Anmol On Secularism in India

This is a speech that I wrote for a debate last year, which I won:

Secularism is defined as: the concept that government or other entities should exist separately from religion and/or religious beliefs. "Secular" is a word found in the preamble of our constitution that has been there since 1976, when it was added in a constitutional amendment, along with the word "socialist". Unfortunately, as I shall show you in the next few minutes, our country has repeatedly betrayed its secularity, and therefore our constitution. Yes, I am for the motion "India is secular only in name". Our nation has made considerable progress in various areas, including technology, our economy, and secularity, but there are still gaping holes in our secularism.

Firstly, I would like to point out that a secular government should either a)be indifferent to religion, as stated in the definition, or b)treat all religions equally, regardless of following- as that would equal religious indifference. So if society were truly secular, there would be no holidays for hindu/muslim festivals, and workers would have to take leave if they wanted to celebrate them, or they would have to give other religions holidays, and if I were to start a religion tomorrow, it should have a few national holidays. One might say that this religion is illegitimate, but where do you draw the line of legitimacy? For this reason, it makes more sense for government to be indifferent to religion.

Since we have made it clear that government should stay away from religion, I would like to point out that the government of India doesn't have a uniform civil code for all religions. Only Muslim men are allowed to be polygamous while it would be a crime if a man of another religion, say, a Hindu man were to be polygamous. This law hasn't been changed, even after the addition of the word "secular" to our constitution. One could argue that the government is just enforcing religious rules on its citizens, but is the government supposed to enforce religious rules? Since religion is created due to belief in god, shouldn't god be enforcing them, unless government is playing god. The fact that government tries to enforce religious rules, means that it is participating in a religious activity, which is contrary to the word "secular".

The above statement was mainly theoretical, and my opponents would say that it doesn't deal with the practical reality in the nation. There are inter-religious friendships, and marriages, but every day, there are hate crimes, and honour killings due to these inter-religious relationships. Social evils like sati are still a very painful reality, and police turn a blind eye in many rural areas, due to religious beliefs. In 1986, in the famous Shah Bono case, Rajiv Gandhi, and the supreme court, refused to look at an Islamic divorce fairly to an Islamic woman, to prevent the alienation of a Muslim vote bank.

There are other such incidents, such as the famous Ahmedabad riots, where 1000's of muslims were killed, and the police famously ignored the massacre that was taking place. The Ayodhya incident, in 1994, where leading politicians in our country were behind the destruction of a mosque in Ram janmabhoomi. Their argument was, "There would be no church in Mecca, or temple in Vatican city", but those countries don't claim to be secular, and we do. The final verdict, where two thirds of the land was given to the Hindus, and one third to the Muslims, was even handed, which could have been shown as a proof of secularity, but there were clear legal arguments for both sides, and the dispute should have been decided one way or the other. The compromise might have been to prevent a riot, since it doesn't take 15 years to decide that a case can't be decided one way or the other. Although, I appreciate the noble cause of preventing a riot, the decision was taken on religious grounds, which would never happen in a truly secular country.

There are those that point out the peace after the Ayodhya verdict as a sign of a secular India. Since the word "secular" is written in the constitution, I presume that lack of secularism is a violation of our constitution and therefore a crime. To determine whether or not a crime has been committed, we need to look at instances where the crime has been committed, not instances where it hasn't been, for example, person a is accused of murder of person b, with person c as a witness. If person c says that he saw person a kill person b, then it proves murder, but if person c says that there was an instance where he saw person a not kill person b, it doesn't acquit him of the murder. Therefore, lack of unsecularism isn't secularism, but unsecular acts show a lack of secularism, and there have been many unsecular acts in our nation's recent history. Therefore, I must conclude that our nation isn't truly secular.

Anmol on Terrorism

Anmol on Terrorism

In recent times the world has been plagued by terrorism, as there appears to be a bomb blast, or a mad man with a machine gun, every day, somewhere in the world. We still feel the effects of certain terrorist acts, and their repercussions, such as 9/11. Nations spend billions of dollars, even declare war over these acts, which makes you to ask, is it worth it? This article might make me appear like someone who doesn’t value human lives, which isn’t true, I value all human lives, however, I believe that the value of life is consistent, and not determined by cause of death.

9/11 was the single most deadly day due to terrorism, with the death of nearly 3,000 people. Soon after, the US declared war on Afghanistan, which was then run by the Taliban, with no objections, within the US, or internationally. They quickly deposed of the Taliban government, leaving it powerless, and forcing its remnants to hide in the mountainous region between Afghanistan and Pakistan. Unfortunately, all the leader of the movement had escaped, so the Western coalition decided to stay in the country, to try to eradicate the entire Taliban. Right now, 10 years later the American government is still there, although, in their favor, they’ve captured most of the senior leadership of both Al Qaeda and the Taliban.

In the following argument, I’ll assume that the war in Iraq wouldn’t have happened without 9/11, and the sensationalism it creates. The financial costs to the US, due to the wars in Iraq, Afghanistan, and Pakistan have been 3.2-4 trillion dollars. 6,500 US troops have perished, as well. For now, we’ll only look at whether or not the wars were beneficial to the US, and look at whether or not the US could’ve conducted the wars in a better manner. We can analyze the costs to Iraq and Afghanistan later.

Excluding 9/11, the average number of global deaths due to terrorism from 1995-2005 had been about 2 people per day. Including 9/11, about 3 people per day. Let’s assume that with superficial US intervention in both Iraq and Afghanistan i.e., if they withdrew after one year, the number of deaths would’ve been 3 times as much, an extremely liberal estimate. That would’ve been an extra 6 lives per day, for 10 years, or an additional 22,000 lives. That sounds like a lot at a superficial level, but if you subtract NATO troop losses, it amounts to an additional 15,000 lives. So, the value of each life amounts to 3 trillion/15,000, or about $200 million per life. They say you can’t put a value on human life, but various organizations have effectively done so in other ways. There are various other costs, such as the time and resources wasted by TSA searches, and other such utilization of resources, but we can ignore them, because the bias is still obviously prevalent without them.

We also need to include the fact that the above statistic referred to global death, and not deaths in the US. There have been at most 2 possible plots which could’ve developed into another 9/11 in the US, and assuming both succeeded, they would have led to a loss of 6,000 lives, still less than the number of US troops who have perished.

Firstly, diseases like Tuberculosis can be prevented for significantly less. The cost of the vaccination amounts to $200/year/life. Assuming Terrorism leads to a loss of 50 years, on average, the US is paying about $4,000,000/year/life. Yet, a trillion dollars has been spent preventing terrorism, and a significant, but relatively small amount has been spent preventing Tb. This is only one example, but when something is 20,000 times more cost effective than something else, the other thing can generally be disregarded.

An argument for the wars in Iraq and Afghanistan is that they helped the people in those nations. The people were helped by regime change, which would’ve happened regardless of whether or not the US engaged in “nation building”. The two wars have led to, according to some estimates, over a million civilian deaths. Although no one can deny the benefits of losing a tyrant as a leader, beyond a certain point, foreign intervention begins to be harmful to a country.

Other “great thinkers” claim that the US is only in those two countries because of oil. To those who endorse this views, I have two responses. The first one being that the amount the US has spent on military conflicts in the middle east is greater than the total value of oil it has extracted. The second is that China has extracted more oil from the middle East than the US. Enough said.

My arguments about Afghanistan and Iraq were more of a case study, than anything else. My main problem with terrorism is the opportunity cost, i.e. the resources wasted on terrorism that could’ve been spent elsewhere. Due to media coverage, etc. the average person spends more than 100 hours a year worrying about terrorism. If they earned a wage of $20/hour, they could’ve earned $2000 in that time, and saved 10 children, which seems more valuable than panicking about Al-Qaeda. As covered earlier, the money spent on terrorism can be better spent in an infinite number of other ways.

The main reason why terrorism flourishes is because of media sensationalism, more than anything. Media sensationalism leads to other mis-valuations, for example, a statistic which often shocks people is that there are twice as many deaths due to suicides than there are due to murder. Only 3% of all deaths in the 20th century (including wars, famines, etc.) have been due to non-natural causes, as opposed to 15% in the centuries before that. The world is getting less violent, yet we cover violence more. We can balance all violent deaths by increasing human life span by 1.5 years, which can be done by marginal medical improvements, or eating healthy, and taking occasional walks. If the US spent 5% of their defense budget on actual prevention of death, they would save significantly more lives than the rest of the defense budget does. The same can be said for any other country.

Fear of terrorism has been shown to be far more deadly than terrorism itself. The trillions dollars spent preventing terrorism, and rights given up in the name of prevention of terrorism seem to be doing more harm than good. Terrorism only flourishes because of media bias, and because politicians aren’t rewarded for crises prevented, but penalized for crises which occur. Obama won’t get re-elected if he points out that average life span in the US increased by two years in his term. A small reduction in life expectancy isn’t seen as significant, although it's more statistically significant than un-natural death. If you look at it, terrorism's objective is to gain attention, and due to our fear of terrorism, they gain that attention, and hence get political clout. Fear of terrorism leads to terrorism. My message isn’t that terrorism related deaths are unimportant, it’s that non-terrorism deaths are important as well.

Anmol on Income and happiness

Anmol on Income and happiness


If you go to school with me, you already know what this article is about, due to our heated discussion in Eco class about it. However, if you weren’t present, this is solely about the correlation between Income and happiness, and the optimal income distribution for net happiness. Also, this article discusses the best income distribution in a society, and what government should do to achieve that distribution. Note that this assumes ceterus paribus: all other things being equal, it also assumes that income and wealth are synonyms, and interchangeable, feel free to make the formula more complex later on.

To understand the link between income and happiness, we must first accept three things. Firstly, that income isn’t the only factor, but a major factor affecting happiness. Secondly, that income has a positive correlation with happiness. Thirdly, that the relationship between income and happiness is less than linear, my assets total less than $10,000, while Warren Buffet has some $50,000,000,000, but he isn’t 5 million times happier than I am. I personally believe that there is no maximum happiness, although many people might dispute this claim.

I think the relationship between income and happiness is logarithmic, i.e. H=k*log I.
It seems to me that someone with 100 times my wealth will be as much happier than I am, as someone 100 times wealthier than him, will be happier than he is. This system seems plausible to me, though we will deal with more complex equations later. With the current formula, let’s assume that there are 2 people in the world (this can be extrapolated to much larger numbers). Their incomes are P and O, and P+O=I. Net happiness= log P+log O, Net happiness= log PO, therefore the point of maximization of PO, is the point of maximization of happiness. This is when P=O, i.e. when income are equal. Equality of income is the point at which happiness is maximized, in this situation.

Assuming you have a function for income vs happiness, to determine that the optimal distribution is when incomes are equal, we must make sure that when incomes are equal, i.e. if one person 1$, and the other person loses 1$, net happiness goes down. Change in happiness for each person ~ gradient of the curve (dy/dx). If gradient above is less than gradient below, in the happiness versus income curve, then it’s best to split wealth evenly. Therefore, the gradient should decrease as the value of x (in this case income), increases, or d^2y/dx^2 should be negative. For all less than linear equations, d^2y/dx^2 is negative, because dy/dx of x^-n, where n is a positive constant, will always be negative, and dy/dx of x^a, where a is between 0 and 1, will always result in a polynomial of the form kx^-n. Therefore, when a is between 0 and 1, when the equation is less than linear, it’s best to concentrate wealth towards the centre. When d^2y/dx^2 is 0, the distribution of wealth is irrelevant to net happiness, and when it is positive, it’s best to split the wealth unevenly.

It would be extremely unusual if net happiness could be perfectly graphed by a function. Surely, doubling one’s wealth while poor is worth significantly more than doubling it while rich. Assuming statements such as the one are true, the gradient of the curve still continues to decrease, so d^2y/dx^2 remains less than 0, and it remains better to split the wealth evenly. The gradient can only reduce, as the curve continues. Therefore, we can conclude that net happiness is maximized when income is equally distributed.


I’m sure the above statement makes me seem like a socialist. In fact, I strongly believe in communism capitalism. I wanted to make it clear that the objective of a tax is not to blindly maximize net happiness. All of us know that socialism doesn’t work, because it disinsentivizes innovation, the engine for economic growth. However, lack of economic growth is only felt in the long run, while the positive attributes of redistribution are felt immediately, which is one of the reasons why socialist revolutions started off so well, and ended, well, not so well.

The first implication of this article is that progressive taxes are fair, although the extent to which they’re in place should be debated. I believe that in the long run, an increase in net wealth, leads to a total increase in societal wealth, for all classes, regardless of how the wealth is distributed initially. Many of the richest families 2,000 years ago, are normal families now, and many of the richest families now were normal 2,000 years ago, but we’ve all benefited from long run economic growth, despite the clear economic biases towards the rich in that era (flat taxes, feudalism, selective voting rights, etc.). However, you could argue that government shouldn’t care about the long long run, which makes sense if you believe that government is there to get re-elected, or serve it’s own purpose in some other way, in which case, changes which take more than 10 years are generally ignored regardless of their benefits. The first question which needs to be answered is “how much should a government base their decisions on long term good, and how far in the long term should they look?”

The next question which needs to be answered is “how progressive should progressive taxes be?”, any measure which can be used to derive, or calculate a perfect tax plan will be helpful.

The first implication of this concept was macroeconomic. The second, has to do with microeconomics. This is a good way to measure whether or not to take certain bets. The first thing this shows is that betting on a lottery, even with no rake, is completely irrational, because losing that 1 dollar, or other small amount of money, isn’t worth a one in a million chance at a million dollars, because the satisfaction of a million dollars isn’t a million times the satisfaction of 1 dollar. The second is that when bets are a very small percentage of your net worth, what probability dictates is generally your correct decision, however, when it’s a large percentage of your wealth, it differs largely from probability. For example, if you bet half your wealth, you need at least 1.71:1. The answer is probably more than that, so the curve is probably less than a logarithmic curve. In a survey, people were asked the minimum odds they needed on a coinflip to risk $100, they said 2.1:1. This would’ve been correct if they were betting half their wealth, but the correct answer (assuming $100,000 of total wealth), was 1.001:1. Another case of people misunderstanding statistics. If we manage to link happiness to income effectively, we can understand whether or not to take bets which are a certain percentage of our wealth, or other financial risks, such as betting on the stock market. Such a formula would be very valuable for academic purposes, although it would probably be ignored in real life.

Anmol On FIscal Policy Part 2

Anmol On Fiscal Policy:2

In my previous article I discussed how beyond a point running deficits reduces a country’s debt as a proportion of GDP. Now, we’ll do the math to calculate the position of that point, as well as finding how much your debt increases as a proportion of your GDP in any situation.
Basically, there are 4 different variables: Deficit (I), inflation multiplier(mpc*Gs/Gs+Gd) (M), GDP, and debt(d). Net Gain from deficit= debt/GDP (2)-debt/GDP (1). We assume GDP=1 for simplicity, because the actual value is irrelevant. In other words,
Gain= (d+d*I*M+I/1+I)-(d)
Multiplying and dividing by 1+I we get:
Gain=(d+dIM+I)-(d+dI)/1+I
Gain=d+dIM+I-d-dI/1+I
Gain=dIM+I-dI/1+I
Gain=dI(M-1)+I/1+I
Gain=I[d(M-1)+1)/1+I
Gain=I[1-d(1-M)]/1+I

therefore, if you have the figures of debt, deficit, and inflation multiplier, you can use that simple formula to calculate reduction in debt burden.

If gain=0, the point of madness, I[1-d(1-M)]/1+I
if I is not = 0, 1-d(1-M)=0
1=d(1-M)
d=1/(1-M)

As you can see, the formula accurately plots the next year’s national debt, as a proportion of the previous year’s national debt.

Anmol On Fiscal Policy

Anmol on Fiscal policy

Right now, the Euro Zone debt crisis, along side the American debt crisis seems extremely serious, because both economies constantly seem on the verge of default, and any such default would lead to a world wide economic collapse. That’s why the leaders of the world will do almost anything to prevent a default. Today’s article will deal mainly with how to deal with large debt burdens, calculation of debt burdens, and interest rates of bonds. Some of the answers I find will definitely surprise you and make you think.

As a response to the Italian debt crisis, Sylvio Berlusconi forced parliament to push through austerity measures, a natural reaction, also mirrored by Republicans to the American debt crisis, but how much do these measures actually help? How much of a surplus should a government actually run when they have large debt burdens? Well, lets look at the case of country X, a hypothetical country to determine the best strategy of a government

First, we must discuss the concept of the multiplier. Let’s say I gain $1, and my marginal propensity to consume (∆consumption/∆income) is 0.8, which means I’ll spend 80¢ of that dollar. The next person has 80¢ and will spend 80¢*0.8, or 64¢ of it, and so on. As you can see, this is a geometric progression, and the formula for the total amount of money in the economy is injection (of money)/1-mpc. So any injection in the economy is multiplied by 1-mpc, which is why 1-mpc is known as the multiplier.

How do you calculate the debt burden of a country? Is it the internal debt? Is it the foreign debt? Well, it’s the internal debt multiplier*internal debt+the multiplier*foreign debt.What is the internal debt multiplier? It’s the amount the economy will lose by paying off internal debt. Lets assume that government can either spend a certain amount of money, T, or return T to bond holders. If they spend T, then growth in the economy will be T*multiplier, or T/(1-mpc), whereas if they pay T to bond holders, the injection to the economy will be T(mpc)/(1-mpc), because the amount they consume will return to the economy. Therefore the debt is (T-T*mpc)/(1-mpc), or T(1-mpc)/(1-mpc) or T. The foreign debt multiplier will be 1-mpc, because the money you use to repay foreign debt automatically leaves your economy. So total debt burden= internal debt*1+foreign debt*multiplier, or internal debt+foreign debt*multiplier.

Now, we need to calculate bond yields. Assuming there is a very small chance of default, bond yields will be close to inflation. Inflation is a function of change in consumption. ∆consumption= ∆national income*mpc. To find Inflation from ∆consumption, we use the formula, ∆consumption (as % of GDP)*G(supply)/[G (supply) + G (demand)]
G being the gradient of the curve. Assuming bond yields are near inflation, as happens often in real life, bond yields are approximately ∆consumption*Gs/Gs+Gd.

Every year, your debt burden is multiplied by your bond yields, which is then added to your net budget deficit, to calculate the debt for the next year. To follow the rest of this article, you should look at a country’s debt burden as a percentage of its GDP, and not in absolute terms, as it will make more sense that way. Lets look at an example to make it easier.

Italy’s national debt is 120% of GDP, and because more reliable data isn’t available, we’ll assume that 45% of its debt is foreign, and 75% is internal. We’ll also assume that mpc=0.7, because reliable data on that too is unavailable. The total debt burden= 75%+45%/(1-0.7), or 75%+150%, or 225% of GDP. Let’s assume that despite all the calls for austerity, the Italian government decides to resist foreign pressure, and run a deficit which adds a burden= 10% of GDP. Therefore, the economy will grow by 10% of GDP to 110% of initial GDP. Assuming Gs=Gd, then Gs/Gs+Gd=1/2, and inflation will be 0.7*10*0.5=3.5%, and bond yields will be 3.5%. Just to make this example clearer, we can assume bond yields will be 4%. The new debt will be 225*1.04+10, or 244% of GDP.

The new national debt will be 244*100/110, or 222% of GDP, lower than what it was before the deficit, which is counter intuitive to what all the pro austerity economists say. What they say makes sense, if you’re in debt, spend less, pay other people back, but the math disagrees with them. Paying off a certain amount of debt will contract your economy more than it contracts your debt, therefore increasing your burden.

Of course, this only works with very large debt burdens, and beyond a point, it stops to work. This point is given by 100*(Gd+Gs)/Gs, for the economy. Note that economic growth isn’t mentioned here, because interest rates will normally be similar to economic growth, so the two tend to cancel each other out. Even unexpected growth is irrelevant, because growth is a fraction of total GDP, so the lowest debt:GDP ratio, is still the most beneficial path. Of course, after your debts reach a certain point, the point which I call “the point of madness”, it should start running surpluses to pay off the debt, that’s the point at which the debt to GDP ratio is constant regardless of deficits, or surpluses, and the deadlock can only be broken by unexpected technology growth. Of course, how economies get beyond this point is beyond me, but some of them find a way to do it. My advice to them: spend, spend, spend.

Anmol On Bailouts

Anmol On Bailouts

The Great recession which hit the US in 2007, and later spread to the rest of the world had a severe impact on the modern world. The business cycle is cruel to all those it affects, at least, when there’s a downturn. The reason for this, as usual, amongst many was due to weird financial instruments on wall street, horrible foresight, and the easy accessibility to credit. What intrigued me the most about this crisis, or at least the reaction to it, was the bailout of the banking sector. Americans realized, after the collapse of Lehman, that a collapse of one bank threatened the entire sector, and hence all large banks were now “too big to fail”. If you look at the risks that these large banks were taking, and look at the consequences of their downfall, you soon realize that the probability of a financial meltdown is much more than we think it is.

The banking crisis started in March 2008, when the New York federal reserve bailed out Bear Sterns so that it could be sold to JP Morgan Chase, to the outrage of many tax-payers. This outrage made the government reluctant to bailout the investment bank Lehman brothers when it was close to bankruptcy, and it’s collapse led to the instability of Wall Street. This of course led to TARP, the $700 Bn bailout fund for banks which was expected to cost US taxpayers $300 Bn, but ended up costing them only 19 Bn, because most of the banks who took TARP funds have already paid them back/ are on track to pay them back. $19 Bn is a very small price to pay to save the banking sector of a country as large as the US, but people still continued to oppose the bailout. This article is not going to be a summary of the great-recession, but a theoretical discussion about whether or not bailouts should be given to these institutions, and whether or not there is a way to improve the current system of bailouts.

Let’s take a brief look at the problem. In the recent Republican debate, it was brought up a few times that the biggest 6 banks in the US, accounted for 2/3rds the nations GDP. If these banks were to somehow fail simultaneously, then the US would face a crisis 3 times worse than the great depression, and the knock-on effects (small banks failing due to failure of the big banks), could make it even more significant. Now, there is no guarantee that this will happen, but if it were to happen, I can’t emphasize enough how large the crisis would be. Imagine 2012. It would be worse.

The main counter argument against bailouts, as I have learnt is that bailouts are moral hazard. If companies know that they’re going to get a bailout whenever they fail, then they need not fear failure, and can take a series of unnecessary risks. If the risks succeed, they all become billionaire’s, if they fail, then they get bailed out by the federal government. Very convenient indeed. However, we really don’t want all our large financial institutions taking unnecessary risks with our life savings, while their executives get 10’s of millions of dollars in bonuses. At the end of the day, wall street rewards risk takers. The way wall street works is that employees get a small basic salary, just enough to cover costs of living, and large bonuses based on performance. Let’s say that an employee loses a large amount of money, say $100 Mn. They still can’t take away his basic salary, so he gets paid his basic salary. Now, let’s say the employee gains $100 Mn, he’ll get a large bonus, probably in the millions of dollars. Now, if he does nothing, he’ll get a bonus, but a small one, perhaps $50,000-$100,000 at most. Looking at this from an individual point of view, why wouldn’t he take the millions or bust, and forgo the $50,000? Even if there’s only a 10% chance of him making the millions, it’s a good risk for him , but a 10% chance of gaining $100 mn, and a 90% chance of losing $100 Mn is definitely bad for your life savings. I understand that the reason why bonuses are so large relative to basic salary is to reward performance, but the problem is that there are no disincentives for making large mistakes. Even if the employee gets fired, he can easily find a job which pays close to his basic salary on Wall Street, which is what he would get despite an incorrect decision. There is effectively no downside to being wrong.

There are other hazards with the bailout package, such as the fact that the TARP loans were given out at very low interest rates, close to 0%, which was significantly lower than the free-market interest rate. As Ron Paul said “They’re borrowing money from us at 0%, and lending it back to us at 3%!” Yes, Ron Paul included the exclamation mark. This is a fairly simplistic understanding of the crisis, even though he does have a point.Companies would never take large loans, just to exploit the low interest rates, because of the various federal government restrictions placed on them if they accept TARP funds, such as a cap on executive pay at $500,000/year. To put that into perspective, a few years ago George Soros’ hedge fund paid him $2,400,000,000. No executive would willingly take a pay cut of possibly 100s of millions of dollars, just to get low yields on bonds from the federal government. However, as I said earlier, his point is still valid, if the banks were indeed as successful as they were touted to be, the government could’ve charged the market interest rate, or at least what the bank pays to its depositors.

There are other moral problems associated with Wall Street. Despite coming cap in hand to the government, begging for bailouts whenever there’s a recession, these firms strongly advocate, and lobby for de-regulation, i.e. removal of government from their markets in the boom years. As the famous saying goes, “People are capitalist during the booms, and socialist during the busts”. I can see why they act in this way, it seems to help them immensely, but this makes average citizens see corporations as evil-corporations, understandably. These firms almost seem two-faced in their agenda. So, basically the three moral problems are moral hazard, low interest rates, and the two-faced nature of large corporations. The problem with letting them fail, is financial apocalypse. Isn’t there a middle ground? The next part of this article will be about possible solutions.

Firstly, let’s assume that we let all the banks fail, just to teach the risk-taking Wall Street fat cats a lesson, and we somehow miraculously recover from the economic downturn. They have been shown by government that their risk taking will not be rewarded, and according to rational logic, the banks should then become more stable. Unfortunately, this isn’t the case. History has shown that people in positions of power, have poor knowledge of history, and occasionally come up with ridiculous assumptions. One of these situations was the options debacle, when a couple of Mathematicians came up with a perfect formula on the pricing of options, and estimated their risk of going bust at 1 in 10^24. Of course, they went bust, as was inevitable. They didn’t account for large stock market crashes, such as the one in 1987 while making their model, and one such crash made their company fail.It’s fairly ironic that both of them are Nobel laureates, but such is the field of Economics. We can only assume, that banks will act in the same way, even if we punish them once. Also, it’ll take a very long time for a country to recover from a loss of its banking system, and possibly 80%+ of its GDP.

There’s a popular theory going around nowadays which says “too big to fail, is too big”. I can’t say that I disagree with that view, but there’s a reason why big institutions exist, and why they’re efficient. Let’s say there’s a small institution, worth $1 Mn. They bet $1 Mn on a 60-40 chance, and 40% of the time they go broke, thus ruining all their investors. Now, let’s look at a large institution worth $50 Bn. Let’s say they make 500 bets of $100 Mn on a 55-45 chance. It’s highly likely that they end up ahead, because their risk is spread out, thus reducing it significantly. Although big institutions do take risks, their risks aren’t limited to one field, so one crash won’t necessarily bring them down. That’s why it is a big deal when a big institution fails, because it signals that the entire market crashed, and not just one segment. Unfortunately, the entire market crashing is not independent of one segment crashing, so there still is a lot more risk than we would like.

I feel that the people responsible for taking risks are executives, and the losers are the customers. If there’s a solution which punished executives, while protecting consumers, I feel that’s optimal. I think the banks should be bailed out, and that executives should be penalized in some way. The way to penalize them can be worked out later, but it satisfies the need for punishment of those responsible, while protecting the average citizen. Perhaps, government can limit leverage on banks which asked for TARP funds, for a fixed period of time, say, 10 years, thus making them less volatile, and less prone to swings.

There were three main reasons why the recession became as serious as it did:

1) The interconnectedness of the entire financial system. People used to give away subprime mortgages, then sell them to the a bank, which would then sell them to a larger bank. The larger bank would bundle up the mortgages, and make AIG insure them, as “securities”, which AIG would then sell to another bank, which would eventually be sold to somewhere completely random, such as a Norwegian town council. It’s almost like Chinese whispers with large amounts of money. Therefore, when the housing bubble eventually burst, all these people suffered, thus bringing down a much larger segment of the economy than it should have. Homeowners also suffered because the values of their houses dropped.

2) Banks were over leveraged, i.e. they had were risking too much money, relative to the number of assets they had. Lehman brothers was leveraged at 30:1, which meant that a 3% drop in their shares, meant that they lost 90% of their assets. Due to the volatility of markets, this eventually happened, and busted Lehman.

3) The collapse of Lehman sent ripples across the entire banking system, and made the Dow Jones Industrial Average, and various other indices crash, as people began to fear a wide banking sector collapse. This then made the banking system weaker, which people then reacted to. Sort of like a self-fulfilling prophecy. This cycle would’ve continued unless government interfered which it did.

In conclusion, I must say that government should never distort prices, as they did by reducing interest rates for sub prime mortgages (interest rates too are a price), to help every American have a home. We also need to be better at predicting these crises, as it was widely assumed that house prices would continue to rise infinitely, as gold is seen today. It would also be helpful if we found a way to control moral hazard, although risk is embedded in the psyche of all Wall Street executives. I still support the bailouts, and feel that if we come up with any method of punishment, it will increase fairness in the market.

Anmol on god

The issue of god or no god is a controversial topic in today's world. Some of us believe that god exists, and mock those who believe otherwise, some of us believe that god doesn't exist, and mock those who say he does, and some of us who dislike the argument, are agnostic. Normally within these arguments after 5 minutes of intellectual discussion, the atheists say, "where did god come from?" and the religious people say "where did matter come from?", not necessarily in that order. It's a sad end to what could otherwise be a fruitful discussion.

The best way to look at religion sociologically, i.e., how society affects religion is by looking at how religion has evolved over time, alongside breakthroughs in science/knowledge in general. The earliest religions-paganism, and hinduism, tried to fill gaps in people's knowledge. They had sun gods which determined the rise of the sun, and at what time it occurred, the moon god, which determined whether or not the moon came up, and gods for other things, such as rain, and wind, and so on. As scientists began to explain those things, it then evolved to one god who created the world 6,000 years ago, and created species, and created the universe. Later on, as we discovered the big bang, and that the earth is 4.6 billion years old, and now religion has started disputing evolution, and asking physicists about the origin of matter.

If you look at it, religion only claims to explain what human beings don't fully understand at the time. It exploits gaps in people's knowledge, and finds false correlation between events. If religion says something to the effect of "pray, or the world will end tomorrow", and you pray, and the world doesn't end tomorrow, it is seen as a religious victory. However there is no evidence to support the fact that the praying itself made the world not end, there is no proof that not praying would have made the world end.

Eventually as time progresses, almost everything scientific will be explained, so religion will only explain what, by definiton can't be explained. One of the only things which can't be explained by definition is the outcome of random events in the short run. For example, if I flip a coin, what determines whether it lands on heads or tails? I have heard various bizarre theories, from the force that you put on it affecting the outcome (most plausible), to the amount you bet on the coinflip affecting the outcome. In the long run, we know that close to 50% will be heads, and 50% will be tails, but in the short run (1 flip), it's either heads or tails. There are too many factors which actually effect the flip, such as air density, wind, the way you flip the coin, velocity of the flip, angle of the flip, angular frequency, viabration of your hand/the coin etc. It is effectively unexplainable. Eventually society will use this to justify the existence of god. They will start to worship a god of heads, and a god of tails. Perhaps it won't be that extreme, but it'll be a god of luck.

When you point out that the existence of god can't be proven to a religious person, they tell you that it can't be disproven either. Frankly, that's a ridiculous answer. If I told you that there was an invisible monster in my closet that you can't see, but that you need faith to believe in, you would ask me to prove it, not disprove it. As occam's razor states, the simplest and most logical explanation should be assumed until a more complex one can be proven. Frankly, the universe being run by the laws of physics is simpler than the idea of an all knowing being in the sky controlling our fate, and destiny, knowing our thoughts, knowing our behaviour, and judging us based on our actions. The burden of proof is on the side of believers. "Faith" is not an argument. If you ask someone why something happens and they say "I believe it regardless of logic", by definition, they are illogical. Despite the burden of proof being on religion, each major religion can be disproven.

Hinduism: 1) Hinduism makes claims such as eclipses are caused by a stomachless god eating the sun, and the sun coming out of him because he lacks a stomach. We know that this isn't why eclipses happen.

2) Hinduism has stories like the Mahabharata which claims that Drona killed 10,000 people a day with a bow and arrow. Let's assume that it takes 2 arrows to kill a person (very optimistic), lets also assume that he hit his target with 60% of his shots (also very optimistic), and that he shot 12 arrows per minute (one of the fastest rates ever recorded despite his obsolete bow). They fought in summer, so the days were about 15 hours long, which is 900 minutes. It took drona 3.33 shots to kill a person. That means he got 3.6 kills/minute. That would give us a total of 3240 kills. This assumes that he took no time to reload/he never ran out of arrows/he always had multiple targets. The actual number was probably much lower than that. Of course, this assumes that this actually happened, which it did not.

Hinduism, Jainism, and Buddhism: reincarnation- reincarnation has to be false. It assumes that the species your soul becomes is based on behaviour in your previous life. Very noble, but unfortunately false. Firstly, most sources on reincarnation believe that souls can't be created or destroyed, which means that the number of living things on the planet must be constant. Firstly, we know that that isn't true, as life didn't come to earth for a long time after the planet was created. Ignoring that fact, we also know that the amount of life on earth dipped significantly during major catastrophes such as the asteroid which made the dinosaurs extinct 65 million years ago. This also doesn't allow for species to be extinct. Let's assume that those who behave best in their previous life become humans in their next life. Suppose humans go extinct, that would make it scientifically impossible for there to be more humans on earth. However, the code of reincarnation states that whenever someone behaves exceptionally well, that someone will become a human. The fact that no more humans are born either means that 1) no one behaves exceptionally well (virtually impossible), or 2) reincarnation is false. Even if you argue that this is true only for large groups of species, it doesn't explain why dinosaur's went extinct. It also doesn't explain evolution, i.e. there were no humans 10 million years ago.

Abrahamic religions: These religions have frequently contradicted modern science, and have often discouraged it. They have stuck to the ideals of Aristotle, and disputed theories such as the big bang, evolution, and that heavy objects fall as quickly as light objects. It is impossible to argue that these religions have been right in every way.

Finally, to those who say "I believe that there is some energy in the universe which controls everything". You need to specify whether this "energy' has any power, whether you need to pray to appease it, and whether it observes your behaviour and possibly reciprocates. If the answer to all these questions is "no", then you're effectively an atheist in denial, and live the life of an atheist. If however you need to appease the deity by praying to it, or preach how the deity is noble, and rewards the good, then you are not an atheist, and in fact believe in god. There is an energy which controls things, outside the laws of physics, and that is randomness, the force which defines random outcomes in the short run. Unfortunately there is no such force, as these outcomes can't be predicted, and if you believe in one, you do so because you feel that life is meaningless without one. This does not however mean that the force actually exists. If the force did exist, then monks wouldn't be praying, but would be winning millions of dollars in las vegas. Also, if a god existed, he wouldn't allow for scarcity, unless he believed in schadenfreude and liked to see us suffer. Many paradoxes also arise, such as the "can god make a rock so heavy that he can't lift it" question, and as physics tells us, paradoxes are impossible.

Anmol on the value of time

Human beings make many obvious mistakes within their lifetime. Whether it’s marrying the wrong person, or buying airline stock (somebody has to), many of these mistakes are easily preventable, and other people can tell you about them, though we sometimes chose to ignore these people. One mistake that’s often forget about, and that others don’t notice easily, is mis-valuing your time.

There are various ways to attach a value to your time, the first would be to check how much you would earn if you worked in that time. Let’s say you’re paid a wage of $25/hour. If you’re paid a salary, you can find your wage by dividing your salary by number of hours worked. Anyway, you need to see how much you earn per minute, about 42 cents, and how much you earn per second, about 0.7 cents. This is extremely important while making decisions. For example: you drop a penny on the ground, it takes 2 seconds to pick it up. Most people would pick it up regardless of their income, because it’s intuitively right, and therefore backed by instinct. Unfortunately, the value of 2 seconds of your time would be 0.7¢*2, or 1.4¢. Therefore, it’s inefficient to pick up the penny, you lose 0.4¢. That might not sound like a lot, but that can be extrapolated into many other situations.

The above situation is one where people tend to undervalue their time. It probably takes about 5 seconds to pick up the penny, it will be a 5 second delay, due to slowing down, looking for the penny, etc., therefore, you pick up 720 pennies per hour, or value your time at $7.20/hour, less than minimum wage in most countries. There are also situations where people over value their time. A good example would be in New York, where people might take a cab between 2 subway stations, if the next subway train is 8 minutes away. Let’s say that the cab fare is $10, with tip, an underestimate to illustrate my point. Therefore, you value your time at $10/8 minutes, or $75/hour, quite a reasonable wage, and one of someone who gets an MBA from a top university.

This would be a situation where they overvalue their time.

The question which is unanswered by wage, is: how would you value the time of someone who isn’t paid a wage, such as a billionaire’s son, who feels no need to work after inheriting a billion dollar fortune. One method of valuation is to assume that his salary is the interest that he receives on the fortune, at a 5% interest rate, that would be $50 million. Assuming that one works on average 2000 hours a year, this would mean that their wage is $25,000/hour, and that’s how they can value their time. However, doing something else won’t prevent them from earning that $25000/hour, such as picking up a penny, so that method of valuation is flawed.

Although the wage method is a good quick method, especially for those without a large amount of wealth, otherwise (a billionaire who earns $5/hour shouldn’t value his time at $5/hour), if one’s wealth is large relative to salary, we need a better method of valuation. There are other problems with the wage method, for example, it allows for one to commit vices, as they would get paid more per hour, than working, but it doesn’t account for the moral dilemma. I think the way to look at this is that work itself has a negative value, and your wage must be larger than the negative value of working. For example, if you feel that working as a software engineer, makes you unhappy enough to lose $20/hour, your wage must be greater than $20/hour for you to do that job. In your time, you must do what gives you the greatest gain in value per unit time.

Now you may ask, why is wealth important to this process, isn’t it the same process for everyone? Well the truth is that the downside to working is mainly an emotional toll, not a financial one. You feel down after working for 8 hours, although it costs you no money. Therefore, wage is not only a value of productivity, but a value of emotions. Rich people value their emotions more, in monetary terms because they have more money. That’s why they go to $200/hour counseling, which most members of the lower and middle classes can’t afford. They’re also likely to buy $50,000 bottles of wine, because it gives them a very marginally higher emotional satisfaction, which is worth $50,000 to them. It also gives them status, which pleases them emotionally, and adds to the value of the wine bottle. If consuming their first bottle of win gives them $60,000 of satisfaction, and they consume it in 1 hour, then the value gained is $60000-$50000/1 hour, or $10000/hour, more than anything else. This is why rich people buy more expensive things, it’s not just because they’re rich. Of course they won’t continue buying the wine, because of the law of diminishing marginal utility, each subsequent bottle is worth less to them. Also, their status isn’t increased significantly by having 2 bottles of expensive wine, instead of one, and the wine is meant to be a once in a lifetime tasting.

There’s a paradox which rises here. Let’s assume that there’s an academic, who’s retired at the age of 25, with savings of $100,000. Since he’s an intellectual, he appreciates all things intellectual. If he values a $100,000 bottle of wine at $200,000, he should buy it, because that gives him his maximum hourly gain, $100,000/hour. However, this obviously isn’t the best solution, as he’s broke after this. Does this mean that we need a no formula?

No, it doesn’t, because as discussed earlier, the bottle of wine gives one an emotional gain. It’s nearly impossible for someone to have an emotional gain greater than his wealth, as emotional gain is proportional to wealth. Is the bottle of wine worth 1000 hours of counseling, or 2000 dinners at a nice restaurant. I don’t think so. the hypothetical scenario is far too unlikely to affect the model.

In the billionaire who earns $5/hour question, the billionaire shouldn’t do that job, as it definitely doesn’t give him the maximum gain in value. So, the billionaire has already mis-valued his time.

In conclusion, the simple way to value one’s time, for those who are paid a wage, is to see how much they time they lose by performing a certain action, and how much money, or value gain they lose. A more accurate, but harder to implement system, is to see what gives you maximum value gain per unit time, and do that in your time. It’s possible that that will be work, if you’re paid $1000/hour, for a job which costs you $20/hour in emotional terms. Also, with work, there’s an increasing emotional stress with hours worked. Even if you were paid a million dollars an hour, you wouldn’t work for 300 hours straight. Also, as wealth increases, emotional stress increases, in monetary value. So, we can conclude that people should only do what gives them the maximum gain in value.