AN ONLINE MARKET FOR EASEMENTS?
Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
At the rate land is gobbled up by the rich, commercial establishments and real estate companies, (and looking at the exponent on the price projection) you might be excused for putting up your neighbor's land for sale and running away with the proceeds to Tonga! But seriously, in a land of a billion people, land is increasingly scarce. After all, we need land for roads, parking spaces, parks, cinema 'complexes', stadiums, malls, offices, palatial bungalows, cottages, hotels, entertainment parks – the list is endless. Look what suburban sprawl did to the US. If we followed them, there would be no rural hinterland to talk about. Even as things stand, our forest cover and our bio-diversity is being raped by an economy that only cares for GDP growth and profits at the bourses. If things continue at this pace, India will be one vast stretch of concrete interspersed with asphalt from Kargil to Kanyakumari!
Now, I am no tree hugger who would brave beheading for the cause of the environment. But, we as a nation can do more than piously recite the statistics bemoaning the loss of forest cover and bio-diversity. One of the primary tasks facing the nation is to conserve its natural heritage. We simply cannot afford to turn our green hinterlands in to SEZs where factories dump waste because the land was provided free with a 15 year tax holiday to top it. A country with a declining forest cover and disappearing fauna must pro-actively put aside land away from 'development' at the hands of our marauders. While issuing a fiat to reserve land around parks and forests would be straightforward, it would not be necessarily efficient. Land parcels are often not available contiguously or at the same time. Besides, the question of compensating owners is likely to embroil such policies in to failure.
Let us explore a market-based alternative, as sketchy and tentative as it may be. To begin with, let's propose an externality in the sense that capitalist development of land ignores the value of environmental services and passive WTP values associated with undeveloped land. Left unattended, the situation will take a turn for the worse, eventually resulting in the extermination of forest cover, and the flora and fauna contained in it. To counter this eventuality, we presume the government issues a funded mandate to increase the green cover from, say, 15% to 30% over a period of two decades. This mandate is implemented annually thru an 'conservation easement subsidy vouchers' scheme that provides subsidy for purchase of easements. The government issues a certain amount of vouchers to each state which in turn distributes it among its various districts. The district authority calls competitive bids for the vouchers. Those participating – real estate firms, individuals, national parks, conservation groups, environmental trusts and organizations bid for the subsidy vouchers. The authority issues conservation easement-cum rezoning vouchers in order of increasing subsidy bids limited by its subsidy budget. Bid winners receive the subsidy when they provide proof of land/easement purchase.
At this point, we have a demand for easements derived from the mandate, and a formal means to provide subsidy to the initial participants in the conservation easements market. What is necessary now is an online market for trading these easements across various classes of market players – commercial developers, speculators, investors, environmental trusts, national parks, conservation groups and so on. The online easements market could run parallely or as part of a traditional real estate market that trades land parcels much like one trades shares. (Easements will remain easements as long as they are traded in the easements market. A developer who seeks to purchase and convert easement for development must have it re-zoned before moving it to the 'land' section of the online market.). Easement and land prices will reflect their supply and demand as perceived by various participants in the market and their intentions/objectives. Higher demand for land development will boost easement prices, providing the necessary incentive for land holders to offer their land as easements. The scheme provides for inter-spatial, and even inter-parcel land-easement arbitrage. Thus, the market provides a dynamic equilibrium between easement prices and prices of commercial land parcels. Such arbitrage between multiple uses for easements and land is on one hand likely to reveal the shadow values associated with unpriced/unappreciated uses/services of land, and on the other bring about a dynamic equilibrium that equates marginal values across parcels of easements and land across space and time.
The 'easement voucher cum online easement–land market' could enable the nation to achieve its green cover goal flexibly at a much lower cost and at an earlier date with the voluntary participation from all stakeholders.
Thursday, January 31, 2008
Saturday, January 12, 2008
Corruption, Desi style!
Corruption, Desi Style!
Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
Many heads have pondered over it, much has been written on it, and many a shelves have been filled investigating it that you'd wonder what I have to add to the phenomenon of corruption - short of suggesting the use of electric eels on the corrupt with divine or better yet, satanic intervention! But seriously, is corruption merely the lubricant that turns the wheels of the economy or is it the proverbial spanner in the wheels of progress? From the farmer who must bribe the bank officer before he signs the loan papers, the widow who must borrow to bribe to receive her husband's death certificate that qualifies her for insurance, the anxious parent in two minds about bribing the Principal to secure his child's admission, to the impatient guy all too willing to part with a few big notes to the license officer to drive away with his new SUV, all are examples of how corruption pervades the daily life of commoners. But much as this corruption is pervasive in our society, should it really be the focus of our attention?
Is it passe to target retail corruption ignoring corruption at the higher levels of society and the economy? Retail corruption will always be. Much as we are warned not to tip public servants, some such as the postman, are so familiar that one is only too willing to share the festivities. And is money for a cup of tea to your garbage handler corruption? Even if it is, is it that pernicious to our economy? Shouldn't corruption be choked in the higher echelons of power? Corruption defined not necessarily by the money that changes hands, corruption that takes many hues unknown to the public – corruption of the ideals, suppression of the intelligent, the moral and the hardworking (and lately, the green and the left-leaning), corruption in the issue of industrial licenses and environmental permits, limits on (or perversely increases in) FDI investments, defence purchases, pollution regulations, rate regulations, minimum support prices, monetary policy, or deals that extend across generations or in to the family of the in-laws (We'll make sure your son-in-law is on the ONGC board). Corruption manifests in other more pernicious forms such as the accommodation of foreign suggestions in the budget and monetary policies (Can't let down the republicans and business houses who supported our stock markets). I suspect even the timing of mid-term elections are negotiable with 'those-who-should-not-be-named'! (Three cheers to the NAM!) If this is not subverting the popular mandate to secure private riches, I don't know what is.
Surely, the motives of corruption at those stratospheric levels is not the upliftment of the masses, much as such 'policies' may be portrayed to be and shown to be welfare enhancing? Should we not prioritize these instances of corruption before castigating the CVC for failure to monitor the various government agencies and bureaucrats for corrupt practices? If favors are granted by the size of the eventual payoff, then shouldn't the CVC turn its attention first to ministers and the senior policymakers who, by their policy pronouncements and regulations change the fortunes of industries? And how does one distinguish between just assignments to the deserving and sham ones meant to reward the wrong so others may follow that path? What worsens the already sordid state of affairs is that our politicians have found a way to share the spoils with all concerned – ruling party cadres, opposition party leaders, trade unions, stock market participants, the greens and the left, perhaps even the press. Who else but our politicians are capable of committing such a leap of faith – transforming a patently illegal act in to what economists term 'pareto superior' – a 'win-win' proposition for all but the true Gandhian. (And true Gandhians will always take a hit for the good of the nation!) But don't be fooled for a moment. If you are wondering whether anyone pays at all, just look around. Your child will pay dearly every time he drinks milk or switches the power on. Your grandson may be burdened at birth with mortgage loans to pay off. Your great grandchild is already sold to the devil!
'Punarjanma' anyone?
Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
Many heads have pondered over it, much has been written on it, and many a shelves have been filled investigating it that you'd wonder what I have to add to the phenomenon of corruption - short of suggesting the use of electric eels on the corrupt with divine or better yet, satanic intervention! But seriously, is corruption merely the lubricant that turns the wheels of the economy or is it the proverbial spanner in the wheels of progress? From the farmer who must bribe the bank officer before he signs the loan papers, the widow who must borrow to bribe to receive her husband's death certificate that qualifies her for insurance, the anxious parent in two minds about bribing the Principal to secure his child's admission, to the impatient guy all too willing to part with a few big notes to the license officer to drive away with his new SUV, all are examples of how corruption pervades the daily life of commoners. But much as this corruption is pervasive in our society, should it really be the focus of our attention?
Is it passe to target retail corruption ignoring corruption at the higher levels of society and the economy? Retail corruption will always be. Much as we are warned not to tip public servants, some such as the postman, are so familiar that one is only too willing to share the festivities. And is money for a cup of tea to your garbage handler corruption? Even if it is, is it that pernicious to our economy? Shouldn't corruption be choked in the higher echelons of power? Corruption defined not necessarily by the money that changes hands, corruption that takes many hues unknown to the public – corruption of the ideals, suppression of the intelligent, the moral and the hardworking (and lately, the green and the left-leaning), corruption in the issue of industrial licenses and environmental permits, limits on (or perversely increases in) FDI investments, defence purchases, pollution regulations, rate regulations, minimum support prices, monetary policy, or deals that extend across generations or in to the family of the in-laws (We'll make sure your son-in-law is on the ONGC board). Corruption manifests in other more pernicious forms such as the accommodation of foreign suggestions in the budget and monetary policies (Can't let down the republicans and business houses who supported our stock markets). I suspect even the timing of mid-term elections are negotiable with 'those-who-should-not-be-named'! (Three cheers to the NAM!) If this is not subverting the popular mandate to secure private riches, I don't know what is.
Surely, the motives of corruption at those stratospheric levels is not the upliftment of the masses, much as such 'policies' may be portrayed to be and shown to be welfare enhancing? Should we not prioritize these instances of corruption before castigating the CVC for failure to monitor the various government agencies and bureaucrats for corrupt practices? If favors are granted by the size of the eventual payoff, then shouldn't the CVC turn its attention first to ministers and the senior policymakers who, by their policy pronouncements and regulations change the fortunes of industries? And how does one distinguish between just assignments to the deserving and sham ones meant to reward the wrong so others may follow that path? What worsens the already sordid state of affairs is that our politicians have found a way to share the spoils with all concerned – ruling party cadres, opposition party leaders, trade unions, stock market participants, the greens and the left, perhaps even the press. Who else but our politicians are capable of committing such a leap of faith – transforming a patently illegal act in to what economists term 'pareto superior' – a 'win-win' proposition for all but the true Gandhian. (And true Gandhians will always take a hit for the good of the nation!) But don't be fooled for a moment. If you are wondering whether anyone pays at all, just look around. Your child will pay dearly every time he drinks milk or switches the power on. Your grandson may be burdened at birth with mortgage loans to pay off. Your great grandchild is already sold to the devil!
'Punarjanma' anyone?
Sunday, January 6, 2008
Party Time at the Stock Market!
Party Time at the Stock Market!
Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
http://gprasadrao.blogspot.com/
A party at the stock market? Which stock? Which scrip? When? Try stocks of political parties traded on the stock exchange much like the common stock of firms? Incredulous? Why? Is it that outrageous? Political parties exist for a purpose – to serve the public in matters of politics (equity), policy, administration or governance. They have leaders, an executive board besides officials and members. They are governed by rules, traditions, and elections. Their goal, arguably the seat of power, or more appropriately, as many seats and as much power as possible, is analogous to the pursuit of profits by entrepreneurs. Clearly, our constitutional fathers presumed, much like Keynes did, that the invisible hand would ensure that the larger national cause is served even while political parties pursued their private goals. Six decades later, the answer – depending on one's political viewpoints – varies from prevarication to a resounding 'No'. If our nation has progressed so much in such a short span of time, it is despite the political parties, not because of them.
The root causes underlying this failure are quite obvious. Politics is the route to power, the power to change policies and the fortunes of various industries. Industrialists court leaders of political parties, whether ruling or in the opposition in the pursuit of industry-friendly policies. The lure of holding on to that power induces even the most astute politician/leader to give in to short-run policies of appeasement ignoring their long-run deleterious impact on the nation. Vested interests corner concentrated benefits in the immediate term even as costs are distributed broadly and imperceptibly across time and space. Politicians have perfected the art of enriching themselves with money and power while granting 'pork chops' to the industry and distributing peanuts among supporters and constituency voters. This 'please all' and 'bleed the future to enrich the present' strategy turns the nation economically and environmentally unsustainable. Nation building indeed!
Wouldn't it make matters worse if we turned our political parties in to publicly traded stocks? (I presume they are already invested in the stock markets anyway, and not in the retail section going by the PSU IPOs sanctioned!) Not if their strategies are anticipated and the system designed properly. Consider political parties – ruling and opposition - incorporated as 'holding companies' much in the fashion of Berkshire Hathaway and 'endowed' (on a matching grant basis?) with a representative basket of stocks, like the Nifty 500 Index, or better yet, a combination of 10-year futures on Nifty 500 and 30-yr bonds, in equal or some proportionate manner. The opposition parties would be endowed with either the same basket of stocks, or conceivably, another self-chosen combination of stocks and bonds more appropriate to their ideology. The stocks of these political entities would then trade on the stock market perhaps as a distinct category in itself.
Foremost, this proposal would bring about a mechanism in which investors – small, large, domestic, FIIs and pension funds – could signal their 'vote' on government policies and party positions by their purchases and sales of the stocks of political parties. Thus, political parties would find it attractive to differentiate themselves policy-wise to attract different classes of investors. Second, it'd be a convenient tool to 'legalize' and internalize the monetary benefits that a political party receives by way of its decisions and parliamentary votes in the running of the government. Third, the market 'price' would serve as a signal to party leaders to gauge their policy performance as well as investor and voter perceptions on the economy. Policies and the choice of leaders could be evaluated in the stock market (Hell, If I can speculate on coffee beans and tea leaves, I can do so with the fortunes of my country as well. Right?). Voters and investors need no longer wait years to opine on matters – a wait so long that many forget what it was all about. Under the proposed system, investors could short the stock of the political party that hoists a leader with a dubious record, delivering an immediate verdict – one that both punishes the party and prods it in to taking corrective action. Relative price movements would also reveal the change in the odds of winning at the ballot box at any particular instant – a substitute to the opinion polls that is currently in vogue. Expectations of political moves, choices, strategies and policies would be reflected in market volumes and prices.
One might argue that while recourse to the stock market provides a mechanism to internalize the long-run impact of current policies, it still does not internalize non-market affects like HDI, communal peace and environmental sustainability. A 'non-market social index' that reflects these and other parameters could be published weekly so investors take account of this information as well in making their political investment (to the extent they do not reflect in the price of long bonds). Trading the fortunes of political parties provides a means for voters and investors to judge party performance from a long-term perspective on an ongoing basis – a distinct attribute of the stock market and something that is sadly lacking in the current system driven by short-term electoral contingencies. It'd radically change the political landscape, empowering the common man, voters and indeed the international investor with a stick to use on the mortifying politics that characterizes our nation.
And a means for our parties to test waters on various issues, choices and policies. Party on!
Elections are round the corner
Next month, or is next year?
I used to have a say
(that coalition of ours was quite shaky!)
now its them -the World Bank and the G-9!
(if money talks, big money barks)
Alliances I seek, votes by the block
try groups of all kinds
unions, social, religious, sports, even online ones
It does beat door-to-door canvassing
by a mile and a half!
(Standing through the sun roof has its risks,
and I don't mean the oppressive heat!)
A leader of politics I am
Astute and aggressive
My opponents have ganged up
I must counter-attack
Shall I court leftist unions in their pocket
and trade my minorities in?
Shall I switch positions on SEZ
now that the tide is turning?
(I hear the GEF has money to invest
Yes, easements we have heard of!)
Shall I promise job reservations, subsidies,
two eggs for mid-day meals,
topped it with an iron tablet or two
That'll qualify for some gender money,
and community insurance funds will come handy
But the JNURM fund accounts?
Surely, you don't expect me to keep!
A leader of politics I am
Astute and aggressive
The digital age is upon us
It ain't that friendly no more
Tons of email to trash
Many an online column to ignore
No, not those opinion polls again
I take them but with a grain of salt
I must counter-attack,
I'll must do one better
Let's celebrate our mentor's birthday
A congregation blocking traffic, blaring music?
Yes, the perfect backdrop for my plans
Have the industrialist approach me
I just might gladden him during my speech
with a populist policy or two!
A leader of politics I am
Astute and aggressive!
Silver screen heroes,
Come, try your hand at politics
In these days of multiple degrees
earn your political halos too!
(Instant mass recognition
who else can boast of?)
My ideals you will embody
my memory will you cherish
my followers you will keep
(your fans are welcome too)
A leader of politics I am
Astute, aggressive
(and now ready to retire!)
Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
http://gprasadrao.blogspot.com/
A party at the stock market? Which stock? Which scrip? When? Try stocks of political parties traded on the stock exchange much like the common stock of firms? Incredulous? Why? Is it that outrageous? Political parties exist for a purpose – to serve the public in matters of politics (equity), policy, administration or governance. They have leaders, an executive board besides officials and members. They are governed by rules, traditions, and elections. Their goal, arguably the seat of power, or more appropriately, as many seats and as much power as possible, is analogous to the pursuit of profits by entrepreneurs. Clearly, our constitutional fathers presumed, much like Keynes did, that the invisible hand would ensure that the larger national cause is served even while political parties pursued their private goals. Six decades later, the answer – depending on one's political viewpoints – varies from prevarication to a resounding 'No'. If our nation has progressed so much in such a short span of time, it is despite the political parties, not because of them.
The root causes underlying this failure are quite obvious. Politics is the route to power, the power to change policies and the fortunes of various industries. Industrialists court leaders of political parties, whether ruling or in the opposition in the pursuit of industry-friendly policies. The lure of holding on to that power induces even the most astute politician/leader to give in to short-run policies of appeasement ignoring their long-run deleterious impact on the nation. Vested interests corner concentrated benefits in the immediate term even as costs are distributed broadly and imperceptibly across time and space. Politicians have perfected the art of enriching themselves with money and power while granting 'pork chops' to the industry and distributing peanuts among supporters and constituency voters. This 'please all' and 'bleed the future to enrich the present' strategy turns the nation economically and environmentally unsustainable. Nation building indeed!
Wouldn't it make matters worse if we turned our political parties in to publicly traded stocks? (I presume they are already invested in the stock markets anyway, and not in the retail section going by the PSU IPOs sanctioned!) Not if their strategies are anticipated and the system designed properly. Consider political parties – ruling and opposition - incorporated as 'holding companies' much in the fashion of Berkshire Hathaway and 'endowed' (on a matching grant basis?) with a representative basket of stocks, like the Nifty 500 Index, or better yet, a combination of 10-year futures on Nifty 500 and 30-yr bonds, in equal or some proportionate manner. The opposition parties would be endowed with either the same basket of stocks, or conceivably, another self-chosen combination of stocks and bonds more appropriate to their ideology. The stocks of these political entities would then trade on the stock market perhaps as a distinct category in itself.
Foremost, this proposal would bring about a mechanism in which investors – small, large, domestic, FIIs and pension funds – could signal their 'vote' on government policies and party positions by their purchases and sales of the stocks of political parties. Thus, political parties would find it attractive to differentiate themselves policy-wise to attract different classes of investors. Second, it'd be a convenient tool to 'legalize' and internalize the monetary benefits that a political party receives by way of its decisions and parliamentary votes in the running of the government. Third, the market 'price' would serve as a signal to party leaders to gauge their policy performance as well as investor and voter perceptions on the economy. Policies and the choice of leaders could be evaluated in the stock market (Hell, If I can speculate on coffee beans and tea leaves, I can do so with the fortunes of my country as well. Right?). Voters and investors need no longer wait years to opine on matters – a wait so long that many forget what it was all about. Under the proposed system, investors could short the stock of the political party that hoists a leader with a dubious record, delivering an immediate verdict – one that both punishes the party and prods it in to taking corrective action. Relative price movements would also reveal the change in the odds of winning at the ballot box at any particular instant – a substitute to the opinion polls that is currently in vogue. Expectations of political moves, choices, strategies and policies would be reflected in market volumes and prices.
One might argue that while recourse to the stock market provides a mechanism to internalize the long-run impact of current policies, it still does not internalize non-market affects like HDI, communal peace and environmental sustainability. A 'non-market social index' that reflects these and other parameters could be published weekly so investors take account of this information as well in making their political investment (to the extent they do not reflect in the price of long bonds). Trading the fortunes of political parties provides a means for voters and investors to judge party performance from a long-term perspective on an ongoing basis – a distinct attribute of the stock market and something that is sadly lacking in the current system driven by short-term electoral contingencies. It'd radically change the political landscape, empowering the common man, voters and indeed the international investor with a stick to use on the mortifying politics that characterizes our nation.
And a means for our parties to test waters on various issues, choices and policies. Party on!
Elections are round the corner
Next month, or is next year?
I used to have a say
(that coalition of ours was quite shaky!)
now its them -the World Bank and the G-9!
(if money talks, big money barks)
Alliances I seek, votes by the block
try groups of all kinds
unions, social, religious, sports, even online ones
It does beat door-to-door canvassing
by a mile and a half!
(Standing through the sun roof has its risks,
and I don't mean the oppressive heat!)
A leader of politics I am
Astute and aggressive
My opponents have ganged up
I must counter-attack
Shall I court leftist unions in their pocket
and trade my minorities in?
Shall I switch positions on SEZ
now that the tide is turning?
(I hear the GEF has money to invest
Yes, easements we have heard of!)
Shall I promise job reservations, subsidies,
two eggs for mid-day meals,
topped it with an iron tablet or two
That'll qualify for some gender money,
and community insurance funds will come handy
But the JNURM fund accounts?
Surely, you don't expect me to keep!
A leader of politics I am
Astute and aggressive
The digital age is upon us
It ain't that friendly no more
Tons of email to trash
Many an online column to ignore
No, not those opinion polls again
I take them but with a grain of salt
I must counter-attack,
I'll must do one better
Let's celebrate our mentor's birthday
A congregation blocking traffic, blaring music?
Yes, the perfect backdrop for my plans
Have the industrialist approach me
I just might gladden him during my speech
with a populist policy or two!
A leader of politics I am
Astute and aggressive!
Silver screen heroes,
Come, try your hand at politics
In these days of multiple degrees
earn your political halos too!
(Instant mass recognition
who else can boast of?)
My ideals you will embody
my memory will you cherish
my followers you will keep
(your fans are welcome too)
A leader of politics I am
Astute, aggressive
(and now ready to retire!)
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