Viswanathan K's Thoughts

Tim Harford wrote a thought-provoking article on the inflation numbers calculated by governments: “The consumer price index, or CPI, aims to measure the average price paid by UK consumers.”   The devil lies in the details. What basket of items you use for the calculation matters. Is it truly representative? But wait, here are further nuances: some items matter more to poor people than others (e.g. food prices).   And then there’s the problem that humans change their behavior. If the price of certain items goes up, they shift to cheaper alternatives. In which case, the increased price of the item doesn’t affect them anymore: “They might pick up some cheap carbohydrates. Rice one week, spaghetti the next — whatever was on special offer.” Even if you could magically factor in for such changing preferences, it’s not enough. After all: “It makes sense to calculate inflation by looking at the same goods, month after month.” But if you keep changing the list of ite...

Often, answering a silly question can lead to better understanding. Randall Munroe proved that in the context of physics via his two “What If” books. Tim Harford tries the same with “silly” economics questions .   There’s a lot of talk on mining asteroids for ores. That’s the first question Harford takes on. How big would an asteroid need to be to make it worth a space mission to mine it? There are 3 aspects to consider, he says. First, engineering. Either you setup a refinery in space (very expensive, maintenance overheads) or you bring the raw ore back to earth (very messy. And expensive). Second, economics. Increase the supply of something and prices could drop. Which makes any cost-benefit analysis tricky and error-prone. Third, physics. It is very expensive to carry anything into space – the extracting equipment, tools etc.   All of that also means that it is better to set up some system in space to launch, receive and refine things (in space). Some place cheaper ...