Tit for tat regulations

FE reports,

The foreign banks from many countries may be pressing hard for liberalised Indian banking rules to venture into or expand in the domestic market, but it has not been an easy task for State Bank of India, the country’s largest bank, to set up normal banking activities in some developed countries.

Of late, the bank, which has a presence in 30 countries, has faced regulatory resistance in three countries -- US, Singapore and Australia – in its foray into full-fledged banking operations.

More interesting part here

In the US also, the bank’s long-drawn efforts to expand its operations have not succeeded so far. Earlier, US authorities had not allowed the bank’s move a few years ago of expanding its activities saying that it has to put up a complete secured system to prevent money laundering and fraudulent activities.

Though the bank has already complied with the US authorities’ instructions on this front, there is no change of stance by the authorities.

“They are not telling us clearly what is preventing them from giving us more freedom to expand our activities,’’ said sources at SBI.

In fact, observers point out that the attitude of several banking regulators towards Indian banks in recent times has compelled Reserve Bank of India (RBI) to adopt counter measures by not allowing foreign banks to expand their operations in domestic market.

“It is ok, if it is a tit for tat by the RBI. But RBI should allow expansion of at least those banks which belong to countries where Indian banks are not facing any problems,’’ commented a prominent foreign banker.

The last comment by the prominent foreign banker reminded me of prisoners dilemma ( Wikipedia). I would suggest you to read the whole thing, or atleast this

In his book The Evolution of Cooperation (1984), Robert Axelrod explored an extension to the classical PD scenario, which he called the iterated prisoner's dilemma (IPD). In this, participants have to choose their mutual strategy again and again, and have memory of their previous encounters. Axelrod invited academic colleagues all over the world to devise computer strategies to compete in an IPD tournament. The programs that were entered varied widely in algorithmic complexity; initial hostility; capacity for forgiveness; and so forth.

Axelrod discovered that when these encounters were repeated over a long period of time with many players, each with different strategies, "greedy" strategies tended to do very poorly in the long run while more "altruistic" strategies did better, as judged purely by self-interest. He used this to show a possible mechanism for the evolution of altruistic behaviour from mechanisms that are initially purely selfish, by natural selection.

The best deterministic strategy was found to be "Tit for Tat", which Anatol Rapoport developed and entered into the tournament. It was the simplest of any program entered, containing only four lines of BASIC, and won the contest. The strategy is simply to cooperate on the first iteration of the game; after that, the player does what his opponent did on the previous move. A slightly better strategy is "Tit for Tat with forgiveness". When the opponent defects, on the next move, the player sometimes cooperates anyway, with a small probability (around 1%-5%). This allows for occasional recovery from getting trapped in a cycle of defections. The exact probability depends on the line-up of opponents. "Tit for Tat with forgiveness" is best when miscommunication is introduced to the game — when one's move is incorrectly reported to the opponent.

I dont know if this is also an example of Beggar thy neighbour policies.

Socialised healthcare

When someone asked Gandhi what he thought about western civilisation he famously replied 'it will be a good a idea'. I guess you can use the same answer if someone were to ask what you about public health system in India. (We stand 126th among 159 countries according to the latest Human Development Report.)

Check this out. In villages near Madurai people go to primary health centres in good number only when crops fail, and they cant afford Rs 10 to private doctors, sending signs to HLL salesmen about how his business going to be in that season, and making a bigger statement about the state of free healthcare in the country.

A July 2005, report on Delhi doctors by World Bank says "doctors in the fee-for-service private sector are closer in practice to their knowledge frontier than those in the fixed-salary public sector. Under-qualified private sector doctors, even though they know less, provide better care on average than their better-qualified counterparts in the public sector." I know i am being unfair to thousands of healthcare professionals in government run hospitals, but i dont think i would be wrong in joining those who criticise how these hospitals and healthcare centres are run.

So, does that mean we will be better off if they are all run by private sector? It might be instructive to compare countries which provide socialised healthcare with those that dont. This piece from Economist website's new feature CORRESPONDENT'S DIARY does just that:

America is the only advanced country that does not have universal health care, with a "single payer", the government, organising the system. Instead, America argues that competition between private-sector insurance companies will cut costs and improve services. If only...

As Paul Krugman, an economist and a New York Times columnist, has pointed out, universal health-care systems minimise their risk by covering everyone, ill and healthy alike. Private-sector insurers minimise theirs by avoiding the sick. So woe betide you if you have a pre-existing condition. Bad luck, too, if you have a catastrophic illness and then lose your job.

At some point, surely, a tipping point in public opinion will be reached. It would help if America's bosses lent a hand: after all, $1,500 of the price of a car from loss-making General Motors goes to pay for health care. I remember interviewing Howard Schultz, the boss of Starbucks. Mr Schultz gives his employees, including part-timers, good health cover, but he also lobbies for the burden of care to be taken off employers' backs, and he cannot understand why so few other bosses are willing to join his campaign.

Perhaps the reason is that the obvious alternative would be "socialised medicine", a phrase that sets alarm bells ringing for the average American. But, as I say in arguments with bemused American friends, the country seems happy enough to have "socialised" roads, schools and armed forces. And what do they get with their present health system? They get lower life expectancy than in most of Europe, and higher infant mortality than in Cuba―even though, at around 15% of its GDP, America's spending on health care is the highest in the world.

None of this convinces my friends. They counter with horror stories about Britain's National Health Service, or the growing queues in the Canadian system. I cite France and Belgium in retaliation. The fundamental problem, of course, is that no health-care system can be perfect when demand is infinite and supply is not. But America sees itself as a moral country. Can it be morally right that someone hit by accident or illness should then be hit by an enormous hospital bill?

Your thoughts?

Life insurance for HIV sufferers

Economist writes

DIAGNOSED with HIV 23 years ago, David Patient thought he would never see the day when he could insure his life. Until the launch late last year of AllLife, an innovative insurance newcomer, the few life insurers taking on clients with HIV offered very limited cover and charged prohibitive premiums. But AllLife is specifically targeting customers carrying the virus, offering them more affordable insurance for up to 3m rand ($410,000). They are now able to protect their loved ones and get mortgages. This is changing perceptions of a disease often considered to be a death sentence.

The average probability of AIDS death in South Africa would appear to make life cover prohibitively costly for people with HIV. But extremes rather than averages apply to HIV/AIDS: people who monitor their health and are treated tend to do well; most of the rest die quickly when AIDS sets in. The first group's risk profile is no worse than diabetics', according to AllLife. To maintain their cover, clients have to go for regular blood tests and take antiretroviral medication when needed. AllLife sends reminders for tests and monitors results. This helps clients to stay alive—and AllLife to keep risks down. Although its cover costs two to five times more than standard life insurance, it is much cheaper than what was available before.
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Life insurance remains beyond the means of millions of South Africans—whether they carry the virus or not—and very few apply for cover. Many of those who discover they are HIV positive withdraw because of confidentiality fears. But according to the Life Offices' Association, an insurance body, some established firms will soon come up with affordable products, too. It took decades before diabetics could insure their lives; let's hope people with HIV do not need to wait much longer.

Reading about AIDS, its public health implications, socio-economic profile of its victims and all the calls for donations to help them, i had always assumed that treating aids is a perfect example for a justifiable government intervention - and that private sector had little role to play, except in terms of charity. Bill Emmott, former editor of the economist once said that a key function of journalism is to challenge assumptions. This piece certainly challenged mine.

Even now, I don't, in any way, think that governments should keep away from dealing with AIDS. But, i look at this as an example of problems that businesses can address - even if they have to work a little harder for it.

And CK Prahlad has more examples in Fortune at the Bottom of the Pyramid.

People bought sugar; government sour

Business Line reports

The Centre has issued show-cause to four mills in western Uttar Pradesh (UP) that have been found to have sold sugar in excess of the free sale quotas (FSQ) allocated to them.

"We have sent show-cause to four mills and they have been given three weeks' time to reply to the notices," a top Food Ministry official told Business Line.
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Under the Sugar Control Order, the Centre decides how much sugar a mill can sell in the open market during any particular month. Mills are not allowed to dispose of or even remove sugar from their bonded godowns without an FSQ release order from the Directorate.

"The mills to whom the notices have been sent sold excess sugar during the festival period last month. They wanted to make the maximum out of the peak festival demand in the Delhi market and dispose of stocks before the start of the new crushing season," the official said. In UP, mills begin crushing operations from early November.

Meanwhile FE reports, "Bajaj Hindusthan Ltd, the country’s biggest sugar maker, and rival mills plan to more than double sales of ethanol to meet government alternative fuel targets, helping boost earnings as prices of the sweetener slump."

protection from destruction is creation

when we look at markets - we look at what it creates. from food to telecom, the fruits of production are easy to identify.

but what about destruction.
dont markets have a role to protect people from destruction. often, when calamity strike when we think it is solely the duty of the government to come to aid of the people. surely non profits do play a role but that does not take away the a fraction of the responsibility the government of the day faces

but what if there is no proper government ??

here is a sadly interesting example of the flood in somalia.
"Hassan said the problem lies in the fact that the country has been without a government since 1991. No one has been able "to de-silt the riverbed or manage the sluice gates on the rivers or adjoining canals. We had one canal but it is no longer functioning". the entire story is available here.
if any of the few readers do come across interesting examples of how markets work or mostly dont work in times of destruction, pl. do leave a comment or mail us!

Vanaspati producers complain buyers are getting a good deal

Financial Express reports,

In a memorandum to the finance minister P Chidambaram and the commerce minister Kamal Nath, the executive director of Indian Vanaspati Producers’ Association (IVPA) IV Mehra said, “Under the free trade agreements with Nepal and Sri Lanka vanaspati, margarine and bakery shortening are against zero duty. These are the products produced by vanaspati industry in the country. Therefore, the industry is adversely affected by cheap imports of these finished products.”

Imports of wheat affects salt production!

Business Standard reports

With the heavy import of wheat and fertiliser at the Kandla port, salt manufactures here are suffering a production loss of 8,000 tonnes per day (tpd) due to unavailability of wagons for the transportation of salts.

Hiralal Parakh, president of Kandla Salt Manufacturers Association (KSMA), said, "The salt manufacturers in Kandla are suffering losses due to the diversion of railway wagons for transportation of imported wheat and fertilisers."

He further said that the KSMA does not oppose the import of wheat or fertilisers but the government authorities as well as the Centre must take due steps to safeguard the interest of salt manufacturers in Kandla.

According to Parakh, the association had approached the railway authorities as well as the Centre but no positive steps had been taken by any of them.

"Accumulation of 20 lakh metric tonnes of salt due to unavailability of enough wagons from the Indian Railways, has compelled the salt producers to reduce the production," he adds.

It's interesting to see why wheat imports shot up in the first place. Indiatogether blames US. Do check this, this and this