Wednesday, March 14, 2007
Lighting Up Rural India: Analysis
Mr. Harish Hande has been for the past few years been working to bring electricity to the countryside, through his solar-energy company Selco India. By servicing the poor rural population, he is "tapping an undesirable market", and doing something no one really dares to do. All this produces spillover benefits. In fact, these are so significant, that the same ideas are being implemented in the States, and in Europe, demand for solar cells are rising such that it is now threatening the existence of Selco India.
As mentioned, the firm's transactions have produced spillover benefits. Spillover benefits are a result of a transaction, and will benefit a third party. Usually, as in this case as well, this third party is society. It is a market failure, as there is an under-allocation of that product in the market. In this article specifically, we can see that the children of the rose pickers have increased study time due to the better lighting from the lights their parents bought. This will eventually lead to better educational standards in the region, and thus each individual will be able to contribute more entrepreneurship and intellectual resources to the society. Not only that, the families have to suffer from fewer fumes, which are created by gas lamps. But those are miniscule in comparison with the bigger picture.
Here is an opportunity to dealing with poverty. Although the firm still behaves like any other firm, as in they would like to maximize profits, Mr. Hande has a dream of eradicating poverty in his region. This is the reason that he has "tapped the undesirable market". However, as he ventured out, he was told that rural people don't pay their loans, and naturally they do not have the money to buy the captial right away. Acting on the principle that necessity is the mother of all invention, "innovative financial transactions" were called for.
His efforts have paid off, as now only "10% of his clients default". The spillover benefit here is the intellectual contribution made to the business world. We thus now have a model for future business dealings with the less-privileged. This type of innovation is good for the society and has a special economic term; technology spillover.
Further, those following his example have unleashed a wave of entrepreneurship, such as the rick-shaw driver in Bangalore who made considerably more when putting Hande's product to alternative use. This wave of entrepreneurship will ultimately lead to developments in all areas.
Thus, solar cells could be called a merit good. Merit goods are goods that are under-provided by the free market, and thus under-consumed by consumers. They are also deemed to be of positive benefit to the society, so their consumption should be increased. In this market the Selco India product is being under-provided, and as a result is under-consumed, and it is of positive benefit to society.
However, the company is being threatened by increased European demand for solar energy. Based on this information, it is safe to say that the solar-cell industry is an increasing cost industry (fig. 1.1).
This means that as more solar-cells are produced, the more expensive it becomes to produce them. Thus, when European demand goes up, so do the costs for Selco India. It is therefore only natural that they would experience losses of $63,000.
Evaluation
Naturally, as a positive externality in itself shows an under-allocation of resources in the market, and the competition from Europe, it looks as though Selco India may need some help in producing the cells that help so many. Here the government could come into play. Considering the costs for Selco India have increased dramatically due to increased European demand, and the already existing need to increase production, a subsidy appears to be in order. The subsidy would increase the output of Selco India and any other firm like it by helping the firm to cover the cost, such that it can produce at a desirable output. As shown in fig. 1.2, a subsidy would correct the market failure and bring solar energy, along with all its benefits, to rural India.
As mentioned, the firm's transactions have produced spillover benefits. Spillover benefits are a result of a transaction, and will benefit a third party. Usually, as in this case as well, this third party is society. It is a market failure, as there is an under-allocation of that product in the market. In this article specifically, we can see that the children of the rose pickers have increased study time due to the better lighting from the lights their parents bought. This will eventually lead to better educational standards in the region, and thus each individual will be able to contribute more entrepreneurship and intellectual resources to the society. Not only that, the families have to suffer from fewer fumes, which are created by gas lamps. But those are miniscule in comparison with the bigger picture.
Here is an opportunity to dealing with poverty. Although the firm still behaves like any other firm, as in they would like to maximize profits, Mr. Hande has a dream of eradicating poverty in his region. This is the reason that he has "tapped the undesirable market". However, as he ventured out, he was told that rural people don't pay their loans, and naturally they do not have the money to buy the captial right away. Acting on the principle that necessity is the mother of all invention, "innovative financial transactions" were called for.
His efforts have paid off, as now only "10% of his clients default". The spillover benefit here is the intellectual contribution made to the business world. We thus now have a model for future business dealings with the less-privileged. This type of innovation is good for the society and has a special economic term; technology spillover.
Further, those following his example have unleashed a wave of entrepreneurship, such as the rick-shaw driver in Bangalore who made considerably more when putting Hande's product to alternative use. This wave of entrepreneurship will ultimately lead to developments in all areas.
Thus, solar cells could be called a merit good. Merit goods are goods that are under-provided by the free market, and thus under-consumed by consumers. They are also deemed to be of positive benefit to the society, so their consumption should be increased. In this market the Selco India product is being under-provided, and as a result is under-consumed, and it is of positive benefit to society.
However, the company is being threatened by increased European demand for solar energy. Based on this information, it is safe to say that the solar-cell industry is an increasing cost industry (fig. 1.1).
This means that as more solar-cells are produced, the more expensive it becomes to produce them. Thus, when European demand goes up, so do the costs for Selco India. It is therefore only natural that they would experience losses of $63,000.
Evaluation
Naturally, as a positive externality in itself shows an under-allocation of resources in the market, and the competition from Europe, it looks as though Selco India may need some help in producing the cells that help so many. Here the government could come into play. Considering the costs for Selco India have increased dramatically due to increased European demand, and the already existing need to increase production, a subsidy appears to be in order. The subsidy would increase the output of Selco India and any other firm like it by helping the firm to cover the cost, such that it can produce at a desirable output. As shown in fig. 1.2, a subsidy would correct the market failure and bring solar energy, along with all its benefits, to rural India.
Tuesday, March 13, 2007
Lighting Up Rural India: Second Draft Analysis
Mr. Harish Hande has been for the past few years been working to bring electricity to the countryside, through his solar-energy company Selco India. By servicing the poor rural population, he is "tapping an undesirable market", and doing something no one really dares to do. All this has produced positive externalities and spillover benefits. In fact, these are so significant, that the same ideas are being implemented in the States, and in Europe, demand for solar cells are rising such that it is now threatening the existence of Selco India.
As mentioned, the firm's transactions have produced spillover benefits. Spillover benefits are a result of a transaction, and will be enjoyed by a third party. Usually, as in this case as well, this third party is society. It is a market failure, as there is an under-allocation of that product in the market. In this article specifically, we can see that the children of the rose pickers have increased study time due to the better lighting from the lights their parents bought. This will eventually lead to better educational standards in the region, and thus each individual will be able to contribute more entrepreneurship and intellectual resources to the society. Not only that, the families have to suffer from fewer fumes, which are created by gas lamps. But those are miniscule in comparison with the bigger picture.
Here is a possible start to dealing with poverty. Although the firm still behaves like any other firm, as in they would like to maximize profits, Mr. Hande has a dream of eradicating poverty in his region. This is the reason that he has "tapped the undesirable market". However, as he ventured out, he was told that rural people don't pay their loans, and naturally they do not have the money to buy the captial right away. Acting on the principle that necessity is the mother of all invention, "innovative financial transactions" were called for.
His efforts have paid off, as now only "10% of his clients default". The spillover benefit here is the intellectual contribution made to the business world. We now have a model for future business dealings with the less-privileged.
Also, those following his example have unleashed a wave of entrepreneurship, such as the rick-shaw driver in Bangalore who made considerably more when putting Hande's product to alternative use. This wave of entrepreneurship will ultimately lead to developments in all areas. This type of innovation is good for the society and has a special economic term; technology spillover.
Thus, solar cells could be called a merit good. Merit goods are goods that are under-provided by the market, and thus under-consumed by consumers. They are also deemed to be of positive benefit to the society, so their consumption should be increased. In this market the Selco India product is being under-provided, and as a result is under-consumed, and it is of positive benefit to society.
However, it is being threatened by increased European demand for solar energy. Based on this information, it is safe to say that the solar-cell industry is an increasing cost industry (fig. 1.1). This means that as more solar-cells are produced, the more expensive it becomes to produce them. Thus, when European demand goes up, so do the costs for Selco India. It is therefore only natural that they would experience losses of $63,000.
Naturally, as a positive externality in itself shows an under-allocation of resources in the market, and the competition from Europe, it looks as though Selco India may need some help in producing the cells that help so many. This is where the government could come into play. Seeing as the costs for Selco India have increased dramatically due to increased European demand, and the already existing need to increase production, a subsidy appears to be in order. The subsidy would increase the output of Selco India and any other firm like it by helping the firm to cover the cost, such that it can produce at a desirable output. As shown in fig. 1.2, a subsidy would correct the market failure and bring solar energy, along with all its benefits, to rural India.
As mentioned, the firm's transactions have produced spillover benefits. Spillover benefits are a result of a transaction, and will be enjoyed by a third party. Usually, as in this case as well, this third party is society. It is a market failure, as there is an under-allocation of that product in the market. In this article specifically, we can see that the children of the rose pickers have increased study time due to the better lighting from the lights their parents bought. This will eventually lead to better educational standards in the region, and thus each individual will be able to contribute more entrepreneurship and intellectual resources to the society. Not only that, the families have to suffer from fewer fumes, which are created by gas lamps. But those are miniscule in comparison with the bigger picture.
Here is a possible start to dealing with poverty. Although the firm still behaves like any other firm, as in they would like to maximize profits, Mr. Hande has a dream of eradicating poverty in his region. This is the reason that he has "tapped the undesirable market". However, as he ventured out, he was told that rural people don't pay their loans, and naturally they do not have the money to buy the captial right away. Acting on the principle that necessity is the mother of all invention, "innovative financial transactions" were called for.
His efforts have paid off, as now only "10% of his clients default". The spillover benefit here is the intellectual contribution made to the business world. We now have a model for future business dealings with the less-privileged.
Also, those following his example have unleashed a wave of entrepreneurship, such as the rick-shaw driver in Bangalore who made considerably more when putting Hande's product to alternative use. This wave of entrepreneurship will ultimately lead to developments in all areas. This type of innovation is good for the society and has a special economic term; technology spillover.
Thus, solar cells could be called a merit good. Merit goods are goods that are under-provided by the market, and thus under-consumed by consumers. They are also deemed to be of positive benefit to the society, so their consumption should be increased. In this market the Selco India product is being under-provided, and as a result is under-consumed, and it is of positive benefit to society.
However, it is being threatened by increased European demand for solar energy. Based on this information, it is safe to say that the solar-cell industry is an increasing cost industry (fig. 1.1). This means that as more solar-cells are produced, the more expensive it becomes to produce them. Thus, when European demand goes up, so do the costs for Selco India. It is therefore only natural that they would experience losses of $63,000.
Naturally, as a positive externality in itself shows an under-allocation of resources in the market, and the competition from Europe, it looks as though Selco India may need some help in producing the cells that help so many. This is where the government could come into play. Seeing as the costs for Selco India have increased dramatically due to increased European demand, and the already existing need to increase production, a subsidy appears to be in order. The subsidy would increase the output of Selco India and any other firm like it by helping the firm to cover the cost, such that it can produce at a desirable output. As shown in fig. 1.2, a subsidy would correct the market failure and bring solar energy, along with all its benefits, to rural India.
Monday, March 12, 2007
Lighting Up Rural India: A Rough Draft [Analysis]
http://money.cnn.com/magazines/business2/business2_archive/2006/12/01/8394996/index.htm?postversion=2007030120
[THE GRAPHS WILL COME LATER. THEY HAVE BEEN MADE. CURRENT WORD COUNT WITHOUT CAPTIONS IS 591, SO WITH THE CAPTIONS I SHOULD BE OK]
Mr. Harish Hande has been for the past few years been working to bring electricity to the countryside, through his solar-energy company Selco India. By servicing the poor rural population, he is "tapping an undesirable market", and doing something no one really dares to do. All this has produced positive externalities and spill-over benefits. In fact, these are so significant, that the same ideas are being implemented in the States, and in Europe, demand for solar cells are rising such that it is now threatening the existence of Selco India.
As mentioned, the firm's transactions have produced spill-over benefits. Spill-over benefits are a result of a transaction, and will be enjoyed by a third party. Usually, as in this case as well, this third party is society. It is a market failure, as there is an under-allocation of that product in the market. In this article specifically, we can see that the children of the rose pickers have increased study time due to the better lighting from the lights their parents bought. This will eventually lead to better educational standards in the region, and thus each individual will be able to contribute more entrepreneurship and intellectual resources to the society. Not only that, the families have to suffer from fewer fumes, which are created by gas lamps. But those are miniscule in comparison with the bigger picture.
Here is a possible start to dealing with poverty. Although the firm still behaves like any other firm, as in they would like to maximize profits, Mr. Hande has a dream of eradicating poverty in his region. This is the reason that he has "tapped the undesirable market". However, as he ventured out, he was told that rural people don't pay their loans, and naturally they do not have the money to buy the captial right away. Acting on the principle that necessity is the mother of all invention, "innovative financial transactions" were called for.
However, he has defied those who discouraged him, as now only "10% of his clients default". This could also serve as a model for future business dealings with the less-privileged, thus benefiting society.
Also, those following his example have unleashed a wave of entrepreneurship, such as the rick-shaw driver in Bangalore who made considerably more when putting Hande's product to alternative use. This wave of entrepreneurship will ultimately lead to developments in all areas. This type of innovation is good for the society.
However, it is being threatened by increased European demand for solar energy. Based on this information, it is safe to say that the solar-cell industry is an increasing cost industry (fig. 1.1). This means that as more solar-cells are produced, the more expensive it becomes to produce them. Thus, when European demand goes up, so do the costs for Selco India. It is therefore only natural that they would experience losses of $63,000.
Naturally, as a positive externality in itself shows an under-allocation of resources in the market, and the competition from Europe, it looks as though Selco India may need some help in producing the cells that help so many. Thus we could even go so far as to claim that the solar-cells will become a merit good. A merit good is under-provided by the market, which the Selco India product is, and as a result will be under-consumed, as they are. This is where the government could come into play. As shown in fig. 1.2, a subsidy would correct the market failure and bring solar energy, along with all its benefits, to rural India.
[THE GRAPHS WILL COME LATER. THEY HAVE BEEN MADE. CURRENT WORD COUNT WITHOUT CAPTIONS IS 591, SO WITH THE CAPTIONS I SHOULD BE OK]
Mr. Harish Hande has been for the past few years been working to bring electricity to the countryside, through his solar-energy company Selco India. By servicing the poor rural population, he is "tapping an undesirable market", and doing something no one really dares to do. All this has produced positive externalities and spill-over benefits. In fact, these are so significant, that the same ideas are being implemented in the States, and in Europe, demand for solar cells are rising such that it is now threatening the existence of Selco India.
As mentioned, the firm's transactions have produced spill-over benefits. Spill-over benefits are a result of a transaction, and will be enjoyed by a third party. Usually, as in this case as well, this third party is society. It is a market failure, as there is an under-allocation of that product in the market. In this article specifically, we can see that the children of the rose pickers have increased study time due to the better lighting from the lights their parents bought. This will eventually lead to better educational standards in the region, and thus each individual will be able to contribute more entrepreneurship and intellectual resources to the society. Not only that, the families have to suffer from fewer fumes, which are created by gas lamps. But those are miniscule in comparison with the bigger picture.
Here is a possible start to dealing with poverty. Although the firm still behaves like any other firm, as in they would like to maximize profits, Mr. Hande has a dream of eradicating poverty in his region. This is the reason that he has "tapped the undesirable market". However, as he ventured out, he was told that rural people don't pay their loans, and naturally they do not have the money to buy the captial right away. Acting on the principle that necessity is the mother of all invention, "innovative financial transactions" were called for.
However, he has defied those who discouraged him, as now only "10% of his clients default". This could also serve as a model for future business dealings with the less-privileged, thus benefiting society.
Also, those following his example have unleashed a wave of entrepreneurship, such as the rick-shaw driver in Bangalore who made considerably more when putting Hande's product to alternative use. This wave of entrepreneurship will ultimately lead to developments in all areas. This type of innovation is good for the society.
However, it is being threatened by increased European demand for solar energy. Based on this information, it is safe to say that the solar-cell industry is an increasing cost industry (fig. 1.1). This means that as more solar-cells are produced, the more expensive it becomes to produce them. Thus, when European demand goes up, so do the costs for Selco India. It is therefore only natural that they would experience losses of $63,000.
Naturally, as a positive externality in itself shows an under-allocation of resources in the market, and the competition from Europe, it looks as though Selco India may need some help in producing the cells that help so many. Thus we could even go so far as to claim that the solar-cells will become a merit good. A merit good is under-provided by the market, which the Selco India product is, and as a result will be under-consumed, as they are. This is where the government could come into play. As shown in fig. 1.2, a subsidy would correct the market failure and bring solar energy, along with all its benefits, to rural India.
Sunday, March 11, 2007
Saturday, March 10, 2007
Marco's Extended Essay Kicks Off In Blog Form
Click Here To Go To Marco's Extended Essay
The Extended Essay is just around the corner.
Wait that's a lie.
It's here.
I'm prepared.
My Extended Essay Blog has been created, and now there's no way to stop it. And let's face it ... who wants to?
There will now be a permanent link to the Extended Essay page on the right hand side of this page.
Quick Preview:
Although I do not yet know what my Extended Essay will be about, I already know which direction it will go in, and who has led me there.
To read the entire post, click on the link above to go to the Extended Essay page.
Lighting Up Rural India: A Crude Analysis
http://money.cnn.com/magazines/business2/business2_archive/2006/12/01/8394996/index.htm?postversion=2007030120
In class, and in homework, we have defined an externality as a by-product of a transaction between two parties. In the case of my article, I would say that the transaction is between the company Selco India, and the poor people of the rural community. The externalities are positive ones, and come in various forms, which I will discuss.
However, the company Selco India is not a corporation. It is rather a company whose target is still to earn profits, but whose goal is to help the poor. This is what is meant by "tapping an undesirable market."
Now, for the spill-over benefits. These can be equated to positive externalities, as in, they are one and the same.
The positive externalities that I have identified from the article are;
- increased study time for the children of rural communities;
- better productivity of the rose pickers, as they can now use both hands to pick roses;
- more earnings due to the better productivity, but also to increased entrepreneurialism;
- fewer fumes from the gas lamps;
all due to the increased lighting gained from the solar panels.
However, the spill-over benefits also include 'business experience', as I like to name it. Dealing with people living on less than $4 a day means that "innovative financial transactions" are called for - an innovative way to allow poor people to take out a loan. This can then be taken into other situations, and used as a role-model for doing business with the less privileged.
Also, the idea is also being implemented in the US now. Labelling this a spill-over benefit assumes that the transaction does society good. In fact it does; solar energy is better than nuclear energy.
I also like the little rickshaw owner's anecdote. It shows clearly the infinite entrepreneurialism that exists in society, and how an idea, like the one that Selco India have, can have such a profound effect on so many people.
Finally, there are a few things I am worried about. Firstly, I am not sure whether increased European demand for solar energy is relevant or not. And secondly, I am not sure where to start graphing.
In class, and in homework, we have defined an externality as a by-product of a transaction between two parties. In the case of my article, I would say that the transaction is between the company Selco India, and the poor people of the rural community. The externalities are positive ones, and come in various forms, which I will discuss.
However, the company Selco India is not a corporation. It is rather a company whose target is still to earn profits, but whose goal is to help the poor. This is what is meant by "tapping an undesirable market."
Now, for the spill-over benefits. These can be equated to positive externalities, as in, they are one and the same.
The positive externalities that I have identified from the article are;
- increased study time for the children of rural communities;
- better productivity of the rose pickers, as they can now use both hands to pick roses;
- more earnings due to the better productivity, but also to increased entrepreneurialism;
- fewer fumes from the gas lamps;
all due to the increased lighting gained from the solar panels.
However, the spill-over benefits also include 'business experience', as I like to name it. Dealing with people living on less than $4 a day means that "innovative financial transactions" are called for - an innovative way to allow poor people to take out a loan. This can then be taken into other situations, and used as a role-model for doing business with the less privileged.
Also, the idea is also being implemented in the US now. Labelling this a spill-over benefit assumes that the transaction does society good. In fact it does; solar energy is better than nuclear energy.
I also like the little rickshaw owner's anecdote. It shows clearly the infinite entrepreneurialism that exists in society, and how an idea, like the one that Selco India have, can have such a profound effect on so many people.
Finally, there are a few things I am worried about. Firstly, I am not sure whether increased European demand for solar energy is relevant or not. And secondly, I am not sure where to start graphing.
Tuesday, March 6, 2007
The Coase Theorem Is The Low Point Of Economic Study
Sorry to say it, but when doing my homework, I had to research what I believe to be an example of useless economic study. The idea of the Coase Theorem being in any way realistic or even ethically correct is morally wrong. The whole concept is completely preposterous.
In the reading packet, on page 211, they put forth the idea of Dick buying a dog which irritates Jane. Jane thus decides to enter negotiations with Dick with the intention to get rid of the dog. Already here there is a major flaw. Who says that Jane should pay anything for the dog that she didn't buy? If what the reading packet says is true, then Bill could just buy dogs that annoy Jane, and Jane would feel compelled to pay him for her peace. Morally wrong.
Regardless, the argument continues by saying that the dog is worth a certain value to Dick, say $500, and peace is worth a certain value to Jane, say $800. This is stupid. You can't put a value on things like these. They are not quantifiable. It would be incredibly cold and impersonal to place a financial value on something that is so priceless.
This theory goes wrong at every turn, making it the lowest form of economic study that I have encountered.
In the reading packet, on page 211, they put forth the idea of Dick buying a dog which irritates Jane. Jane thus decides to enter negotiations with Dick with the intention to get rid of the dog. Already here there is a major flaw. Who says that Jane should pay anything for the dog that she didn't buy? If what the reading packet says is true, then Bill could just buy dogs that annoy Jane, and Jane would feel compelled to pay him for her peace. Morally wrong.
Regardless, the argument continues by saying that the dog is worth a certain value to Dick, say $500, and peace is worth a certain value to Jane, say $800. This is stupid. You can't put a value on things like these. They are not quantifiable. It would be incredibly cold and impersonal to place a financial value on something that is so priceless.
This theory goes wrong at every turn, making it the lowest form of economic study that I have encountered.
Monday, March 5, 2007
Lighting Up Rural India
http://money.cnn.com/magazines/business2/business2_archive/2006/12/01/8394996/index.htm?postversion=2007030120
Mr Welker,
Could this article be dealing with positive externalities, as the farmers have increased productivity, and could we argue that the solar power is a merit-good, as it is undersupplied in the market?
Mr Welker,
Could this article be dealing with positive externalities, as the farmers have increased productivity, and could we argue that the solar power is a merit-good, as it is undersupplied in the market?
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