Sorry if you fell off your chair on reading the post title. But I could not resist using the title of a rediff slide-show (they put it on multiple pages so that the number of page clicks goes up) that some people have started breathlessly forwarding. These people are the type who are always in a hurry to report that “India is the second largest this” or “India has the most of that” and other hyper bullshit generally peddled by the likes of The Times of India and other rags. Anyway, that reminded me of a story.

The Flying Horsies

The story goes thusly. Once upon a time there was a king. One day he got really really upset with his minister and in a fit of anger ordered that the minister be shot at dawn the next day. The minister pleaded with the king to spare his life for just three years. Why, demanded the king. The minister said that he will develop flying horses and that will take three years. He reminded the king what a great advantage his armies would have with flying horse technology. The king thought about it and said, OK but if there are no flying horses in three years, his (the minister’s) ass is grass.

So then, the minister goes home and his wife says to him that he’s really dumb. How the heck can he develop flying horse technology in three years, she laments. The minister said to his wife, “Three years is a long time. In three years, the king could die, and if he does his orders are no longer valid. In three years, I could die. And who knows, perhaps in three years someone will develop flying horses. We don’t even know what will happen tomorrow, forget three years.”

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Predicting the Future

Cast your mind to, say, 1980. What would you have said if someone had told you that by the end of 1991, the USSR will be dissolved — gone, kaput, expired? You would have told the person to lay off the drugs. What if someone has told you in 1975 that China would become a manufacturing giant in a few decades and that the US would be indebted to China? You would have had that person committed to a mental institution.

What if in 1947 someone said that India will be ruled by an Italian-born practically uneducated, grossly corrupt woman whose only claim to fame was that she had married the grandson of one of the present set of politicians?

What if you were told in 1947 that in about 50 years the number of abjectly poor people in India would be three times the number then?

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Horse Doo-doo

Only very deluded people make projections into the far future. The only long-term forecast one can believe in is the one which says that the future will be unimaginably different from the present. No one had predicted the revolution in the information technology — not the cell phone, not the computers, not the internet.

James Burke likes to put it this way. He says that if you, in the year 1700, had told your drinking mate that in a few centuries, every Londoner will have his own personal transportation and that he would be able to go wherever he desired, your friend would have fallen off this chair laughing — the image of London streets six-feet deep in horse dung would have been too ridiculous.

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Pile of H S

The projections like the one CITI is peddling are worth less than horse dung. People who take them seriously are intellectually challenged, to put it most politely. I don’t have the patience to point out all the errors built into its conjectures — which are piled high and dry — but let me just point out the most glaring. Its projection are reported in “purchasing power parity” or PPP, terms. PPP is itself a steaming pile of horse dung. So there.

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I believe that it is better to tell the truth than to lie. I believe that it is better to be free than to be a slave. And I believe that it is better to know than to be ignorant.

Go read the rest of this great quote from Mencken.

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Whom the gods would destroy they first make mad, observed old Euripides. I am afraid that insanity is spreading rapidly in India.

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Per capita GDP Time Equivalent of Cost

A better measure for comparing incomes across economies is based on time.

Time is a great measure for all sorts of things once you have an invariant in hand. For measuring distances, the speed of light provides an invariant measure. Thus, you can say that the sun is about 8 light minutes away and the nearest galaxy to the Milky Way, the Andromeda galaxy, is about 2.5 million light years away.

Costs can be measured in terms of time, provided we have an invariant. In our case, we really don’t have an invariant because the time to earn a unit of money varies from person to person, and from region to region. However, there is already a measure of average incomes in a specific location. That is the total production of final goods and services measured in monetary terms over a year for a specific collective of people that is called the gross domestic product (GDP). GDP divided by the number of people gives you the GDP per capita.

GDP per capita is a handy “local invariant” of sorts. India’s GDP per capita is about $450 per year. In a sense, you can say that the average person earns $450 a year and that is a local invariant. Now if something costs $450, then one may say that it costs one year. The “Per capita GDP Time Equivalent of Cost” is what I am provisionally proposing, or PGTEC. (The stress is on the word “provisionally.”) The units are time: so you could measure PGTECs in hours, days, months, years, and life times.

I can now denote the cost of an 800 sq foot apartment in my neighborhood for a laborer as 200 years. Since the working life of an average person (given the life expectancy of about 65 years and a productive life of about 40 years), the cost of the apartment would be five laborer lifetimes. Astounding.

What good is the PGTEC measure? Well, for one thing, it is easy to understand and compare costs across regions. The median house in the US costs around $70,000. And the per capita GDP is around $23,000. So the average house cost in terms of PGTEC is 3 years. Compare that to 200 years in India. India is therefore about 70 times more expensive than the US when it comes to housing.

That is from a post from nearly five years ago: The High Cost of Living. (March 2006).