Availability Heuristics
Human beings and even experts appear to have a relative short memory on even recent history, and project the immediate outcomes to future. Availability heuristic operates with a vengeance.
This happens with financial markets. Stock market goes up, goes up more, and goes up even more — and we start believing that going up is the only directional outcome. Soon there is correction.This happens with housing markets. This happens with energy markets. This happens all time, all over
We forget that there is cyclicality. There is regression to the mean.
This is true for political markets. There is plenty of data. Even in India, there is enough data. In mid-1980s Modi’s party had members in the national parliament. Just 2. As late as 3 years back, Modi’s party had 117 legislators. Now 281 of them. Congress party had over 400 legislators in mid-1990s. Today, about 40-45. In the last 25 years, say since 1991, Congress-party has led the national government for about 15 years, supported a government for about 2 years. Modi’s party had led the government for about 8 years — and it will definitely do so for the next 3 years.And there is plenty of empirical evidence elsewhere. In the US, as recently as in 2008 when Obama won the Presidency, analysts were going on and on about structural changes in demography — changes that doomed the
Republican Party. But in the last 8 years, Republican party has won majorities in the both the legislative chambers (House and Senate.) After President Eisenhower’s era of peace and prosperity the country opted for one of the most expansionist — almost socialist — government in the 1960s. In UK, as recently as 1990s the Labor Party was supposedly finished because Margaret Thatcher had structurally recast the country’s debate and political framework. Not so. Labor part got elected 3 times in 1990s and the first decade of 2000s. Though Winston Churchill won the War for the British, the electorate rejected the Conservative party in the 1945 elections.
The empirical evidence for cyclicality is overwhelming
The World Bank and The International Monetary Fund
The non-US, non-Japan, non-Western Europe world has always looked upon IMF and the World Bank with suspicion. Because of US and Europe have been the most significant financial contributors, and the drafters of the original agreements in Bretton Woods Conference, they have had significant powers at these institutions, including the fact that leadership of the Bank is always an American and the Fund an European. Given the current voting rights, it appears that this is not about to change for the next few decades.
As if the Fund agrees with the skepticism, the Fund itself has published a manuscript — fresh off the press – – criticizing the Fund for pushing its agenda, instead of delivering the growth.Here is the abstract: “Instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion . ” And the manuscript :
http://www.imf.org/external/pubs/ft/fandd/2016/06 /pdf/ostry.pdf
US Higher Education and The President’s Recognition of Contribution to Knowledge
US is a special destination for Higher education. No other country can claim to democratization of highquality higher education. That’s why US economy is the most robust and innovative, and will continue to be so for the next 50 years. No other country — small or big — can match this.
Let us look one institution: MIT. MIT is a special place. MIT is one of 4 or 5 American universities which makes its (undergraduate) admissions decisions need-blind, but all the admittees are given financial aid (based only on need) and MIT meets each admittee’s full financial burden. MIT does not have legacy admissions, but respects letter from a very engaged alumnus. I have probably made 4-5 references to the undergraduate program, and about 4-5 to graduate programs.
Because of MIT’s extra-ordinary generosity of meeting each admittee’s full financial burden, the median debt burden of a student after 4 years of study is only $18,000 — almost unbelievable.
MIT recently launched MIT for Better World in Cambridge. ¹Here is what President Reif had to say: “I am pleased to announce that today we officially launch the MIT Campaign for a Better World. Humanity faces urgent challenges—challenges whose solutions depend on marrying advanced technical and scientific capabilities with a deep understanding of the world’s political, cultural, and economic complexities. We launch the Campaign for a Better World to rise to those challenges and accelerate positive change. We aim to raise $5 billion to amplify the Institute’s distinctive strength in education, research, and innovation. Together, through this Campaign, we will give the brilliant minds and hands of the MIT community the fuel and the focus to make inspiring progress. Each of us—alumni, friends, and partners—has an important role to play in shaping the future of MIT and the world, and I am privileged to join you in this work. With your help, we can build a better world.”
The National Medal of Science is a Presidential Award given to individuals “deserving of special recognition by reason of their outstanding contributions to knowledge in the physical, biological, mathematical, or engineering sciences.” In 1980 Congress expanded this recognition to include the social and behavioral sciences. Two of the recipients this year resonate in a personal manner with me.
Dr. Shirley Ann Jackson, Rensselaer Polytechnic Institute, NY (“For her insightful work in condensed matter physics and particle physics, for her sciencerooted public policy achievements, and for her inspiration to the next generation of professionals in the science, technology, engineering, and math fields.) Dr. Jackson is the first African-American person to get a doctoral degree in Physics from MIT, which she did so in 1973. Her area of doctoral specialization was theoretical elementary particle physics. I have known Dr. Jackson for sometime. She is a remarkable scientist, but also a no-nonsense and very insightful academic and policy leader
¹I got to attend the marvelous announcement and the gala dinner. And I got to meet and connect with so many interesting thinkers, including Nobel Laureate Richard Schrock of Chemistry. Richard and his wife were marvelous. Richard recorded a 3-minutes video of his seminal discovery for the benefit of my daughters, Anagha and Subhaga. He also wrote a note on the program for them encouraging them to join/contribute to Science.And there were so many other interesting meetings, including those with Deans (and former Deans) Dave Schmittlein, Dick Schmalensee, Glen Urban; Institute Professor Tom Magnanti; MIT President Reif and his wife Christine, Susan Hockfield (former President); MIT Corporation Chair Bob Millard, John Reed (former Chair), and Desh Deshpande (Corporation Member); Ray Stata (Founder, Analog Devices); andSanjay Sarma (MIT VP for Digital Learning).
Dr. Rakesh K. Jain, Harvard Medical School and Massachusetts General Hospital, MA (“For pioneering research at the interface of engineering and oncology, including tumor microenvironment, drug delivery and imaging, and for groundbreaking discoveries of principles leading to the development and novel use of drugs for treatment of cancer and non-cancerous diseases.)Jain, who is also the director of tumor biology laboratory at Massachusetts General Hospital, has a B.Tech in Chemical Engineering from IIT-Kanpur. Jain is a member of all three branches of the US National Academies – the National Academy of Medicine, the National Academy of Engineering and the National Academy of Sciences – and the American Academy of Arts and Sciences.
Author Information:
Dr. Kalyanaram earned his Ph.D. in Management Science in 1989 from the Massachusetts Institute of Technology (MIT). He holds an MBA from the University of Texas at Arlington and a BE in Electronics and Communication Engineering from the University of Madras. His dissertation was adjudged a finalist in the AMA Doctoral Dissertation Award in 1989 and in the Academy of Marketing Science Doctoral Dissertation Award in 1990. In 2002, MIT recognized him for his contributions and service with the Harold Lobdell Award. Among his other recognitions are: Outstanding Educator of the Year by Greater Dallas Asian American Chamber of Commerce, and he has been listed in the Who’s Who in America.
Dr. Kalyanaram’s prior appointments include: Advisor and Director of Research Center, American University of Armenia and Central Bank of Armenia; Advisor and Mentor, AACSB Accreditation; Department Chair and Professor, International University of Japan; Editor, NMIMS Management Review; Founding Director of full-time Cohort MBA Program; Director of all Masters’ Programs (including MS, evening MBA, full-time MBA); Chair, Department of Marketing, The University of Texas; Program Director of MBA Programs in U.S. and abroad (Canada, China and Middle-East) and Director of Faculty Research, New York Institute of Technology; Dean of University Research (Business, Commerce, Engineering, Pharmacy, Science, Technology) and Dean of School of Business, India; Associate Dean for Research, Kazakhstan; Full Professor (Practice), City University of New York (Baruch College); Full tenured Professor at The University of Texas, New York Institute of Technology, NMIMS University and Amrita University, India and International University of Japan; Visiting Professor, Tata Institute of Social Sciences, India; Full Professor; and Inaugural Endowed Chair and Professor, Kazakhstan Institute of Management, Economics and Strategic Research (KIMEP)
Dr. Kalyanaram has also served as a distinguished scholar at the prestigious Woodrow Wilson Center for International Scholars, and the East-European and Russian Research Center. He has been the Associate Editor of Management Science and currently serves on three editorial boards. He is also a reviewer for 13 journals in marketing, economics, and management. He has authored and/or co-authored over 50 journal articles. His areas of expertise include public policy, international commerce, economics and trade, education and the impact of law and regulation on economy, society and development.
