Economy
National Income data does not cover technological advances
National income statistics measure what the producers get, which does not capture the entire value created. Estimation of consumers’ surplus remains elusive despite being very significant in value despite technological advances
 
It has become a cliché to say that change is the new normal. In the 1920s, Joseph Schumpeter had famously talked about ‘creative destruction’ being the distinctive feature of capitalism. Alvin Toffler had, in his book, The Future Shock, foreseen a spurt in technological advances and its impact on human behavior. It would be safe to say that even they would have found it hard to believe the disruption technology is causing these days. Established ways of the society are getting increasingly disrupted whether it is processes, behaviour or relationships between people. Nothing seems sacrosanct anymore. 
 
This technological change apparently does not seem to be impacting income and productivity positively. Annual global growth rate has declined by more than a percentage over the last decade. Widespread gloom about the future prospects of the global economy continues. Even specific studies on productivity seem to reveal a very pessimistic picture. Research which was undertaken at the Economic Research Department of the Federal Reserve Bank of San Francisco shows productivity growth to be decelerating. How does one reconcile the contrasting picture of rapid, disruptive pace of technological change and apparent low growth in productivity?
 
Economists have been the butt of jokes for as long as one can remember. They never seem to agree on anything. It is said that if you meet two economists, you get three opinions. Not many people have faith in statistics on national income and inflation. Confronted with skyrocketing prices of onions, followed by a similar trajectory in other essential prices, it is natural for people to disbelieve statistics showing that inflation has moderated.
 
National income statistics are based on the attributes of the old economy, having been designed for times when physical products and manufacturing were predominant. Even in those times, there were anomalies in the methodology. For instance, national income comprises only those products whose value can be measured and which are traded for such value. Thus, the work done by a housewife is ignored, leading  well-known economist John Hick to quip that you could actually reduce national income by marrying your maid servant!
 
Goods and services are distinguished by economists on the basis of two attributes like being ‘rival and excludible’. A rival product is one whose consumption by one consumer prevents simultaneous consumption by others. Technically, a product is considered non-rival if, for any level of production, the cost of providing it to an additional customer is zero.
 
A product is excludable if the supplier of that product can prevent people who do not pay, from consuming it. These attributes enable producers to charge a fair price for rival and excludible goods.
 
Many of the services today are neither rival nor excludible. Their distribution is easy and the use spreads to large numbers quite rapidly. Witness how easy and rapid was the spread of mobiles, internet, Facebook, Twitter and WhatsApp. However, producers find it difficult to monetize this distribution and most of these services are either free or priced low. While these services add tremendous value and in general, make the economy more productive, economic statistics are not geared towards incorporating such value addition. It is a challenge for economists to devise ways to incorporate such services in their income and productivity calculations.
 
Increasing importance of services in the economy presents challenges for statisticians since services are difficult to define, measure and value. Nature of costing is also very different. Physical products usually have a high marginal cost (high raw material and labour inputs) while services especially new age services, are characterised by large fixed cost in terms of development, technology and operations. But, the marginal cost of providing the service to an additional customer is extremely low. Microsoft spent a huge amount in developing the Windows package. Its cost in providing Windows to an additional customer is negligible. Mobile telecom companies such as Bharati Airtel had to invest heavily in technology, spectrum purchase, operations and customer acquisition. Having done so, the cost of providing services to an additional customer is miniscule. 
 
Competition and cost structure ensures that pricing of such services is based on marginal cost, which does not capture value addition or customer satisfaction in the real sense. This has implications for estimation of increase in productivity. Many customers would be willing to pay much higher price for such services since they derive substantially higher satisfaction. In economic terms, we can say that consumer surplus is a significant proportion of the total value created. National income statistics measure what the producers get, which does not capture the entire value created. Estimation of consumers’ surplus remains elusive despite being very significant in value.
 
Let us consider the telecommunication sector in India. At the time of economic liberalization in 1991, the price of one call was Rs1.25, which inflation adjusted in today’s value is approximately Rs7.45. The utility or the value created by a telephone call has obviously not reduced. However, since the price of a call has come down, owing to technological developments and competitive pressures, the GDP calculation now is done at lower prices prevailing currently, distorting the estimation.
 
This is however nothing new and estimation of gains due to productivity have always been a problem. When the computer age dawned and improved efficiency significantly, the statistics failed to show any increase in productivity, prompting Noble laureate Robert Solow to quip that the computer age was “everywhere but in the productivity statistics.”
 
The western world has largely succeeded in satisfying day-to-day basic needs of its people. But, the needs and wants have continued to expand even if the struggle for survival is over. In some sense, these needs and wants are what Maslow has termed higher order needs. Such needs provide satisfaction in different ways and capturing the value of such satisfaction necessitates a quantum jump in the ability of statisticians and the way they capture such value propositions.
 
(Sunil Mahajan, a financial consultant and teacher, has over three decades experience in the corporate sector, consultancy and academics.)

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COMMENTS

Chandragupta Acharya

9 months ago

Excellent thought provoking article. Thanks

17 Indians to explore Antarctica for climate change impact
Bengaluru : About 150 explorers from 26 countries, including 17 young Indians, are sailing to Antarctica on Sunday on a 13-day expedition to study the impact of climate change due to global warming.
 
"The largest group of 150 men and women, including 17 from India, will cruise in a ship from Ushuaia, the world's southernmost town in Argentina, to the Antarctica Peninsula for exploring the icy continent around the South Pole," expedition coordinator Samantha Van Ruiten told IANS.
 
The eight women and nine men from India are students, techies, researchers, executives and members of non-government organisations (NGOs), with a common cause to save the planet from ill-effects of greenhouse emissions, urbanisation, over consumption and changing lifestyle.
 
"Antarctica provides an ideal setting for the expedition to know first-hand the fallout of climate change and feel how temperature rises on its icy landscape due to greenhouse gases and other emissions from chimneys, highways, fossil fuels and waste in developed and developing countries across other continents," Samantha said ahead of the mission under the "Leadership on the Edge" programme.
 
Though there was an overwhelming response to the 2041 Foundation's call to embark on the ecological mission, only 150 were selected keeping in view logistics and resources, health and environmental concerns over the flora and fauna of the 14 million km uninhabited and ice-covered landmass below South America.
 
The first expedition in 2003 had just 42 adventurers from 18 countries and the 2015 expedition 110 members from 22 countries worldwide.
 
"I am excited to visit Antarctica though far away, coldest, driest and windiest in the southern hemisphere, as it gives me an opportunity to explore the unknown continent and study the impact of global warming on its fragile ecosystem," 28-year-old D. Chandrika, a member of the International Antarctica Expedition (IAE 2016), told IANS from Pune.
 
Headed by veteran polar explorer and renowned British environmentalist Robert Swan and hosted by the US-based Foundation, the expedition from March 13 to 25 will focus on promoting renewable energy sources, environmental sustainability and climate preservation.
 
"As promotion of green energy and clean technologies worldwide is a major objective of this expedition, our assessment of the impact will make nations combat climate change and reduce global warming to protect the environment by framing sound policies," Chandrika, an astrophysicist and India officer of University of Gottingen in Germany, asserted.
 
Swan, 60, an OBE (Order of British Empire) and first person to set foot on North Pole and South Pole in 1989, had set up the 2041 Foundation to preserve Antarctica by promoting recycling, renewable energy and sustainability to combat affects of climate change.
 
The Foundation was set up in 1991 when the protocol on environment protection issued a moratorium banning drilling and mining in Antarctica. The 50-year protocol is due for review in 2041, as per the Antarctica Treaty System international agreement signed in 1959 to govern human activity in the continent.
 
"The 2041 mission is to build on Swan's dedication by informing, engaging and inspiring generation of leaders to take responsibility, lead sustainable life, contribute to policy development and do what it takes to preserve the last great wilderness on earth," Samantha pointed out.
 
Rohan Sood, 26, a techie from Kangra in Himachal Pradesh, is raring to skate and trek on the icy terrain for a once-in-a-lifetime experience at the world's bottom where average temperatures hover around minus 10 to minus 5 degrees Celsius in six months of summer from October to March and sink lower to minus 20 to minus 35 degrees Celsius in six months of winter from April to September.
 
"There is an urgent need to create global awareness on saving our planet from the dangers of global warming and climate change by conserving resources, using renewable energy and going green with eco-friendly materials," Sood told IANS.
 
Though based in Dubai as an engineer with Japanese industrial electronics product firm Anritsu, Sood is a globe trotter, having visited 18 countries across five continents and worked on community projects in Sri Lanka and Slovenia.
 
"It's humbling to be on the expedition to protect the environment and preserve the fragile eco-system for the benefit of humankind. As saving the earth from global warming and climate change is a responsibility of everyone and every nation, we need to work together for sustaining life itself," Sood noted.
 
Hyderabad-based Aarti Rao, 25, a member of the Third Pole Foundation Swan mentored in 2013 at Leh as part of the Global Himalayan Expedition, is upbeat on flying across three continents to reach the planet's edge for a lifetime adventure.
 
"I was inspired to join the expedition by Swan and other explorers like Robert Scott to be the change we want to bring about in families, companies, communities and countries. It's time for action in policy development, sustainable business and designing future technologies," Rao, an engineering graduate, told IANS.
 
According to a British survey, Antarctica has 90 percent of the earth's ice and 70 percent of fresh water, thanks to an underwater torrent of one trillion tonnes that develops in the Weddell Sea every hour. The mass of salty brine formed by freezing of the ocean floor set off a global current system.
 
"Our expedition creates ambassadors for education, environment and sustainability across the globe. To protect Antarctica and the rest of our planet, we must inspire leaders to return home and create change at personal, community and corporate levels and beyond," Samantha added.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Protect your Family from Mobile Tower Radiation
Citizens must demand that the standard for radiation through mobile towers should be similar to the practice across the world and not 100 times higher leading to health disasters among residents, advocates Prakash Munshi
 
Indian government and the authorities are silently killing gullible citizens with huge dose of radiations from mobile towers. Instead of patting themselves for using norms lower than what is prescribed by an international non-governmental organisation (NGO), they should cut down the power of radiation from such towers to save Indian citizens, say Prakash Munshi. He was speaking at Moneylife Foundation on the ill-effects of mobile tower radiation. Mr Munshi has been creating awareness on health hazards from electro-magnetic frequency (EMF) radiation emanating from mobile towers antennae and advising precautionary measures to protect citizens.
 
"In September 2012, the Department of Telecommunication (DoT) came out with revised guidelines adopting one tenth of the norms set by International Commission on Non-Ionizing Radiation Protection (ICNIRP), an NGO. However, even these lower norms are far higher than norms followed by other countries, like Australia, France and UK. Revision in norms should have been done to reduce health hazards to citizens by reducing actual radiation levels and not norms. This could have been easily achieved by reducing the permitted power from the antennae to 10% or reducing the maximum power transmitted per antenna/site to 2watts instead of 20watts per antenna," says Mr Munshi, who prefers to be called as a concerned citizen and not an activist.
 
 
Mr Munshi is on a mission to educate users on the perils of mobile phone radiation, along with Bollywood actor Juhi Chawla. With 4G technology making an entry on to mobile space, Mr Munshi feels there is an urgent need to have transparency and public knowledge of radiation emitted by mobile towers. He said, one can reduce exposure to EMF radiation by avoiding using mobile phone or cordless phones for long. If there is a mobile tower near your home or office, first convince the operators to reduce transmitted power. If this is not possible, then go for removal of the tower from that location. If both fail, then install shields on all your windows. The shields or mesh should be made from steel or copper, Mr Munshi added.
 
He said, "What the Indian government is saying is they cut the standard to 450 milliwatts (mW) per sq metre for a frequency of 900Mhz (for 1,800Mhz and 2,100 Mhz and above, it is 9000 mW and 10,000 mW, respectively) and hence there is no violation from the cellular operators. But we want that standard to be reduced to match with what is followed in other countries. This is not happening. And at some places like the infamous Haji Ali Juice Centre, we found radiation levels above 100mW, when checked randomly, and without informing the operators."
 
"What is more shocking is there are simply no norms for clusters of antennae installed in India. Such clusters are not seen anywhere in the world, except India," he added.
 
Mr Munshi pointed out to a report from a magazine that has quoted, Michael Repacholi, Founder Chairman of ICNIRP. In the report, Mr Repacholi, stated that India has made a political decision and not health-based decision to adopt one tenth of ICNIRP norms. "Base stations RF (radio frequency) signals are normally extremely low, some 100s to 1000s of times below ICNIRP limits. However, if base stations are removed then coverage is lost and people will not be able to make calls. Alternatively, if base stations and the mobile phone try to increase their signal strength so the person using the phone is subjected to much higher RF levels. In addition, people living near base stations that have to increase their signal to communicate with the mobile will also receive higher RF exposures," Mr Repacholi said in an interview to Infrastructure Today.
 
Even the 53rd Parliamentary Standing Committee on Information Technology, in its report had stated, "The Committee strongly deprecates the lackadaisical approach of the Department of Telecommunications which is the nodal department for expansion and modernization of mobile telephony.” 
 
Mr Munshi says, "Although France and Australia follow the extremely high norms their actual levels of radiation are much lower than the Italy, Russia, Poland, Bulgaria and Lithuania, cited by the DoT before the Committee. The actual radiation level in France is at 20mW sq metre for 97% of mobile tower antennae there. According to Australian Radiation Protection and Nuclear Safety Agency (ARPANSA), the country has actual radiation levels ranging from 0.904mW/m2 to 150.99 mW/m2 for the combined radiation from individual base stations." In India, the radiation levels are hundreds of times more.
 
 
Mr Munshi then explained health hazards due to EMF radiation, caused by mobile towers and precautions to take to protect people living near such locations. He said even the World Health Organisation (WHO) in its press release in 31 May 2011, stated that WHO/International Agency for Research on Cancer (IARC) had classified radiofrequency electromagnetic fields at possible carcinogenic to humans (Group 2B) based on an increased risk for glioma, a malignant type of brain cancer.
 
 
Participating in a debate, Rajan S Mathews, Director General of Cellular Operators' Association of India (COAI), told Mr Munshi that EMF radiation from mobile tower antennae is classified under group 2B “possibly carcinogenic” just like pickles and coffee. To this, Mr Munshi replied saying, "But I do have a choice whether to eat pickle or coffee. Citizens don’t have any choice on the radiation penetrating their residences 24x7. Health is our fundamental right and cannot be sacrificed for wealth of a few individuals and corporates.”
 
 
Talking about the latest blame game for call drops, the COAI is saying that this is happening because of lower signal levels as we have adopted a standard that is one tenth of the international standard of radiation. Mr Munshi, says, "It is incorrect to say that call drops are due to reduction in norms. Norms are only on paper. The actual radiation levels at the ground level did not change with the change in norms on 1 September 2012. Mr R Chandrashekhar, former Secretary of DoT has mentioned on a TV debate that 95% of the mobile tower antennae in India were below the reduced norms as on September 2012."
 
Even TRAI Chairman RS Sharma has blamed telecom companies for call drops. “The problem has increased in the past 5-6 months. In this time the spectrum has not shrunk suddenly. In fact, if at all, more spectrum has been made available. At the same time the customer base is growing at a steady rate,” Mr Sharma was quoted in a news report.
 
Mr Munshi says the government, authorities and mobile operators say there is no conclusive evidence of the ill-effects of mobile tower radiations. Citing the precautionary principle from laws of the European Union, he said, "If an action or policy has a suspected risk of causing harm to the public or to the environment, the action or policy is harmful, the burden of proof that it is not harmful falls on those taking an action. The principle implies that there is a social responsibility to protect the public from exposure to harm, when scientific investigation has found a plausible risk. Why the Indian government follow the same principle and ask mobile companies to reduce power of transmission similar to global practice, he questions. 

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COMMENTS

snvaidya

8 months ago

Congratulations for posting this important article on the subject. Not many people are aware of what is happening in this field and the harm being done to the public by intense microwave radiation.

Dr. S. N. Vaidya

Ralph Rau

9 months ago

The Mobile Phone spells disaster! For a long and healthy life depend on your land line and try to avoid your mobile phone - especially when near a landline.

Sankaranarayanan Vaitheeswaran

9 months ago

Thanks to Mr. Munshi for the informative and educative presentation. However, it is really disheartening to note that we are in a choiceness situation waiting to get ill-health due to this radiation. When I sit in my terrace and look around, it is really a horrifying scene - we are surrounded by such towers from all the four sides. Every third building which is slightly taller has the big microwave tower with discs projecting in almost all directions.
What we cannot measure - we cannot monitor. So, if we have to monitor and report to the government or any other authorities of the levels of radiation, then we should be equipped with some means to measure them.
Are there any simple devices which we can buy and use to determine the levels ?.

sunil kumar

9 months ago

sir,which department of Govt should be responsible - Telecom/IT/Heathcare or any other

dilip mody

9 months ago

Can you give details like size,etc of

Mesh to be installed on the windows please.

Thanks,
Dilip Mody

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