Pop economics in the times of Covid

Manasi Phadke | Updated on May 23, 2020

The behaviour of economic agents in the Covid era resonates in some of the best-selling books on economics

My bookshelf simply spills over with books on pop economics. I’ve been flipping through a few favourites during lockdown, albeit with sanitised hands, and find that some of these beauties have a Covid-connect.

Tim Harford would be delighted to know that all economists in India are currently Undercover Economists. We are also masked, with gloves on our invisible hands. It is obvious that Tim Harford is a coffee lover. Nearly all the chapters of his famous book carry examples on coffeenomics. However, I met Harford recently, not at his favourite Starbucks (which is shut due to the same lockdown which re-introduced us), but right outside the tempo which came to deliver my usual supply of F&V.

The tempo brings me farm fresh vegetables from a village just outside Pune. Most of the vegetables were being sold for ₹80 a kg. And pre-packed vegetables for ₹110/kg. “Don’t know what’ll kill us first – Covid or prices”, remarked one lady nastily. I nodded admiringly, but not too aggressively, lest the mask fall off the Undercover Economist. “Oh, c’mon, it’s a typical scarcity model”, whispered Hardford in my brain.

Firstly, there is simply no alternative to buying vegetables from this man currently. Second, and most important, there is no way for the farmer to know how scared his customers feel about Covid. Now, how do you smoke out the scared ones? Offer them a slightly differentiated, pre-packed product. Minimally handled, packed at farm. Does it really cost ₹30 a kg for the farmer to pre-pack the veggies at his farm? No! But this is not about covering costs. It is about uncovering the thought process of the customer, trying to identify which customer will pay how much, thereby moving the consumer surplus from home to farm.

I stared moodily at my veggies basket, hmm, all pre-packed. On my way up the flight of stairs, the mobile buzzed. A WhatsApp message. This farmer group wants to sell fresh fruits to me through Swiggy. That’s amazing! Despite the reduction in labour force at the Swiggies and Zomatoes of the world, it is obvious that e-commerce platforms will dominate the food supply chains in the near future. Venkat Iyer, in his very lively autobiographical account Moong over Microchips may sure have left his job at IBM to turn farmer, but it is clear that moong will eventually have to combine with the microchip in Covid times. I am expecting a new Iyer novel anytime, ‘Potato Chips to Microchips’.

A guttural cooing interrupts my Iyerian thoughts. Damn these pigeons, I think irritatedly. Pigeons in my balcony and black swans in my bookshelf. How the innocent economist dreams to get rid of these avian nasties. Because nasty is what it is. Covid is a Low Probability High Consequence (LPHC) event with all the black swan characteristics that Nassim Nicholas Taleb told us about. The premise of The Black Swan is interesting. For years, it was traditional knowledge that swans are white. All it took was a sighting of a “single (and I am told quite ugly) black bird” to challenge years and years of knowledge. According to Taleb, such “anti-knowledge” black swan events have three characteristics: rarity, extreme impact and retrospective predictability.

‘What if’ thoughts

And that is exactly what Covid has done to us. A super rare event has caused a disastrous impact on lives and livelihoods of millions of people. And we are suddenly living with the “what if” thought. What if we had made our food systems safe earlier, what if we had paid enough attention to overcrowding in urban spaces earlier. What if we had given a thought to the floating migrants earlier, what if we had strengthened our MSMEs earlier. There is of course retrospective predictability as well — most of it residing in the opposition.

Armed with the surety that Covid is not a virus, but a rather large black swan, I went to the balcony to shoo away the aforementioned pigeons, which apparently spread viruses. Which is when the blaring of the TV brought me more breaking news. Sixtyone-year olds and higher face the maximum threat from Covid, glowered one anchor at me.

Levitt and Dubner winked at me from the bookshelf. Its just correlation, they told me in that marvellous piece of literature called Freakonomics. Correlation just tells you whether two variables have moved together. Human minds are wired to understand correlations and attach higher probability of occurrence to those two variables which exhibit high correlation.

I longingly think of introducing Jordan Ellenberg and his book How Not to be Wrong to this obnoxious anchor, now threatening me menacingly from the TV screen. Human beings not only attach higher probability to certain events, but they are also wired to take logic ahead linearly. An absolute ode to the singularly and linearly rude perspective of this gentleman. As of now, my highly non-linear and over-wrought economist mind is scared of the new addition that this anchor might send across to my book-shelf, ‘How to be always right even when mostly wrong’.

The writer is a Pune-based economist

Published on May 23, 2020

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