Cash v. In-Kind Transfers in India

Three articles in the recent issue of The Economist caught my eye.

One article reports about India giving money to poor people instead of food or in-kind transfers. Standard economic theory has taught for years that a cash transfer is equivalent to or  better than an in-kind transfer of the same value for the recipient. The article is also noteworthy for highlighting the use of technology in helping create a way for banks to identify people, making deposits to bank accounts possible. 

The second article reports a law suit against Standard and Poor's for its rating of constant proportion debt obligations issued by ABN AMRO. The article begins, "PROTESTING that only fools would rely on your product to make investment decisions may seem a dangerous argument to make. Yet it is one that has served credit-ratings agencies well over the years, allowing them to sell ratings to debt issuers while abjuring legal responsibility for the quality of their work." Economists have known for years that ratings tend to be biased. Two factors lead to bias. The issuer pays the rating agency and the ratings have the legal standing of an editorial - they are opinions. I find humor when reading that Standard and Poor's used the formula provided by the bank to determine the value of the asset. One mystery to me is why anyone pays much attention to ratings.

The third article discusses why people vote when voting is not compulsory. Economics teaches that the expected cost of voting typically exceeds the expected benefit. The chance that your vote matters is small. The only time it matters is if all other voters are tied and yours decides the election. The cost is real; you will spend at least 30 minutes going to a poll and waiting in line. We discussed the logic of voting in the first economics course I took. Thank you Dr. Hendley.