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Tuesday, August 23, 2005

Six eggs a year

A common canard of the Left:
Rural India is in acute distress, which is bound to turn to turmoil if its crisis is not addressed. It is not too late. There is a strong case for a universal employment guarantee and a universal Public Distribution System.
This is from the strap of a recent op-ed article by Utsa Patnaik in the Hindu. Well, Aadisht Khanna finds fault with some of her assertions, and takes her on. First, he summarises the points she is making:
All right, so what is actually going on? Basically, Professor Patnaik has made the following assertions:
* Rural India is facing an employment crisis
* This is because of the economic policies pursued in the past fifteen years.
* The proof of this is that people are eating much less grain.
* The assertion that people are eating less grain is borne out by data from the National Sample Survey, which measures consumption and expenditure across India.
Okay. Let's take this up.
Aadisht goes through the data, some of which he lists, and finds that Patnaik's conclusions are drawn from selective data, and are, thus, simplistic. He writes:
There is a decline in rice and wheat consumption, and also in the consumption of dal... But at the same time, the consumption of other stuff has risen- milk, vegetables of all sorts, meat of all sorts (though fish has shown the most dramatic rise), and most notably eggs- the consumption of those has doubled.

And this suggests something that you would expect a Professor of Economics to know- the consumption pattern looks suspiciously like that of Giffen goods.

Normal goods are the ones which you buy more of when you have more money. Giffen goods, on the other hand, are goods which you buy less of when you have less money- because you now cut down on your consumption of that good, and use the savings to buy more of something else.

What's the classical example of Giffen goods used in economics textbooks? That when your income rises, you buy less bread and more meat- exactly what we see happening in rural India from 1988 to 2000.
He examines if the averages are skewed by the rich getting markedly richer, but finds, in other NSS reports, that "the consumption of people in the
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