Monday, July 28, 2014

Beyond CSAT - aim to select the optimum group of civil servants and not the "best" individuals

I watched a discussion on Lok Sabha Tv for an hour about the aptitude test of UPSC which has been in the news recently - its need and its fairness. Neither the discussion nor anything I have seen in the paper talks about the fact that if there is a single test, any single outcome may seem unfair even if the test is not.

As the ratio of the number of candidates to the number of people selected increases to the levels in India, a thought experiment can tell us that if the test were repeated, examiners interchanged, the list of selected candidates can vary substantially.

A very large number of candidates not selected could have done better than the selected candidates on another day or in another mental state.

The scenario becomes far more complex if one tries to think of what would be an excellent group of candidates for the civil service. After all no one would select a soccer team by any method where all the selected players  could turn out to be goal keepers!

The concern about the mix of the outcome is very real. The discussion had references to states  complaining about the number of candidates selected from their state because of the changes in the exam system.

Suppose there was a  formula for the optimum selection of the group with factors like
  • Test result
    • overall
    • individual subject
  • hetergeneity
    • male/female
    • economic background
    • mother tongue
    • place of residence
    • social background
  • Affirmative action 
    • Replacement of reservations
  • New blood
    • people whose parents/relations have not been in any government service
Factors to be considered could be specified. The multiple objective functions could be specified. The number of objectives could be quite large. It will make no difference to the implementation of the algorithm. The source code of the algorithm could be published.

These could be tested against the past examinations to create the lists of who would have been selected had this process been in use.

I am certain if the outcome is fair to all stakeholders, the concern over unfairness of the exam and bias of examiners will decrease. But more significantly, we can have a group of administrators in whom the society as a whole has confidence and which as a group is likely to deliver better outcomes for the governance of the country.

Sunday, July 27, 2014

Private insurance companies are cheating more than LIC

While I would like to be trusted, I would also like to be able to trust. Experience appears to be that while socialism makes people behave badly, capitalism seems to do that to companies!

Will the increase in foreign equity result in better behaviour by the insurance companies or greater pressure to get results regardless of the means?

Moral hazards  are an integral part of the insurance industry. I look forward to the day when software robots are the insurance agents and not commission based humans!

Still no access to mother's pension - bureaucracy and rules supreme

There must be a reason for results like "The more people are exposed to socialism, the worse they behave".

I was thinking of my own experiences, including not being successful in getting access to the full pension of my disabled mother.  I can easily imagine persisting and finding a "solution"(more like a work-around) to this problem if I had monetary problems.

The complaint to RBI resulted in a response -  contact the bank or  its head office. The complaint to the bank resulted in a response with the mail being forwarded to another department. And nothing after that.

The complaint to the Central Pension Accounts Office resulted in a reply  asking for some details and silence after that.

I am certain that had I persisted, the operational staff at the bank, in addition to being sympathetic, would have offered a way out. I am also certain that the way out would have required lying at the very least.

Why do societies which have welfare of the people as the primary goal create rules which assume that the person seeking help cannot be trusted :(

Monday, July 14, 2014

Accidents and Compensation - Losing the moral issues

I recall seeing a show as a young boy which deeply moved me.  A person had just been acquitted of causing a death in an accident. The accident resulted from a medical problem(blackout?) the car driver had but without being aware of it. However, this person is not able to come to terms with his own role and commits suicide.

This story is refreshed in my mind whenever I read news of accidents and compensation. It seems as if the moral culpability seems to be getting lost in the financial compensation conflict. I doubt if higher compensation causes the drivers to be more cautious - e.g. "people in that car may be very well off so I had better be careful".

The compensation was awarded now for an accident four years ago. So, wouldn't it be better if there was a very fast, unambiguous payment to the victims without any need for courts or tribunals and without having to determine the status and potential worth of the victims in society.

Each individual should have his or her own life/accident insurance  to ensure that his/her family is not financially hurt by an accident, whether in traffic or roof falling down or gas cylinder exploding or ...

There has to be a better way to minimize the number of accidents and ensure that the victims do not suffer or have to fight for their rights.

Interesting perspective about medical malpractice suits in the US. It seems to reflect that the malpractice suits are not a financial burden but rather a significant cost to the society in non-monetary terms.

But medical malpractice is a business driven almost purely by profit through tragedy. Decisions often hinge on the theatrical performance of two competing teams to an audience selected specifically for their lack of knowledge regarding the issue they're judging. There has to be a better way.
A change in the attitude of the doctors may have reduced the malpractice suits. E.g. the following which still holds for India
It seems hard to believe now that there was a time when medicine was such a paternalistic profession that we were never expected to consult with a patient about any treatment plan or procedure (I'm the doctor, you're the patient was the expected answer to any question). It was once considered unethical even to inform a patient of a bad prognosis (we felt it would be detrimental to their health if they knew they were dying).
Who should compensate

From the news report:
The accident occurred because the taxi was being driven at a high speed and the Canter driver suddenly applied brakes in the middle of the road.
 ... Gurdev and Uday Shankar to pay the family a compensation of Rs 1.19 crore, including costs. However, in the interest of justice, the court ordered that Bharti Axa General Insurance Company Limited, the insurer of the Canter, would make the payment of Reena’s share of Rs 60 lakh and then recover it from the two accused.
I would have guessed that the taxi was unambiguously at fault for not keeping a safe distance - no matter what the driver in front does. Canter driver may be fined and penalised if the brake lights were not functioning.

Justice? Wasn't the taxi insured? Isn't it a legal requirement to have 3rd party insurance? Who monitors it?

Sunday, July 13, 2014

Value for Society versus Economic Value

As I read about the smallest banking trojan in circulation, I was pleased that I will soon be converting one of our neighbours to Linux. I managed to fix her Windows problem. I also installed the open source Clam anti-virus after removing a commercial product which kept scaring and nagging her to pay for renewal.

However, she said that she wanted me to install Linux on her free partition as I had mentioned that I have never needed to use an anti-virus software!

The entire anti-virus industry would not have appeared had it not been for Windows. Obviously a loss to the economy, but would it have been a loss to the society?

Since I do not have to make effort to make money, I can spend my time learning. Thanks to open source, I can, without having to spend anything over and above my internet connection, learn OpenStack, Hadoop, Zotonic(an Erlang based Web framework), and whatever my mind decides is exciting or useful to know this week or month! My experimentation does not add any value to the economy. I like to think that the open source universe does add value to the society as it makes it possible for anyone to learn.

There is little doubt that windows has created a lot of economic wealth. I am not so sure it would be even a fraction of the social wealth created by Linux and open source software. That is, if we could find a way to measure social wealth! E.g. see or read "The Clothesline Paradox" though I would like to think that we can find a way to measure wealth without resorting to money.

Saturday, July 12, 2014

Irony of paying less tax for making money from money by doing nothing

As I get older, I would have expected to become more conservative. Instead, I am more likely to be upset by Arun Jaitley promises more income tax relief if economy improves and discussions on tv where it is taken for granted that India has a high rate of taxation, which needs to be brought down. Rare left wing economists talking about the low tax to gdp ratio are brushed aside.

I find it ironic that I pay less tax now thanks to a major part of my earnings coming from divindends in mutual funds than I did when I worked 9 to 5. What is  so special about earning money from money?

In fact, the government takes a 20+% on dividends of non-equity funds, which benefits the richer people far more than people like me.

I suppose, the motivation is supposed to be an incentive for people to invest, but what will I or any person with surplus money do? Can't be kept under a mattress. People like me may put it in the bank instead but the motivation for investing in equity funds is hardly the low tax rate. It is the gambling instinct of riding a bull run :)

No one starts a factory in the hope of paying low tax on profits! Yes, the richer people can move the money to other countries. I would say let them. How much can Cayman Islands and other tax havens consume?

Since I was not going to get a government pension, it was obvious that I needed to save and not spend. However, if the government taxed me more but had a negative income tax for my old age, would it have mattered?

We need to worry about what will happen as we can't stop the following from happening - "Hi, I’m a tablet. I’ll be your waiter tonight".

As a consumer(in US), I do not want to pay the waiter 15% or more tip. I do not want to feel guilty about not paying the tip because the person is probably being paid a minimum wage. As a consumer in India, I am immune to the treatment of such workers in Udipi-like joints. I have learnt to close our eyes as the alternate would make me far too aware of my own incompetence and helplessness and make it impossible to eat out (or do anything) at inexpensive places. Even in the US, I wonder what are the earnings of fast food joint workers but they were supposed to be students working part time to supplement their pocket money.

We need to re-think the importance of money - investments increasingly no longer imply wealth for the society but only for some individuals in the society.

I recall reading a comment. There will be no shortage of things to do for humans in future. The issue is whether they will be paid for it. No one can deny the importance of raising children and the effort involved in it. Today, does the society pay a mother (or father) who has chosen to stay at home for this task beyond the maternity leave?

UPDATE: Longer holding, higher tax takes sheen off debt funds
Better, but wouldn't it be simpler to just treat it as interest from bank deposits no matter what the duration? No special treatment and treat dividend distribution tax as "tax deducted at source" to be treated like any other income.

While at it, do the same for equity funds.

I wish the exercise of increasing capital gains tax was philosophical rather than just a way to collect more tax.

Friday, July 11, 2014

Goa as a location for a first University Town

I have long felt that Goa could be a great place for education in India. Goa University campus location is beautiful and valuable. That makes it possible to consider creating a new University Town with little monetary burden on the government.

The location of Goa University in Taleigaon is "prime real estate". It would be wonderful if the University could sell the land and shift the campus to a common location with Goa Engineering College. Goa Institute of Management could also shift as it is in a cramped location.

Given the irrationality of real estate valuations, the money from Taleigaon would be more than enough to build a new campus with a lot of surplus. I would not be surprised if the income from the surplus may ensure that Goa University will never need any funding from Government for its operating costs.

University should have undergraduate courses on the campus as well, making it possible to seed a University Town quickly. Admission for students from out of state should be encouraged.

The infrastructure should ensure a very comfortable lifestyle for the faculty, students and researchers. Within a few years, it may be possible to get insights into whether such a model can succeed and sustain itself.

Thursday, July 10, 2014

More EPS fine provided the employees can opt out into NPS

News items like EPS-95: Rs 1,000 monthly pension, 28 lakh to benefit really upset me. I realised the scope of this scheme only on retirement! This is a scheme which sought to give private sector similar benefits as central government pension (discontinued for new employees as it is a financial burden for the government -  actually, the current tax payers). The scheme is subject to some arbitrary constraints which make it viable at the expense of the better off. Charge higher taxes but don't cross-subsidize in a non-transparent manner.

I had assumed that I was not a member of EPS because I had not opted for it when it came out. I did not realise that my option was not valid or relevant after I had changed my job and moved from the company managed fund to the government managed one.

From the same news item(emphasis mine):
At present, workers whose basic wage at the time of joining is up to Rs 6,500 per month, including basic pay and dearness allowance, can be subscribers of the EPFO schemes.
This is news to me. The companies always me the impression that membership to EPFO was mandatory. Given a choice, even PPF would have been preferable. And these days, NPS would most likely be the preferred option for anyone earning more than the EPFO limits.

I suspect the limit has been increased to make the operation of EPFO/EPS temporarily solvent and postpone the actual financial problems of the organisation to the next generation.

New IIM's and IIT's - why not University Towns

As I sat passively listening to various post budget discussions on Rajya Sabha and Lok Sabha TV, one commentator struck a chord. It is fine to build new IIT's but without quality faculty, mediocrity will prevail. And why would well qualified people go to remote places?

In another discussion, one commentator, I believe an expert in economics, was asked about jobless growth. He ridiculed it and said that there was no such thing. You cannot have growth without jobs. It blew my mind. I wanted someone to question that comment but no one did. It is not just a problem of the rich countries with software eating jobs.

The government wants to create new IIT's, IIM's and urban centers of excellence. Nothing wrong with the idea itself.

So, what if instead of creating each institution in a separate place, the government creates university towns starting with a student population of 10,000 plus. Obviously, Berkeley and numerous small but well known towns in the US come to mind. However, our visit to Manipal had been a remarkably pleasant experience. Now one can even point to the CEO's of Microsoft and Nokia and suggest that Manipal may be an example worth emulating.

A university town ensures that academic and student populations of diverse disciplines interact and learn from each other and not just what is taught in classrooms. The size of IIT, Kanpur assured that there was just one restaurant, I think called Red Rose. It was dark & dingy and I saw rats running around. (I spent a year as a postdoc at IIT,K). An adequate student population ensures a lively, vibrant environment. These are fun environments for faculty and families as well.

The best way to prepare for the future is to learn and not based on the jobs available today, which is why I had thought that the Delhi university four year program was a worthwhile experiment. University towns may instead be tremendous opportunities for the young Indians.

Personal Experience:
Ropar is not all that remote just an hour's drive from Chandigarh. Yet, the IIT Ropar has a problem attracting faculty, at least in Computer Science. I enjoyed being able to experiment with content and style of teaching unlike in a traditional engineering college. Although I was not very happy with the outcomes, I was ready to try another experiment based on this video of Eric Mazur. However, the desire to experiment and see if students would learn better was not enough compensation to drive an hour each way for even three days a week.

Build one in Goa

Thursday, July 3, 2014

Incomprehensible Customer Service

One more bank tries to make me happy :)
"Happiness lies in the joy of achievement and the thrill of creative effort." - Franklin D. Roosevelt
I found that I could not carry out online transactions.

I had recently disabled sms alerts as it bothered me that they started deducting quarterly for SMS alerts without any intimation. From the branch, I came to know that the procedure for getting rid of SMS alerts is to delete the mobile number!

So, online transactions need me to enter a number sent to a mobile phone, which never reaches me as there is no mobile number! Ah, the system assumes that the phone number exists and no need to check.

I had to call the call center about a solution to this dilemma. How to carry out online transactions without subscribing to sms alerts?

It took a while for the call center employee to appreciate my predicament. The complaint is registered and I got a complaint number. Then came the solution which was beyond anything I could have imagined.

"Call back after 7 days. Tell your complaint number and we will let you know what the solution is".

I suggested that the call center can send me an email - they do not have that facility.

Simply amazing.

I would definitely achieve happiness if I succeed. I have already made a lot of effort. I will have to make some more effort and I am sure, I will need of creativity to get around their system :)

Oh, the site has an email option and, now, even a grievance monitoring option. So far my experience indicates that these services are connected to a black hole. I have never got even an automated acknowledgement.