IndiaSpend ResearchWire - February 5
Hello,
In today’s edition, we discuss the Modi government’s “new welfarism”, whether metro rail systems help reduce air pollution, why renewable energy prices are falling so fast, vaccine nationalism and what that means for poorer countries, and a podcast on the power of disgust.
If you have missed any of our earlier editions, you can read them here.
A report card
For a good read on the Indian economy, I recommend this policy paper by Arvind Subramanian and Josh Felman.
Subramanian and Felman put forth an evidence-led view of the Modi government’s economic performance, examining it “reasonably dispassionately”. They look at six key reforms—including the GST, the Insolvency and Bankruptcy Code (IBC), inflation targeting, and public provisioning of goods such as cooking gas and toilets—and present a report card of sorts arguing that while the “hardware” of economic reform has been more or less on point, the “software” of adequate planning, implementation, good data, and rule of law in implementation have been left severely wanting.
You don’t say.
Read also this by R. Nagaraj calling Subramanian and Felman out for being too nice to the government.
Finally, read this on the Modi government’s “New Welfarism” and its political economy—how handing out gas connections is easier to do, easier to count and easier to sell in the next election than, say, investments in health that show results over long periods of time and are not as easily attributable to one government policy. As Nagaraj rightly points out:
“New welfarism” is just a fancy way of saying populist schemes.
Not all it’s cracked up to be?
Subways and metros cost a lot of taxpayer money, but what do they buy? One popular argument is that subways reduce air pollution by enabling people to move away from fossil-fuel-guzzling cars. But what if a subway doesn’t address peak traffic routes, or non-subway users make more trips than they normally would because the roads are empty and that much more fun to drive on?
Studying data for all subway openings and expansions that happened anywhere in the world between August 2001 and July 2016, a paper by Nicolas Gendron-Carrier, Marco Gonzalez-Navarro, Stefano Polloni and Matthew A. Turner finds that on average, a subway opening resulted in only small improvements in air quality, statistically not very different from zero.
But this is on average. The benefits go up when you look at cities with an above-average pollution problem.
When cities had high pollution to begin with, air quality improved by about 4% after a subway opening.
The effect was larger near city centres and persisted for at least 4 years. In such cases, a subway opening prevented 22.5 infant deaths and 500 total deaths, per year—equivalent to about $43 million and $1 billion per year (based on standard income-adjusted life values).
There is also a decreasing marginal benefit from an expansion in subways i.e. the benefits from adding to an existing network are found to be dramatically smaller than those from opening new ones.
So, should governments continue to provide massive subsidies for subway construction and operation? The researchers argue that the health effects can indeed make up for a significant fraction of construction costs, but only when these costs are low.
See also this by Deepti Goel and Sonam Gupta who find that a large extension of the Delhi Metro led to a 34% reduction in carbon monoxide emissions at the ITO intersection between 2004 and 2006—but warn against thoughtless building of capital-intensive metro rail projects without a thorough cost-benefit analysis.
Plummeting prices
I recommend this excellent piece by Max Roser of Our World in Data on the science and economics behind the stunning decline in prices of renewable energy.
In most places around the world, power from new renewables is now cheaper than power from new fossil fuels.
Max shows that the fundamental reason for this is the fact that technology drives much of the cost of renewable energy—unlike, say, power from coal where the cost of the coal itself accounts for about 40% of total costs.
Historically, renewable energy has demonstrated a ‘learning effect’.
This means, as the installed capacity increased exponentially, the price of producing the energy declined exponentially. More deployment meant falling prices, which in turn meant more deployment—and falling prices.
He notes that such ‘economies of scale’ are not unusual but what is truly “mind blowing” here is just how strong this effect is. Little wonder then that businesses globally are buying more renewable power than ever before. Read the piece—it’s well-written, easy to follow, and an overall insightful read.
So many left behind
Vaccine nationalism has been called out by many for being the global shame that it is. This chart by the Economist Intelligence Unit (EIU) tells us what we already know: Vaccine nationalism means that poor countries will be left behind.
The EIU argues that while the rich countries (including the US, the UK and most of the European Union) with access to proven vaccines will manage to inoculate their most vulnerable by mid-March, poor countries will not see any meaningful vaccination coverage (enough for life to return to normal) until 2023, “if ever”. An article is here and the full study can be accessed here.
See also the graphic below by World Bank economist Phillip Shellekens who finds that of the 80+ million doses of the COVID-19 vaccine administered globally, 62% went to high-income countries, 35% to upper-middle income countries, and 0 to low-income countries.
These covered 16% of the priority citizens in rich countries—and less than 1% in low and lower-middle income countries.
If you’re struggling to see why this may be a bad thing, read how a new study finds that if poor countries go unvaccinated, rich ones will pay. But then again, for all this talk of vaccine nationalism, remember that this is also true:
Are you easily disgusted?
I am, and I really enjoyed this Freakonomics podcast on the power (and problems) of disgust. From an evolutionary standpoint, disgust has served us well: There is very good reason to not eat your bodily waste, for instance.
But what if that disgust is also holding us back, preventing us from doing things that could improve the environment, the economy, even our health?
Tune in here to hear about why disgust matters, how you can overcome it (“When in doubt, cover it with chocolate”), and for Paul Rozin who’s great fun: “I’m a massive dog lover, but I would eat dog out of curiosity. I’ve never eaten roadkill, but I would.”
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The read on plummeting renewable prices is very interesting. Very positive news!