Are we running out of people in Earth?

Yes! You read that right. No! Interstellar is not happening in real life.

Global population growth rates have been falling as a result of birth control policies in the emerging world in the 70’s. In terms of raw numbers, the population of the world has been growing. This is largely due to advances in science and medicine resulting in longer lives. The average human life continues to rise from 50 in 1969 to 69 and is still rising. However, the population of people that drive economic growth (working age people) continues to shrink. Fertility rates in India have fallen from 5.87 in 1960 to 2.5 in 2012. Once this number reaches 2.1, the population will start to shrink.

While economic growth can never be credited to a single factor, a sizable working age population is critical for economic growth. In the boom periods in the late 20th century the growth rates of labor forces in most major booming economies were high. That number has fallen to well below 2% as of 2010. However, a population boom does not necessarily mean an economic boom.

A shrinking working population growth rate amidst a rising population is the worst possible combination for an economy looking to grow. The first response has been to produce more babies with governments (mostly in developed countries) incentivizing childbirth. In Japan, Prime Minister Abe proposed easier access to childcare and tax incentives and proposed making it easier for women to get back to work after childbirth. Policies ranging from paternity leave in the UK to paid leave in Germany are a step in the right direction but are yet to bear fruit.

A better approach to stop the labor force from falling is to bring back retired employees to work. Owing to better healthcare people often remain active well into their 70’s and are forced to be without work. Including retired employees back in the labor force may help in solving the expensive pension funds worldwide.

Another pool of untapped talent resides with the working age women in any country. While some countries have realized the potential impact of including women in the work force, most others are yet to wake up to this idea. Japan, Canada and the Netherlands have managed to attract an increased participation from their women owing to campaigns promoting working women. In India, the participation rate has fallen from 35% in 1990 to 27% in 2014.

For every nation that suffers from brain drain (top educated students immigrating elsewhere) there is one that benefits from brain gain. The United States is perhaps the best example of a country that gained immensely from brain gain. The immigrant population is 13.3% of the total population of the United States. More than half of the top 25 firms in the Silicon Valley were founded by first or second generation immigrants (Apple, Google, and Amazon). Given the anti-immigrant sentiment prevailing in the US currently, Silicon Valley faces the risk of losing out on the best talent. The US has increased the number of student visas in the past decade but the number of work visas remained constant as a result of which a large number of students have been sent to their home nations.  Canada’s minister of immigration, Jason Kenney in 2013 said Canada was ‘open to newcomers’ which will help to balance Canada’s aging population and to its own benefit that sentiment has been carried forward in the Trudeau administration.

While most nations actually need immigrants, fears of outsiders stealing jobs makes for policies against immigration rather than welcoming it. In 2015, Donald Trump proposed to build a wall on the Mexican border with Mexico paying for the wall. What Mr. Trump and those supporting him may have overlooked is that, in the years leading up to 2015, net migration from Mexico had fallen to zero.

The impact of a population decline will continue to unfold in the years to come. We have been slowly waking up to this prospect. The nation’s best poised to grow in future will be the ones that have a sizeable working age population and the ones welcoming women, immigrants and the elderly into the labor force.



What you don’t know about supermarkets

You are a smart consumer. To avoid the crowded supermarket in the heat you went to a supermarket at an ‘unpopular’ hour. You find all the things on your list immediately and the newest in the ever growing line of Cadbury’s chocolates (You really can’t go wrong with those). 
Sadly, the supermarket owner did account for this beforehand. What they may not want you to know is that, every item in that supermarket is placed at its designated spot after careful planning. As much as a consumer would like to believe they are hawkeye, everything that catches your eye is meant to.
When you enter any store, it has some scarcity power (it can charge you a higher price to some degree) simply because it takes an effort to walk to the next store. Based on this, firms discriminate in terms of prices (Charging different prices to different groups). Ideally, they would want to charge each consumer the maximum she is willing to pay. Amazon did try this (and makemytrip does this in India). Their claim was to try to ‘personalize’ your experience which meant charging you a higher price for a repeatedly viewed product or service. Now, that is frowned upon and Amazon after much backlash decided to stop doing that. So they decided to turn to discriminating based on different groups instead of individuals, which apparently is not socially frowned upon. Consider the Big bazaar card, a popular loyalty program of an Indian super market: By providing you ‘points’ which get you a discount on your next purchase, they get to know your buying patterns and all but ensure that you will visit their store again to redeem said points.
You (okay, maybe not you) are lazy. Firms know that, they know you will never bend down to get something from the bottom shelf in a crowded supermarket if you can see it at eye-level. So isn’t it a happy coincidence that only the expensive products are kept at eye-level?
Sometimes, even necessities can be exploited. A recent boom in the organic foods industry has caused a sudden spike in their demand. Any major supermarket will provide you with an array of those organic foods. Customers often miss out HOW they are placed. Organic foods are typically together and it is claimed to be for convenience, somehow organic eggs are never with ‘normal’ eggs. The price difference is too humbling. 
You may think those ‘nice’ stores that give student discounts and senior citizen discounts are truly altruistic but sadly they are not. It is generally good business to give those discounts. Only a cynic (or an economist) would argue otherwise. However, the important question here is how much sales rise when prices are dropped.
That leaves us with restaurants and movie theaters. It is no secret that they are kings at price discrimination. That has gotten to the extent that people expect to be charged more at restaurants and they presumably they do not want to appear thrifty since a considerable amount of people here are on dates. 
So how does all this information help you in becoming a smarter consumer? In order to get a bargain shop cheaply and look for alternatives before making a purchase. If you want to outwit the supermarkets then simple observation is your best tool, similar products are often priced similarly and just need to found (presumably from the annoying bottom shelf).

Why is popcorn expensive at the movies?

I remember having to look twice at the price card in a cinema recently. The price of the popcorn was much more than I was willing to pay. A friend told me that the cinema owner has a complete monopoly once a customer enters the cinema and hence could price the popcorn as he wished. While I didn’t say no at the time I was not convinced by her explanation.
If the owner does indeed have a complete monopoly then why does he not charge a fee to use a washroom? Or why is the air conditioning free of cost? After all a monopolist can do as he likes, right? The answer here is that these charges would make the cinema less attractive for customers. Even if he were to charge a rest room fee he would be forced to sell cheaper tickets in order to attract customers. So what he would gain from the rest room fee would be lost at the box office along with inconvenience for the customers.
 Like most consumers, I am indifferent to paying 50Rs for popcorn and 350Rs for the movie or 100Rs for the popcorn and 300Rs for the movie. In other words, if popcorn is cheaper then I will eat more. It is important to look at the taste and preferences of movie goers to understand popcorn pricing. Cheaper popcorn will attract popcorn lovers (like myself!) and make them willing to pay a higher price at the box office. But to make the most of this willingness he must raise ticket prices and if there are enough people who do not eat popcorn then this strategy will backfire.
I must address this ‘willingness to pay’ that I’ve been referring to. When you walk into a store to buy a laptop the salesperson is likely to ask you something along the lines of ‘How much do you wish to pay?’ Of course what he really means to ask you is what is the most you are willing to pay? Economists call this the reservation price. (I wish it could be zero) Ideally, the seller would like to charge you exactly this price but he questions you about your job, profile or utility of the product to charge you as much as he can.
 Research from the Stanford business school suggests that expensive popcorn benefits the consumer. The findings of the research suggest that by charging a higher price on popcorn and other goods ticket prices can be kept lower. In fact, cinemas rely on the sales of popcorn and other goods for profit. These goods account for 20% of gross revenue but 40% of profits.
A general analysis of popcorn consumption patterns suggests that people who book their tickets online or people who show up in groups typically consume more popcorn. More research is needed to figure out why. But this raises an important issue: What purpose does the high pricing of popcorn solve? Popcorn is not expensive to charge more money from consumers. That purpose would be better served by cheap popcorn and expensive tickets. The real purpose is to extract different sums of money from different customers (economists call it price discrimination). Popcorn lovers,  will pay more for consuming popcorn. The objective of the owner is not to set a uniform price for all customers but to match a price to a customer’s willingness to pay.
Broadly speaking, expensive popcorn seems to be in the best interests of consumers. This helps in keeping ticket prices relatively cheap and keeps the business viable at the same time. Maybe the price of popcorn is a fee for cleaning up after the moviegoers leave or maybe not. I will let the reader decide.

A Weaker Rupee and you

You are probably aware that the rupee has been falling against the dollar recently (constant newspaper headlines don’t make ignorance easy here). Bold headlines suggest this is problematic for the economy, but is it?
Each currency has a purchasing power (how much one unit can buy). The purchasing power of the rupee has been affected largely by internal inflation. From 2009-2014 inflation was around 10% per annum. Simply put, a soft drink which cost 30 rupees in one year cost 33 in the next. So a currency loosing value that fast in the nation is bound to loose value in the international markets as well. The rupee went from 54 to 68 very rapidly, so buying foreign goods (and imports) became expensive (not to mention all the potential holidays to the US that were cancelled) This sharp fall brought about a panic induced reaction from the RBI and the government, which involved raising interest rates (read: expensive loans) and a major hike in the import duty for gold (so much for the big fat Indian wedding).
Unlike the star wars prequels, here’s why it isn’t all bad news: A weaker currency also means that for an investor the currency feels cheap and that will invite money flow into the country in the form of FDI which is vital for economic growth. If money is flowing out of a country while its currency is falling, then it a problem (Russia 1990) but India does not face that problem yet.
India never adopted an exported oriented growth strategy (scaling up exports to facilitate industrialization) and has been largely dependent on imports. This is why a strong currency was perceived to be good since it helped keep inflation in check. When inflation differentials are taken into account, the rupee was found to be overvalued. This is known as the Real Effective Exchange Rate (REER) of a currency. A stronger rupee means that imports from countries with cheaper currencies rise (China). A rational consumer will account for quality of imports, but if Indian products are as good as foreign, a cheaper currency would give then benefit to India.
In an era of open economies, a currency needs to remain competitive and in Indias’ case a slightly weaker currency can facilitate development and boost exports. With oil prices still relatively low our import costs are not expected to rise significantly because of a weaker rupee. This is different from a free fall in the value of the currency which is problematic if the country has a substantial foreign debt and a weak manufacturing base for exports.
A fairly valued market determined exchange accompanied by low inflation is the ideal situation for any economy.

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