Thursday, May 27, 2010

Grasshopper & the Ant

The FT columnist, Martin Wolf has come up with the all-time-favourite Aesops fable to explain the ongoing "global financial crisis".

In this version, ants are Germans, Chinese and Japanese, while the grasshoppers are American, British, Greek, Irish and Spanish.
Ants produce enticing goods grasshoppers want to buy. The latter ask whether the former want something in return. “No,” reply the ants. “You do not have anything we want, except, maybe, a spot by the sea...”
In the end...
...the leader of China’s nest tells America: “We, your creditors, insist you stop borrowing, just as European grasshoppers are now doing.” The leader of the American colony laughs: “We did not ask you to lend us this money. In fact, we told you it was a folly. We are going to make sure American grasshoppers have jobs. If you do not want to lend us money, raise the price of your currency. Then we will make what we used to buy and you will no longer have to lend to us.” So America teaches creditors a lesson from a dead sage: “If you owe your bank $100, you have a problem; but if you owe $100m, it does.”

The Chinese leader does not want to admit that his nest’s huge pile of American debt is not going to be worth what it cost. Chinese people also want to go on making cheap goods for foreigners. So China decides to buy yet more American debt, after all. But, decades later, the Chinese finally say to the Americans: “Now we would like you to provide us with goods in return for your debt to us. Thereupon, the American grasshoppers laugh and promptly reduce the debt’s value. The ants lose the value off their savings and some of them then starve to death.

What is the moral of this fable? If you want to accumulate enduring wealth, do not lend to grasshoppers.
The story is obviously an over-simplification. But it has provoked comments that are even more interesting.


Full Article:

Wolf, Martin (2010), The Grasshoppers and The Ants - A Modern Fable, Financial Times, 25 May 2010 -

Monday, May 24, 2010

Japan's Population Dilemma

Finally an article that brings out the dilemmas and Hobson`s choices linked to Japan's plunging population growth:

Japan’s Phony Solution - The half-truths about immigration, Paul J. Scalise, NEWSWEEK, Apr 30, 2010

Exerpts -
Japan’s population has peaked. A downward turn is expected to follow, reaching close to 100 million in 2050 and 45 million in 2105. That means fewer workers paying fewer taxes to support an already expanding army of senior citizens. With social security, pensions, and interest payments on the national debt occupying more than 50 percent of Japan’s national budget in 2009 (up from 19 percent in 1960), the government, sooner or later, will face a decision of crisis proportions. Does it raise taxes sharply? Cut benefits drastically? Go deeper into debt? Or throw open the doors to young foreigners to restore balance between workers and retirees?

...Highly skilled, high-wage immigrants present their own problems. Feldman’s Japan model assumes that the average immigrant would be less productive than local hires because of different languages, work habits, traditions, and educational needs. And what’s never explained is how to attract the “right” immigrants and assimilate them in the first place. Right now, Japan’s average compensation per employee (adjusted for purchasing-power parity) is 36 percent lower than in the U.S. and 15 percent lower than in the euro area, according to the OECD. Worse, monthly cash earnings have been falling slowly for the past decade. If Japan wants to attract doctors, nurses, and engineers, and keep them, it needs to pay them more. And therein lies the rub. Is it really worth it in the long run?

Japan’s Ministry of Health, Labor and Welfare estimates the fiscal cost and benefits of an influx at three different stages of an immigrant’s life. In stage one, when only single youths are admitted, the government gains more in tax payments than it pays in benefits. In stage two (with spouse) and stage three (with spouse and two children), the benefits paid by the local and central governments far exceed the tax revenues. If 500,000 migrants were to enter Japan in stage three, the ministry estimates, the net loss would become a whopping ¥1.1 trillion, or about $12 billion.


Japan’s Phony Solution - The half-truths about immigration, Paul J. Scalise, NEWSWEEK, Apr 30, 2010

Tuesday, May 18, 2010

Summer Fauna

An attempt to identify folks that creep, crawl and fly about in Tsukuba University...

Snake-in-the-grass with a bite (or peck) that went right through the skull. Most likely to be a rat-snake (scientific name - Elaphe carinata yonaguniensis; common name - Yonaguni-Syuda).


 One on the fist and about a dozen inside. "Dango Mushi" is apparently the current favourite with kindergarten kids - at least until the bigger beetles make their appearance.
  • English common name - Woodlouse or Pillbug (because it can roll itself into a perfectly round "pill" when disturbed)
  • Scientific name - Amadillium vulgare
 Strikingly colorful bird, eyeing the photographer with cautious disdain...
This one turns out to be Japan's "national bird" - the Green Pheasant (Phasianus colchicus versicolor)
...and the dour looking female.




Sunday, May 16, 2010

Understanding Tech Progress

I spent almost the entire day today trying to understand one chapter of one book. Covering just 40 pages in a day may sound like a lazy way to spend a Sunday but then the book in my hand was Joel Mokyr's classic, "The Lever of Riches" and the chapter  - Understanding Technological Progress.

The question being discussed was something that intrigues me to no end - How and why did the West come to dominate technological progress for the past two centuries?

 Mokyr starts by rubbishing the old adage - "necessity is the mother of invention" by pointing out that historically, innovation has never been something that could be be turned on or off in a demand-supply scenario. The demand for faster, labor & capital efficient ways of doing things has always been there but that did not lead to a supply or speedy adoption of a technical superior alternative.

 According to Mokyr, invention & innovation is born from a complicated mix of factors that 'on the aggregate level determines the propensity of a member of a society to invent and that makes others want to adopt his inventions'. These are -

  • Life Expectancy: If your life is short (and hard) you are less likely to defer gratification
  • Nutrition: What is often described as "laziness" is really the result and not the cause of poverty and malnutrition. For instance, IPDS (infant protein deficiency syndrome) permanently cripples mental development, especially among the lower ranks of society - slaves, peasants and labourers.
  • Willingness to Bear Risks: If individuals consistently overrate their chances of success (optimistic bias) it offsets the inherent bias to under-produce technological change (because social benefits typically exceed private benefits).
  • Geographical Environment: Abundance or scarcity of natural resources (coal, iron-ore) does not automatically lead to tech creativity.
  • Path Dependency: The view that tech change primarily depends on its own path (David, 1988) works nicely in some case but not in others. In England mining triggered innovations (mining > struggle with water > better pumps > more accurate boring machines & tools > steam/water power ) or the effect of the shipping industry on Holland (ship-building > rope & sail making > wind-driven sawmills > provisioning industry). But, on the other hand, even though the wheel was invented long ago (500BC-100BC) the camel came to replace wheeled transport in Middle East and North Africa.
  • Labor Costs: Availability of cheap labor delays adoption of labor-saving technology but there are numerous examples to the contrary.
  • Science & Technology: science aims at comprehension but tech aims at utilization.Until 1850 technology came first followed by the scientific explanations. Even for the past 150 years the majority of important inventions, from steel converters to cancer chemotherapy, from food-canning to aspartame have been used long before people understood why they worked.
  • Religion: Religion as a socio-political force did seem to have an impact on the incentive to innovate. The Hindu brahminical doctrine "held that promotion to a higher caste was possible through reincarnation if an appropriately resigned and obedient life was led" was a fiendishly clever and almost failure proof incentive to protect status quo. (Here the pathetic story of Ekalavya also comes to mind)
  • Values: In most ancient societies (Greeks, Romans, Jews), it was better to be brave or wise than to be rich. The more wealth is measured in terms of positional goods relative to material goods, the less attractive tech change will look.
  • Institutions and Property Rights: Institutional change is usually at the centre of events. For tech change to be effective and sustainable, the authorities must relinquish their direct control over the innovative process and decentralize creates the opportunity for the innovator to enrich himself through property rights and public recognition.
  • Politics and the State: The dilemma is that `if you want to realize the potential of modern technology you cannot do with the state, but you cannot do without it either`(North, 1884). Only when strong governments realise that technological backwardness itself constituted a threat to the regime, as in the case of Peter the Great`s Russia, post-1867 Japan, and, to a lesser extent, Napoleon`s France, did they decide to intervene directly to encourage tech change. Another reason why politics matters is that tech change is notoriously subject to market system left on its own is unlikely to produce a desirable level of innovation. Tech progress requires above all a tolerance towards the unfamiliar and the eccentric (Goldstone, 1987)....the qualities that make people tolerant also makes them more receptive to new ideas (Cipolla, 1952). The archenemy of tolerance and pluralism is conformism...widely observed phenomena such as tradition and social inertia become understandable if conformism is assumed to be part of human behavior.
  • War: Societies that were creative in making clocks, guns, ploughs and spectacles were also good at making tribuchets, guns and mane-of-war.
  • Openness to New Information: Human history is full of examples of societies holding others in utter contempt and despising people who look different, spoke a different language or believed in a different God....Europeans learnt from the Arabs who did not return the favour...Europeans appreciated knowledge irrespective of source; Asian cultures, with the exception of Japan did not. Typical of the European approach was the great Leibniz, who implored Jesuit traveling to China "not to worry so much about getting things European to the Chinese, but rather about getting remarkable Chinese inventions to us; otherwise little profit will be derived from the China mission". Chinese missions, on the other hand, (which started before the Europeans ventured out) was to demonstrate the wealth & glory of China to the barbarians by means of lavish gifts...
  • Demographic Factors: There is apparently a link here (larger population > larger markets > better division of labour), but then, again, it worked the other way too.
 In India there is still a strong undercurrent of that decadent mindset (some kind post-colonial complex?) which pulls in the opposite direction by chauvinistically insisting that everything worthwhile (literally from "zero") originated in India. However "Openness to New Information" is a factor that seems to be slowly correcting itself in India.

The bigger worry is in the area of  "Values". In most places India continues to be a society in which those who are educated do not work (physical labor) and those who work are not educated. The "inarticulateness of the productive masses will thwart the diffusion and adoption of new technology in the unlikely event that it emerges"...    :(

Friday, May 14, 2010

Banking & Finance: The Tide Turns...

For a long now it had been assumed in the English-language media that the word "world" was a synonym for the so-called Western-democracies. As mentioned in a previous note, it had become so commonplace to refer to all the other regions in the world with reference to this self-proclaimed "center" that it seems difficult to imagine that the Middle East, East and Far East could also have an opposite, Asia-centric reference.

When the bully-pair of Uncle Sam and his poodle needed an excuse for taking over the oil-fields of Iraq, they declared that "the world would not tolerate WMDs in the hands of a tyrant like Saddam Hussain".

For decades now it was assumed that this "world" had all the right answers to problems being faced by the rest of humanity. Institutions created under the Bretton Woods Agreement - IMF, World Bank and the UN - would coax, nudge and bully countries into making Structural Reforms which would speedily 'privatize and liberalize' their basic institutions - banking & finance, health-care, education, public utilities. It was, of course, an unmitigated disaster for many poor countries in Asia, Africa and Latin America. A group of countries that acted contrary to the IMF & WB  "reforms" were to be feted later as Asian Tigers who emerged from the East Asian Miracle!

More recently, When the sub-prime mortgage crisis in USA unraveled the banking and financial system in USA and Europe, financial papers kept referring to it as the "Global Economic Meltdown" until a little bird pointed out that absolutely no crisis - let alone a meltdown - in the Emerging Markets.

The latest Economist now points out that the banking and finance sector from these markets have moved from the bantam-weight to the heavyweight category. China's two largest banks are also the largest in the world; Companies from Russia, Brazil and India are fast closing in on the largest Western financial firms; demand for credit is growing much faster than GDP; domestic savings is driving investments..."these counties were all on a journey where the ultimate goal was a fully privatized system that looked like banking in America or Europe. The crisis has changed everything governments are playing a proactive role to ensure that money keeps flowing into the economy"...

The tide is slowly turning...and I'm lovin' it!


* The Economist, May 2010: Special Report - Banking in Emerging Markets

* Democracy Now, April 1, 2009: Noam Chomsky on the Global Economic Crisis 

Chomsky explains the double-standards quite nicely - 
It is striking to see the difference between the advise that the Westerners are following and compare it with the instructions being given to the third world -

1. First pay off your debts (to us)
2. Privatize (so that we can pick up your assets on the cheap)
3. Raise interest rates (to slow down the economy)
4. Let the population suffer (to pay us back)

The USA does just the opposite...we lectured the third-world on free-trade and we choose to nationalize (the too-big-to-fail principle). It nothing but protectionism. Here is the instructions for you, the poor people, and here are the policies for us - the rich people.

Tech Surprises

Surprises from the History of Science & Technology:

  • Nobody has really figured out why the Chinese stopped innovating after 1500AD, or why the Arabs, who were at the forefront of compiling knowledge (algebra, geometry, metallurgy, chemistry)  from Asia until 1200AD, never quite went on to invent things on their own.
  • The ancient Greeks were thought to be backward in terms of mechanical devises until the discovery of the Antikythera mechanism in a sunken ship, off the coast of Crete. It was a geared astronomical computing machine of astonishing complexity, built in circa 100BC.
  • Science became important for technology-development only after 1850s. Until then new discoveries and innovations happened only by chance or accident, and the scientific rationale for it was deciphered only later. Eg. Vulcanization of rubber, longevity of canned food
  • The original Jethro Tull was not a rock-band but the name of a pioneering agriculturist who invented the modern seed-drill, which was a lot more efficient than spreading seeds by hand (broadcasting) or using sticks to poke seed-holes (setting).
  • 18-year old British chemist, Willing Perkin, was trying to make artificial quinine (anti-malarial) when he discovered aniline purple (1856) which replaced natural mauve dye. Three years later French chemist Emanuel Verguin discovered aniline red or magenta.
  • The Sewing Machine: 17 different sewing machines were invented in Europe and America - all were unworkable because they tried to replace the motion of the human hand in stitching. In 1830 Thimonnier invented a chain-stitch system but his uniform factory in Paris was destroyed twice by violent tailors. Then came Elias Howe (1846)with the lock-stitch, and Issac Meritt Singer, who powered his machine with a foot treadle.
  • The pneumatic tyre was patented in 1845 but the invention was forgotten until a Belfast vet surgeon, JB Dunlop resurrected it in 1888, after he was unhappy with the comfort of his 10-yr-old son's tricycle ride.


Mokyr, Joel (1990), The Lever of Riches - Technological Creativity and Economic Progress, Oxford University Press, 1990

Monday, May 10, 2010

Healthcare in Japan

I am puzzled by the health-care system in Japan.

On the face of it everything looks fantastic. Their public hospitals seem to much better than the best private hospitals in India and convey an image of squeaky clean, high-tech efficiency.

But today, after spending the whole day at a hospital for a minor sports injury, I am not so sure.

A judo-related injury had been troubling my wrist for the past two weeks now. I visited the Tsukuba Medical Centre today, just to confirm if the pain was due a fracture of some sort. When I reached TMC at 9:30AM it was humming with activity but nobody would have called it an abnormally crowded day. Yet, it took me 1.5 hours to meet the doctor; 1 hour for the X-rays; 30 mts for the doctor`s diagnosis; 1 hour to pay the bill and - the biggest surprise of all -  2.5 hours of waiting to collect a set of bandages from the prescription shop outside!

There is something seriously wrong here but I`m just not able to pinpoint it.

The break-up of events at the hospital was something like this:
  • 9:30 - Collect the out-patient form, and a token-number at the reception-desk
  • 10:00 - Submit the form. Show Health Insurance card. Told to wait outside consultation rooms 7-8-9.
  • 10:30 - A nurse comes to confirm the ailment details and records them on the OPD form
  • 11:00 - Doctor`s examination; told to go for an X-ray (`Rentogen`) check
  • 11:45 - Enter X-ray taken from four different angles and sent online to the doc
  • 12:20 - Doctor`s diagnosis - no fracture, apply ointment/bandage, avoid strain/judo for two weeks
  • 12:30-13:30 - Waiting to pay the bill (Y 3280 - 30% of actual amount)
  • 13:35-15:40 - Waiting inside the only prescription store (Imagawa Drugstore, opposite Matsumi Park) in the vicinity for a set of four bandages (post-insurance cost - Y750)

At the hospital, it is very unlikely that the delay was caused by tardy staff -- they are as diligent, sincere and helpful as can be. Perhaps it is due to the fact that the National Health Insurance coverage structure encourages people not only to visit the hospitals more frequently for every minor ailment, but also to spend longer time with the doctors seeking advise and consolation.

But the prescription-store is another story altogether. Since each zone had only one place where you can get the prescribed medicines, large companies seem to have monopolized these outlets and deal with patients at their own leisurely pace. Each store has a play area for kids, a separate counter for eye-care, free equipment for blood pressure, free tea dispensers, vending machines, magazines and a flat-screen TV.

Despite having eight staff across the counter, it was 2.5 hours before the token numbers moved from 101 to my number - 131!

This is so out of character in a country where you can set your watch with the train timings...

 Waiting and Imagawa Drugstore, Tsukuba

Saturday, May 08, 2010

Driving Through Western Japan

Golden week cmae with a golden join a friend on his cross-country drive to his hometown near Hiroshima. In all we must have covered about 2500km drive through Western Japan - Izumo, Shimane and Yamaguchi prefectures.

Beautiful, undulating hills and mountains blanketed with thick forests, highways cutting through innumerable tunnels and picturesque little towns...

Some pics from the 8-day journey.

The longest one noted - 3300m
A Soba-noodle shop cum railway station at Kamidake

 Koi (carp) flags across a river

 Car-parking at Izumo Shrine

 Straw festoons at Izumo Shrine

Japan Sea - rough and choppy

 Lone angler

 More and more tunnels

 Railway line hugging the beach

Shop-front in Tsuwano town, Shimane Prefecture

Tsuwano Church



 To Yamaguchi

Thursday, May 06, 2010

Innoshima, Omishima & Onomichi

Images from sites around Hiroshima: Innoshima, Omishima & Onomichi

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GoogleMap of area covered

 Onomichi City from the Shrine

 Imabari Bridge Viewpoint

 Outside Omishima Shrine

 Seto Inland Sea

Innoshima Bridge

Aloha Hiroshima!

I had expected my visit to Hiroshima to leave me horrified, or at least disconcerted. It did not.

What I saw instead was a cheerful, touristy city with wide, neat roads; streetcars ambling past at a leisurely pace; a flower festival showcasing international dances - naked Latino's doing the salsa followed by overdressed Tibetan troupes swirling in their skirts and cap-ribbons; in the subway Japanese girls dressed as Hawaiian dancers swaying their grass skirts to music as the shoppers and tourists looked on...

Was this really the city where, 64 years, an American B-29 bomber, swooped down to drop the first nuclear bomb in history, killing more than 80,000 people? Was this the city that Radio Tokyo reported later as the place where "practically all living things, human and animal, were literally seared to death"?

Walking down the sunny avenues of Hiroshima it is really hard to believe that such a horror ever happened here. There is, of course, the iconic `A-Dome`, and a short walk away is the museum with its many models, photos, diagrams and displays. Then there are also mutilated trees and the handful of surviving Hibakusha (`explosion-affected-people) who sit under a nuclear umbrella and campaign relentlessly for total N-disarmament.

The museum did have its surprises though. I did not know, for instance, that about 20,000 Koreans died in the bombing (1 for every 4 Japanese!) - most of them were working in Hiroshima as forced labourers or conscripted soldiers. Another surprise was that the whole narrative of the exhibition was less emotional and more rational when it came to answering some critical questions:

Q- Why was the A-bomb dropped on Japan instead of Germany?
A- The Allies knew that the Germans had a nuclear program and were wary of a scenario where an unexploded bomb could yield valuable secrets to the enemy. All available information suggested that the Japanese did not have the resources for such a program.

Q- Why was Hiroshima chosen?
A- Hiroshima had a large military-industrial complex; it was the HQ of the 5th Division of the Imperial Army, and it was believed to be one of the few cities that did not have allied POWs (actually it did - 260 allied POWs were killed).

Apparently, prior to 6 August 1945, the relentless fire-bombing of over 60 Japanese cities had not brought about an unconditional surrender - despite the loss of over 800,000 civilian lives. So the idea was to pick-out peripheral cities one by one and move towards the more critical ones (Kyoto, Osaka, Tokyo) until imperial Japan was forced to wave the white flag.

That is one way of explaining things. A more balse - and plausible - explanatiion was that so much money and resources had already been invested in the top-secret "Manhattan Project" that the US top-brass knew they would be hauled over the coals after the war, unless, of course, there was some dramatic output. So they sent out a Little Boy and a Fat Man to do the talking...

Whaterver the reasons for the bombings, in the ultimate reckoning the Hiroshima of today is neither a `City of Peace` nor a `living symbol of the follies of a nuclear war` is a showcase of pure pragmatism.

Somebody has already observed that the A-dome seems to be getting smaller every year. So the city officials seem to be saying to each other - `well, what has happened has what is the best way of roping in the tourists and getting them to spend more in Hiroshima?`


Hibakusha in NY conference

First A-Bombing - Wiki -


The Museum

Hiroshima at 8:14 AM on 6 Aug., 1945. The `T`-shaped Aioi Bridge was the original target

Red Ball = Ground Zero