Tag: Steve Landsberg

In my extended-family when a kid grows up, the parents push him towards getting an engineering degree. If I may generalise a little more this is largely true for the Kashmiri Pandit community my parents belong to.

Once a youngster gets into an engineering course, all is forgiven and it is automatically assumed that the future will now be bright. And this may have been largely true for the nineties and the noughties, when India’s information technology companies were taking off. But now we are in the teens and the story has changed.

Why? The “indifference principle” is at work. As Steven E. Landsburg writes in The Armchair Economist: “Unless you’re unusual in some way, nothing can ever make you happier than the next best alternative.”

Landsburg explains the indifference principle through an example. As he writes: “Would you rather spend a bright summer day at the shopping mall or the…Fair…If the Fair is more fun than the mall, people flock to the Fair, building up the crowd size until it’s not more fun than the mall.”

So, the Fair doesn’t remain fun anymore because way too many people turn up. Something similar has happened to the engineering degree in India. The country is producing way too many engineers. As analyst Akhilesh Tilotia of Kotak Institutional Equities writes in a recent research note titled How many graduates are required to change a light bulb?: “Engineering graduate output of Indian universities stood at 15 lakh a year in FY2015 [the period between April 1, 2014 and March 31, 2015], up from 3 lakh in FY2005 [the period between April 1, 2004 and March 31, 2005].”

Hence, over the last decade, the number of engineers being produced has gone up five times. In fact Tilotia in his book The Making of India writes: “India in 2016 will graduate more engineers annually (1.5 million) than China (1.1 million) and the United States (0.1 million) combined.” One impact of so many engineers being produced is that it has “reduced the importance of ‘capitation fees’”.

Nevertheless, the trouble is that the employment opportunities for engineers haven’t gone up at the same speed. Information technology companies which were taking in a bulk of the country’s engineering graduates, aren’t recruiting at the same pace as they were in the past. As Tilotia points out: “net hiring in the IT sector has remained stagnant at 2.5 lakh [per year] over the past five years until FY2015”.

In fact, if we leave out the individuals recruited by the BPO sector from these numbers, the number of employees recruited by the information technology companies in the financial year ending as on March 31, 2015, stood at 2.09 lakh. The number of engineers produced, as mentioned earlier, stood at 15 lakh. Hence, there is a clear disconnect between supply and demand. The engineering dream to prosperity has clearly broken down.

The fascination of Indian parents for pushing their children towards getting an engineering degree has been built on hearing too many “success stories” of Indian engineers working in information technology companies in the United States on dollar salaries and other parts of the world.

Even those Indian engineers who have settled in the country and started working for the information technology companies in the nineties and up to the mid noughties, have done well for themselves. And these success stories have had a lot of impact on the thinking of parents.

The trouble is that the story has changed. As Tilotia writes: “IT companies have publicly stated that they are looking to automate meaningful parts of service offerings…Automation of workflow can significantly impact the prospects of entry-level joinees – their work is more susceptible to being automated.” Nevertheless, stories take a long time to unravel.

To conclude, as Landsburg writes: “In order for one activity to make you happier than another, you must be unusual in some way.” Hence, dear parents, the engineering bubble has burst. And as far as children go— please let them be!

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared in the Bangalore Mirror on August 5, 2015

Mathematician John Nash on whose life the movie A Beautiful Mind is based, was recently killed in a car crash. Nash and his wife Alicia were sitting in the back seat of a cab and were not wearing seatbelts. The couple were ejected from the car when it crashed into a guard rail.
The driver of the car escaped death because he was wearing a seatbelt. Chances are that the Nash couple would have survived the crash as well if they had been wearing seatbelts.
Nevertheless, the question to ask here is do seatbelts really save lives? It needs to be borne in mind here that I am not just talking about the individuals in the car, but also about those who are walking on the road.
As Steven E. Landsberg writes in The Armchair Economist—Economics and Everyday Life: “Back when seat belts (or air bags or antilock brakes) were first introduced, any economist could have predicted one of the consequences: The number of car accidents increased. That’s because the threat of being killed in an accident is a powerful incentive to drive carefully.”
What Landsberg meant here was that drivers drive less carefully once they know that their cars are safer. If the cars are less safer, then there is an incentive for drivers to drive more carefully, else they are likely to end up dead or be seriously injured. With a seatbelt, the chances of surviving an accident go up and this leads to drivers driving less carefully. And this makes their cars more dangerous for the people walking on the roads.
In fact, Landsberg jocularly told me in an interview I did with him a few years back, that: “If I took the seat belts out of your car, wouldn’t you be more cautious when driving? What if I took the doors off? So if we really wanted to reduce the number of driver deaths, the best policy might be to require every new car to come equipped with a spear, mounted on the steering wheel and pointed directly at the driver’s heart. I predict we’d see a lot less tailgating.”
In fact, John Adams, an emeritus professor at University College London has carried out research in this area. His findings suggest that making the use of seatbelts compulsory in 18 countries either led to no change or an increase in road accident deaths.
What is interesting nonetheless is that wearing seat belts leads to a reduction in the number of driver deaths. Nevertheless, because the drivers feel safer with the seatbelts on, they are likely to drive more recklessly. And this leads to an increase in overall road accident deaths because the number of pedestrian deaths tends to go up.
Also, seatbelts do not save many driver lives either. At least, that is what research carried out by Professor Dinesh Mohan of IIT Delhi suggests. As he writes in a research paper titled Seat Belt Law and Road Traffic Injuries in Delhi, India : “An estimated 11-15 lives may have been saved in Delhi per year due to current levels of seat belt use out of a total of 1,800-2,000 fatalities per year on Delhi roads. This amounts to less than 1% reduction in total fatalities due to road traffic crashes in Delhi because a vast majority of crashes comprise vulnerable road users and motorised two-wheeler riders.” Given that Mohan’s paper was published in 2009, this finding is a little dated though.
To conclude, what all this tells us is that “people respond to incentives,” which is the fundamental principle of economics and as Landsberg writes: “when the price of accidents(e.g., the probability of being killed or the expected medical bill) is low, people choose to have more accidents.” And that is something worth thinking about.

(Vivek Kaul is the author of the Easy Money trilogy. He can be reached at [email protected])

The column originally appeared on Bangalore Mirror on June 3, 2015

Dear parents, the engineering bubble has burst

Do seatbelts save lives?