Archive | May, 2015

Why can’t India attract research talent?

A few Takshashila alumni and friends Kunal Singh, Varun Goel & Aravind Ilamaran have started a new opinion-analysis portal called Policy Wonks.

I write about how there’s an oversupply of PhDs and research talent in the US and elsewhere, but not enough of them have come knocking on India’s doors just yet:

American academia has been in trouble for the better part of the past decade. Till the advent of MOOCs, productivity has not changed much in higher education for about a century. As a result, university education has seen a high amount of inflation. To keep costs low, universities started supplying ever higher number of PhD students – who can be cheap research and teaching labour as RAs and TAs respectively. Thanks to this oversupply, you have hundreds of talented people applying for each tenure-track position in the sciences, for example. As Ajit Balakrishnan points out in Business Standard, this has led to the creation of a lot of “adjunct” temporary faculty positions in a space considered to be dominated by tenure.

Unfortunately, India has been poorly positioned to take advantage in this acute oversupply of talented PhDs and post doctoral researchers. This is especially surprising given that a significant number of them are Indian or of Indian origin. With the salient exception of a few people and a few Indian institutions, most researchers prefer to eke out a modest living on uncertain terms rather than come back and work in Indian academia.

We witnessed a smaller version of something similar happening when NASA started getting budget cuts in the last two decades, thereby being forced to lay off good aerospace talent – again with a lot of them being of Indian origin. India’s space agency ISRO benefited little by maintaining an insular hiring policy. Quite unfortunate for an organisation whose second director – Dr UR Rao – was wooed back to India by a visionary Vikram Sarabhai well before India had a dedicated space agency.

[Read the full piece over at Policy Wonks]

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Arranging a market for lemons

My fellow blogger Karthik Shashidhar (and his wife Priyanka Bharadwaj) started an interesting conversation on his personal blog on the grand old market in India: arranged marriage. They assert that the arranged marriage market has become increasingly illiquid, and hence unattractive.

Both Priyanka and Karthik raise an important point that can look obvious in hindsight – that as people exit the arranged marriage market in India, the market becomes smaller, more “illiquid”, and as people are unable to find suitable partners there – they continue to exit. Almost all markets have positive network effects too – the more the number of “buyers” and “sellers”, the healthier a market usually is. However, in a society divided by caste, class and religion, marriage markets were always small and illiquid, and it requires greater evidence to establish that arranged marriage markets today are necessarily less liquid than markets of previous generations.

Marriage is a curious contract that is both a labour union and a union of capital, which usually ends up creating a larger labour pool over time. ‘Arranging’ the marriages of suitable men and women has been the done thing for centuries if not millennia among large numbers of people. Finding a spouse involves heavy search costs no matter how you go about it and failed relationships constitute a significant sunk cost too. (Though apparently, people can learn from their failures. As Douglas Adams said it, “You live and you learn. At any rate, you live.”) There’s also significant information asymmetry involved – marriage is a serious affair after all, and you need to know a good amount of details any potential spouse before entering into such a contract. Further, in large families, it wasn’t just two individuals who got married, but two households.

“Arrangements” were an ideal solution to the marriage market, and it can be argued that arranged marriages provided better outcomes. Extended families and networks solved the search cost challenge, and the same networks could also solve the information asymmetry challenge – of whether the spouses were well off, were from “good families” and more.

I would argue that in the marriage market in India today, two things have happened: one, that the nature of information asymmetry has significantly changed; and two, that the arranged marriage market has become a market for lemons.

The nature of information asymmetry has changed because people look for different things in spouses – for shared interests, temperaments, greater personal compatibility and more. While financial and familial backgrounds may still matter, the asymmetry in that information is usually more readily solved. Traditional arranged marriage market mechanisms and networks fail to provide symmetry in the new kinds of information, and this makes the arranged market start failing. Also, this is happening in parallel with dating and other competing mechanisms that are making new marriage markets.

So this means that a “good” partner is unable to differentiate themselves from a “bad” partner in an arranged marriage market – and the lack of differentiation results in an overall devaluation of the “goodness” of a partner or a match. As the more high-value partners and people start moving out of the arranged marriage market to others, you are increasingly left with people who continue in the arranged marriage market because of poor choice – with them being adversely selected. Thus arranged marriage markets can become markets for lemons.

This is not to say that it’s impossible to have a happy arranged marriage these days. Nor is it inconceivable that both technology and society can evolve new ways of disrupting markets for lemons. The classic lemon market, that of second-hand cars in the US, is now a thriving one where information asymmetry is a thing of the past.

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