The Arthashastri

  The ‘Dharma Sankat’ of Petrol Prices Co-authored by: Gautam Sodani & Varish Seth Credit: OfferGrid (Pinterest) Prime Minister Narendra Modi, on 17th February 2021, said, “India imports more than 85% of its oil requirements and the recent price hike is due to the negligence of previous governments towards reducing India’s import dependence in the energy sector.” He obliquely pointed that this price hike is to curb the domestic demand of petrol and diesel (law of demand), which in turn will reduce our dependence on imports, and as a result we will look at domestic production of alternative sources of energy.  It is a fascinating ‘economic argument’ and a ‘vital step’ to make India Atmanirbhar in the energy sector, isn’t it? However, the Prime Minister seems to be totally ignorant of another basic economic concept called the ‘price elasticity of demand’ – which essentially renders his entire argument to be inherently flawed. Petrol and diesel are primary inputs for essentia...

  Rationality of an Irrational Consumer With rapid globalization and technological advancement in recent years, consumers have become lazy and more occupied.   Does this affect consumer rationality? The mainstream field of economics emanated and evolved rapidly when man realized there is scarcity of resources. And that’s why the archetypal economic theory of consumer says that ‘people should relish choices and make a rational decision out of their constrained budget and preferences they hold’. But sometimes making a rational choice could be exhausting such that anyone forced to make a number of decisions in a row is likely to appear as lazy and having too many choices can leave a consumer ending without a rational conclusion. That’s why ‘rationality’ of a consumer is often questioned in contemporary economics. Having choices or alternatives is good. It makes the market more competitive and paves the way for gains from trade. That's the view of neoclassical consumer th...

Dark Side of Vaccine Development COVID-19 pandemic has already exploited economic structures and punctured health mechanisms of many countries all over the globe. But now the developed world is exploiting the pandemic itself. And these are not just the private players and companies, but governments too are looking to take advantage of this global crisis and make money out of it. As we all await an effective vaccine that many hopes will kick-start the world’s return to normalcy, geopolitics is increasingly spilling over into the vaccine race, not just with its development but also the distributional aspect, and thus complicating the matters further. This developmental race (for COVID-19) has brought   about the  ‘politicization of vaccine’. When a COVID-19 vaccine will become available, powerful leaders around the world are all likely to resort to shortsighted ‘my country first’ approaches to manage its production and distribution. In absence of an effective internation...

Consumer Behavior: Accumulated Demand and Recovery of Losses Let’s Recap: “Economics is a social science that deals with allocation of resources and concern with production, distribution, and consumption of goods and services.” The utility of a good determines its demand and productivity of labor and capital determine its supply, and subsequently, equilibrium is determined in the economy. But, in this micro-economic equilibrium setup, we often disregard one important component of demand and that is ‘taste’. Consumer preferences are defined as the subject of their taste of various bundles of goods. Tastes and preferences of consumers are very important in micro-economic analysis , especially in the short-run. Why not in the long-run? Because of their volatility and erratic nature. ‘Tastes and Preference’ often impact demand and supply in the short run and especially when there are temporary supply disruptions such that the good becomes scarce in a particular market area....