeper into a spiral of depression, where I would remained had I not started working. Unlike most people my work is my passion and you must follow your passion.

So then, this is the year that I graduate. I will be writing more regularly and hope to have lots to say, after all, I am extremely opinionated! Please keep reading! :)