Arrow's theorem says that if the decision-making body has at least two members and at least three options to decide among, then it is impossible to design a social welfare function that satisfies all these conditions at once.
In social choice theory, Arrow’s impossibility theorem, or Arrow’s paradox, demonstrates that no voting system can convert the ranked preferences of individuals into a community-wide ranking while also meeting a certain set of reasonable criteria with three or more discrete options to choose from. These criteria are called unrestricted domain, non-imposition, non-dictatorship, Pareto efficiency, and independence of irrelevant alternatives. The theorem is often cited in discussions of election theory as it is further interpreted by the Gibbard–Satterthwaite theorem.
The theorem is named after economist Kenneth Arrow, who demonstrated the theorem in his Ph.D. thesis and popularized it in his 1951 book Social Choice and Individual Values. The original paper was entitled "A Difficulty in the Concept of Social Welfare". [1] Arrow was a co-recipient of the 1972 Nobel Prize in Economics.
Statement of the theorem
The need to aggregate preferences occurs in many different disciplines: in welfare economics, where one attempts to find an economic outcome which would be acceptable and stable; in decision making, where a person has to make a rational choice based on several criteria; and most naturally in voting systems, which are mechanisms for extracting a decision from a multitude of voters' preferences.
The framework for Arrow's theorem assumes that we need to extract a preference order on a given set of options (outcomes). Each individual in the society (or equivalently, each decision criterion) gives a particular order of preferences on the set of outcomes. We are searching for a preferential voting system, called a social welfare function, which transforms the set of preferences into a single global societal preference order. The theorem considers the following properties, assumed to be reasonable requirements of a fair voting method:
non-dictatorship: the social welfare function should account for the wishes of multiple voters. It cannot simply mimic the preferences of a single voter.
unrestricted domain or universality: the social welfare function should account for all preferences among all voters to yield a unique and complete ranking of societal choices. Thus, the voting mechanism must account for all individual preferences, it must do so in a manner that results in a complete ranking of preferences for society, and it must deterministically provide the same ranking each time voters' preferences are presented the same way.
independence of irrelevant alternatives (IIA): the social welfare function should provide the same ranking of preferences among a subset of options as it would for a complete set of options. Changes in individuals' rankings of irrelevant alternatives (ones outside the subset) should have no impact on the societal ranking of the relevant subset.
positive association of social and individual values or monotonicity: if any individual modifies his or her preference order by promoting a certain option, then the societal preference order should respond only by promoting that same option or not changing, never by placing it lower than before. An individual should not be able to hurt an option by ranking it higher.
non-imposition or citizen sovereignty: every possible societal preference order should be achievable by some set of individual preference orders. This means that the social welfare function is surjective: It has an unrestricted target space.
Arrow's theorem says that if the decision-making body has at least two members and at least three options to decide among, then it is impossible to design a social welfare function that satisfies all these conditions at once.
A later (1963) version of Arrow's theorem can be obtained by replacing the monotonicity and non-imposition criteria with:
Pareto efficiency: if every individual prefers a certain option to another, then so must the resulting societal preference order. This, again, is a demand that the social welfare function will be minimally sensitive to the preference profile.
The later version of this theorem is stronger—has weaker conditions—since monotonicity, non-imposition, and independence of irrelevant alternatives together imply Pareto efficiency, whereas Pareto efficiency, non-imposition, and independence of irrelevant alternatives together do not imply monotonicity.
Formal statement of the theorem
Let A be a set of outcomes, N a number of voters or decision criteria. We shall denote the set of all full linear orderings of A by L(A) (this set is equivalent to the set S | A | of permutations on the elements of A).
A (strict) social welfare function is a function which aggregates voters' preferences into a single preference order on A. The N-tuple of voter's preferences is called a preference profile. In its strongest and most simple form, Arrow's impossibility theorem states that whenever the set A of possible alternatives has more than 2 elements, then the following three conditions become incompatible:
unanimity, or Pareto efficiency
If alternative a is ranked above b for all orderings , then a is ranked higher than b by . (Note that unanimity implies non-imposition).
non-dictatorship
There is no individual i whose preferences always prevail. That is, there is no such that .
independence of irrelevant alternatives
For two preference profiles and such that for all individuals i, alternatives a and b have the same order in Ri as in Si, alternatives a and b have the same order in as in .
Proof
Based on the proof by John Geanakoplos of Cowles Foundation, Yale University.[2]
We wish to prove that any social choice system respecting unrestricted domain (U), the Weak Pareto Principle (WP), and independence of irrelevant alternatives (IIA) is a dictatorship.
Say there are three choices for society, call them A, B, and C. Suppose first that everyone prefers option B the least. That is, everyone prefers every other option to B. By the Weak Pareto Principle, society must prefer every option to B, since if everyone prefers something to B, it must have a higher social ranking by WP. Specifically, society prefers A and C to B. Call this situation Profile I.
On the other hand, if everyone preferred B to everything else, then society would have to prefer B to everything else by WP. So it is clear that, if we take Profile 1 and, running through the members in the society in some arbitrary but specific order, move B from the bottom of each person's preference list to the top, there must be some point at which B moves off the bottom of society's preferences as well, since we know it eventually ends up at the top.
We now want to show that, during this process, at the point when the pivotal voter n moves B off the bottom of his preferences to the top, and society's B also moves off the bottom of its preferences, that society's B moves to the top of its preferences, not some intermediate point.
To prove this, consider what would happen if it were not true. Then society would have some option it prefers to B, say A, and one less preferable than B, say C. (If otherwise, just change C's name to A and vice versa).
Now if each person moves his preference for C above A, then society would prefer C to A by WP. By the fact that A is already preferred to B, C would now be preferred to B as well in the social preference ranking. But moving C above A shouldn't change anything about how B and C compare, by independence of irrelevant alternatives. That is, since B is either at the very top or bottom of each person's preferences, moving C or A around doesn't change how either compares with B. We have reached an absurd conclusion.
Therefore, when all the voters through voter n have moved B from the bottom of their preferences to the top, society moves B from the bottom all the way to the top, not some intermediate point.
In the second part of the proof, we show how voter n can be a dictator over society's decision between A and C. Call the case with all voters up to n having B on the bottom of their preferences and the rest with B at the top Profile II. Call the case with all voters up through n having B on the bottom and the rest having B on the top Profile III.
Now suppose everyone up to n ranks B at the bottom, n ranks B below A but above C, and everyone else ranks B at the top. As far as A is concerned, this organization is just as in Profile II, which we proved puts B below A (in Profile II, B is actually at the bottom of the social ordering). C's new position is irrelevant to the B-A ordering for society because of IIA. Likewise, n's new ordering has a relationship between B and C that is just as in profile III, which we proved has B above C (B is actually at the top). Hence we know society puts A above B above C. And if person n flipped A and C, society would have to flip its preferences by the same argument. Hence person n gets to be a dictator over society's decision between A and C.
Since B is irrelevant (IIA) to the decision between A and C, the fact that we assumed particular profiles that put B in particular places doesn't matter. This was just a way of finding out, by example, who the dictator over A and C was. But all we need to know is that he exists.
Finally, we want to show that the dictator can also dictate over the A-B pair and over the C-B pair. Consider that we have proven that there are dictators over the A-B, B-C, and A-C pairs, but they are not necessarily the same dictator. However, if you take the two dictators who can dictate over A-B and B-C, for example, they together can determine the A-C outcome, contradicting the idea that there is some third dictator who can dictate over the A-C pair. Hence the existence of these dictators is enough to prove that they are the same person, otherwise they would be able to overrule one another, a contradiction.
Interpretations of the theorem
Arrow's theorem is a mathematical result, but it is often expressed in a non-mathematical way with a statement such as "No voting method is fair", "Every ranked voting method is flawed", or "The only voting method that isn't flawed is a dictatorship". These statements are simplifications of Arrow's result which are not universally considered to be true. What Arrow's theorem does state is that a voting mechanism cannot comply with all of the conditions given above simultaneously for all possible preference orders.
Arrow did use the term "fair" to refer to his criteria. Indeed, Pareto efficiency, as well as the demand for non-imposition, seems trivial. Various theorists have suggested weakening the IIA criterion as a way out of the paradox. Proponents of ranked voting methods contend that the IIA is an unreasonably strong criterion, which actually does not hold in most real-life situations. Indeed, the IIA criterion is the one breached in most useful voting systems.
Advocates of this position point out that failure of the standard IIA criterion is trivially implied by the possibility of cyclic preferences. If voters cast ballots as follows:
7 votes for A > B > C
6 votes for B > C > A
5 votes for C > A > B
then the net preference of the group is that A wins over B, B wins over C, and C wins over A. In this circumstance, any system that picks a unique winner, and satisfies the very basic majoritarian rule that a candidate who receives a majority of all first-choice votes must win the election, will fail the IIA criterion. Without loss of generality, consider that if a system currently picks A, and B drops out of the race (as e.g. in a two-round system), the remaining votes will be:
7 votes for A > C
11 votes for C > A
Thus, C will win, even though the change (B dropping out) concerned an "irrelevant" alternative candidate who did not win in the original circumstance.
So, what Arrow's theorem really shows is that voting is a non-trivial game, and that game theory should be used to predict the outcome of most voting mechanisms. This could be seen as a discouraging result, because a game need not have efficient equilibria, e.g., a ballot could result in an alternative nobody really wanted in the first place, yet everybody voted for.
Note, however, that not all voting systems require (or even allow), as input, a strict ordering of all candidates. These systems may then trivially fail the universality criterion. Some systems may satisfy a version of Arrow's theorem with some reformulation of universality and independence of irrelevant alternatives; Warren Smith claims that Range voting is such a system.
Other possibilities
The preceding discussion assumes that the "correct" way to deal with Arrow's paradox is to eliminate (or weaken) one of the criteria. The IIA criterion is the most natural candidate. Yet there are other "ways out".
Duncan Black has shown that if there is only one agenda by which the preferences are judged, then all of Arrow's axioms are met by the majority rule. Formally, this means that if we properly restrict the domain of the social welfare function, then all is well. Black's restriction, the "single-peaked preference" principle, states that there is some predetermined linear ordering P of the alternative set. Every voter has some special place he likes best along that line, and his dislike for an alternative grows larger as the alternative goes further away from that spot.
Indeed, many different social welfare functions can meet Arrow's conditions under such restrictions of the domain. It has been proved, however, that under any such restriction, if there exists any social welfare function that adheres to Arrow's criteria, then the majority rule will adhere to Arrow's criteria.[3] Under single-peaked preferences, then, the majority rule is in some respects the most natural voting mechanism.
Another common way "around" the paradox is limiting the alternative set to two alternatives. Thus, whenever more than two alternatives should be put to the test, it seems very tempting to use a mechanism that pairs them and votes by pairs. As tempting as this mechanism seems at first glance, it is generally far from meeting even the Pareto principle, not to mention IIA. The specific order by which the pairs are decided strongly influences the outcome. This is not necessarily a bad feature of the mechanism. Many sports use the tournament mechanism—essentially a pairing mechanism—to choose a winner. This gives considerable opportunity for weaker teams to win, thus adding interest and tension throughout the tournament. In effect, the mechanism by which the choices are limited to two candidates is best considered as a part of the balloting system, and hence Arrow's theorem applies.
There has developed an entire literature following from Arrow's original work which finds other impossibilities as well as some possibility results. For example, if we weaken the requirement that the social choice rule must create a social preference ordering which satisfies transitivity and instead only require acyclicity (if a is preferred to b, and b is preferred to c, then it is not the case that c is preferred to a) there do exist social choice rules which satisfy Arrow's requirements.
Economist and Nobel prize winner Amartya Sen has suggested at least two other alternatives. He has offered both relaxation of transitivity and removal of the Pareto principle. He has shown the existence of voting mechanisms which comply with all of Arrow's criteria, but supply only semi-transitive results.
Also, he has demonstrated another interesting impossibility result, known as the "impossibility of the Paretian Liberal". (See Liberal paradox for details). Sen went on to argue that this demonstrates the futility of demanding Pareto optimality in relation to voting mechanisms.
Advocates of Approval voting consider unrestricted domain to be the best criteria to weaken. In approval voting, voters can only vote 'for' or 'against' each candidate, preventing them from making distinctions between their favored candidates and merely acceptable ones.
Advocates of Range voting also consider unrestricted domain to be the best criteria to violate- but instead of limiting voter options like approval voting, range voting increases the number of voter options beyond what Arrow's Theorem allows.
Scalar rankings from a vector of attributes and the IIA property
The IIA property might not be satisfied in human decision-making of realistic complexity because the scalar preference ranking is effectively derived from the weighting—not usually explicit—of a vector of attributes (one book dealing with the Arrow theorem invites the reader to consider the related problem of creating a scalar measure for the track and field decathlon event—e.g. how does one make scoring 600 points in the discus event "commensurable" with scoring 600 points in the 1500 m race) and this scalar ranking can depend sensitively on the weighting of different attributes, with the tacit weighting itself affected by the context and contrast created by apparently "irrelevant" choices. Edward MacNeal discusses this sensitivity problem with respect to the ranking of "most livable city" in the chapter "Surveys" of his book MathSemantics: making numbers talk sense (1994).
Friday, March 21, 2008
Wednesday, October 31, 2007
Exchange for Physicals will ensure that Agricultural futures markets succeed in India!
The Indian futures markets has had a reasonable 'success story' however this success has been restricted to only precious metals,some base metals and crude oil contracts which has been due to significant retail and investor participation.
However it is to be noted that Agricultural futures has not succeeded and as a matter of fact the recent drop in volumes on major agricultural futures exchange in India has got many a stake holders worried.
Although it is very easy for us to say that it was the fault of policy makers and recent bans etc however that is not the real truth.
We at Altos Research believe that the real reason for failure of agro contracts in the India context is the absence of an offset method which is extremely popular in many global exchanges namely the EFP or the Exchange for Physicals(not to be confused with the SPOT exchange, and an electronic spot exchange is not the panacea of all ills of the commodity market).
What is an EFP ?
There are four ways to close out a futures contract:
1] Offset is the transaction of a reversing trade on the exchange. If you are short 20 March soybean futures traded on the Chicago Board of Trade, you can close the position by taking an offsetting long position in 20 March soybean contracts on the same exchange. There will be a final margining at the end of the day, and then the position will be closed.
2] Cash settlement is simply the holding of a cash settled future until expiration. At that time, there is a final margin payment, and the contract expires.
3] Delivery is the holding of a physically settled future until it physically settles according to exchange rules.
4] Exchange for physicals (EFP) is a form of privately negotiated physical settlement of long and short futures positions held by two parties.This aspect has been completely ignored in the Indian context and this is what we believe is required for the success of Agricultural Contracts in the Indian derivatives exchanges.
Every futures contract has a last trade date and a delivery period specified by the exchange. In the case of a cash settled future, the delivery period is the last trade date. On that date, the settlement price is set equal to the cash price of the underlier. There is a final margining based on that settlement price, and then the contract expires.
For physically settled futures, exchange rules depend upon the specific underlier. Usually, there is an entire month—called the delivery month—during which delivery may occur. The last trading day for the future falls towards the end of that month. A party that is short a future may elect to deliver the underlier on any business day in the delivery month. Typically, notice of delivery must be made to the exchange say two-five business days prior to delivery. The date on which notice is given is called the notice date. The first possible date for notice comes towards the end of the month preceding the delivery month. It is called the first notice date. Upon receiving notice of delivery, the exchange selects a party that is long the future to take the delivery. This may be the party with the largest long position in the future. Alternatively, the party to take delivery may be selected by lot.
The vast majority of futures contracts are traded by hedgers or speculators with no interest in taking or delivering the underlier. Such parties holding long futures will offset them prior to the first notice date. Those with short positions will offset them by the last trade date. Most futures are closed out by offset.
Exchanges specify conditions of delivery. These include acceptable locations for delivery, in the case of commodities or energies. It includes specifics about the quality, grade or nature of the underlier to be delivered. For example, only certain Treasury bonds may be delivered under the Chicago Board of Trade's Treasury bond future. Only certain growths of coffee may be delivered under the Coffee, Sugar and Cocoa Exchange's coffee future.
In many agricultral commodity or energy markets, parties want to settle futures by delivery, but exchange rules are too restrictive for their needs. For example, the New York Mercantile Exchange requires that natural gas be delivered at the Henry Hub in Louisiana. Suppose two parties need to buy/sell gas at some other hub and have transacted futures to hedge against price movements prior to the transaction.
What should they do?
One answer is that they could privately negotiate the trade(OTC) and then reverse their futures positions by offset. This requires that they take price risk during the period between closing the physical trade and offsetting their respective futures positions. Many exchanges offer an alternative called exchange for physicals (EFP).
The mechanics of EFP vary by exchange. Generally, the parties privately negotiate their physical trade. Then, instead of offsetting their futures hedges with trades on the exchange, they inform the exchange that they want to transfer the futures from one party to the other, closing out their respective positions.
Essentially, EFP is customizable physical delivery.
An Exchange of Futures for Physical (EFP) is a transaction negotiated off-market in which one party buys physical assets and sells futures contracts while the opposite party sells the physical market products and buys futures contracts.
EFPs provide a mechanism to:
1]swap from a futures to a physical position or vice versa
2] off market price certainty for large physical vs futures transactions
3] fulfilll delivery commitments
The physical and futures components must be 'substantially similar' and equal in terms of either:
--> value (ie the value of the physical being similar to the value of the futures); or by
--> quantity (the quantity of the physical being similar to the quantity of the futures)
An Example of an EFP contract is the one on the Australian Futures exchange at Sydeny.
Commodity contracts (wool, electricity) can provide a hedge either for the quantity or amount (value) of a physical transaction.
If a trader is holding 20 tonnes (20,000 kilograms) of greasy wool and wished to exchange it for SFE Greasy Wool Futures contracts, the exchange could be made either:
1)at any reasonable price for 8 contracts (each of 2,500 kilograms), or
2) for an equivalent value of futures. If the physical is trading at 600 cents/kilogram and the futures contract is priced at 670, the hedge could be made against the ($6.00 x 20,000 =) $120,000 worth of wool by using ($120,000/($6.70 x 2,500 kg) = approx.) 7 futures contracts.
Either trade would be deemed by SFE to be a valid EFP.
Note that the physical wool should have a micron measurement within that allowed for in the futures. For example SFE Fine Wool Futures includes 19.6 – 22.5 microns and therefore the physical component of an EFP involving SFE Fine Wool Futures should include a physical of a similar size. If the wool traded is in a greasy state, the yield of the physical wool should also be submitted.
For commodities with variable quality, some allowance can be made for variation from SFE contract-specified quality, but this must be justified to SFE on enquiry.(EFB Exchange for Basis)
My 2 cents on this and Sincerely hope that Agro contracts suceed in our country because honestly that is going to determine the future of futures in our country for time to come.
(Note: This is an abstract of Research on "Success formula for Agricultural Futures in India" You can order the complete copy of this research paper from http://www.research.altostrade.com)
also check out for our daily research http://altosdailyresearch.blogspot.com
However it is to be noted that Agricultural futures has not succeeded and as a matter of fact the recent drop in volumes on major agricultural futures exchange in India has got many a stake holders worried.
Although it is very easy for us to say that it was the fault of policy makers and recent bans etc however that is not the real truth.
We at Altos Research believe that the real reason for failure of agro contracts in the India context is the absence of an offset method which is extremely popular in many global exchanges namely the EFP or the Exchange for Physicals(not to be confused with the SPOT exchange, and an electronic spot exchange is not the panacea of all ills of the commodity market).
What is an EFP ?
There are four ways to close out a futures contract:
1] Offset is the transaction of a reversing trade on the exchange. If you are short 20 March soybean futures traded on the Chicago Board of Trade, you can close the position by taking an offsetting long position in 20 March soybean contracts on the same exchange. There will be a final margining at the end of the day, and then the position will be closed.
2] Cash settlement is simply the holding of a cash settled future until expiration. At that time, there is a final margin payment, and the contract expires.
3] Delivery is the holding of a physically settled future until it physically settles according to exchange rules.
4] Exchange for physicals (EFP) is a form of privately negotiated physical settlement of long and short futures positions held by two parties.This aspect has been completely ignored in the Indian context and this is what we believe is required for the success of Agricultural Contracts in the Indian derivatives exchanges.
Every futures contract has a last trade date and a delivery period specified by the exchange. In the case of a cash settled future, the delivery period is the last trade date. On that date, the settlement price is set equal to the cash price of the underlier. There is a final margining based on that settlement price, and then the contract expires.
For physically settled futures, exchange rules depend upon the specific underlier. Usually, there is an entire month—called the delivery month—during which delivery may occur. The last trading day for the future falls towards the end of that month. A party that is short a future may elect to deliver the underlier on any business day in the delivery month. Typically, notice of delivery must be made to the exchange say two-five business days prior to delivery. The date on which notice is given is called the notice date. The first possible date for notice comes towards the end of the month preceding the delivery month. It is called the first notice date. Upon receiving notice of delivery, the exchange selects a party that is long the future to take the delivery. This may be the party with the largest long position in the future. Alternatively, the party to take delivery may be selected by lot.
The vast majority of futures contracts are traded by hedgers or speculators with no interest in taking or delivering the underlier. Such parties holding long futures will offset them prior to the first notice date. Those with short positions will offset them by the last trade date. Most futures are closed out by offset.
Exchanges specify conditions of delivery. These include acceptable locations for delivery, in the case of commodities or energies. It includes specifics about the quality, grade or nature of the underlier to be delivered. For example, only certain Treasury bonds may be delivered under the Chicago Board of Trade's Treasury bond future. Only certain growths of coffee may be delivered under the Coffee, Sugar and Cocoa Exchange's coffee future.
In many agricultral commodity or energy markets, parties want to settle futures by delivery, but exchange rules are too restrictive for their needs. For example, the New York Mercantile Exchange requires that natural gas be delivered at the Henry Hub in Louisiana. Suppose two parties need to buy/sell gas at some other hub and have transacted futures to hedge against price movements prior to the transaction.
What should they do?
One answer is that they could privately negotiate the trade(OTC) and then reverse their futures positions by offset. This requires that they take price risk during the period between closing the physical trade and offsetting their respective futures positions. Many exchanges offer an alternative called exchange for physicals (EFP).
The mechanics of EFP vary by exchange. Generally, the parties privately negotiate their physical trade. Then, instead of offsetting their futures hedges with trades on the exchange, they inform the exchange that they want to transfer the futures from one party to the other, closing out their respective positions.
Essentially, EFP is customizable physical delivery.
An Exchange of Futures for Physical (EFP) is a transaction negotiated off-market in which one party buys physical assets and sells futures contracts while the opposite party sells the physical market products and buys futures contracts.
EFPs provide a mechanism to:
1]swap from a futures to a physical position or vice versa
2] off market price certainty for large physical vs futures transactions
3] fulfilll delivery commitments
The physical and futures components must be 'substantially similar' and equal in terms of either:
--> value (ie the value of the physical being similar to the value of the futures); or by
--> quantity (the quantity of the physical being similar to the quantity of the futures)
An Example of an EFP contract is the one on the Australian Futures exchange at Sydeny.
Commodity contracts (wool, electricity) can provide a hedge either for the quantity or amount (value) of a physical transaction.
If a trader is holding 20 tonnes (20,000 kilograms) of greasy wool and wished to exchange it for SFE Greasy Wool Futures contracts, the exchange could be made either:
1)at any reasonable price for 8 contracts (each of 2,500 kilograms), or
2) for an equivalent value of futures. If the physical is trading at 600 cents/kilogram and the futures contract is priced at 670, the hedge could be made against the ($6.00 x 20,000 =) $120,000 worth of wool by using ($120,000/($6.70 x 2,500 kg) = approx.) 7 futures contracts.
Either trade would be deemed by SFE to be a valid EFP.
Note that the physical wool should have a micron measurement within that allowed for in the futures. For example SFE Fine Wool Futures includes 19.6 – 22.5 microns and therefore the physical component of an EFP involving SFE Fine Wool Futures should include a physical of a similar size. If the wool traded is in a greasy state, the yield of the physical wool should also be submitted.
For commodities with variable quality, some allowance can be made for variation from SFE contract-specified quality, but this must be justified to SFE on enquiry.(EFB Exchange for Basis)
My 2 cents on this and Sincerely hope that Agro contracts suceed in our country because honestly that is going to determine the future of futures in our country for time to come.
(Note: This is an abstract of Research on "Success formula for Agricultural Futures in India" You can order the complete copy of this research paper from http://www.research.altostrade.com)
also check out for our daily research http://altosdailyresearch.blogspot.com
Thursday, August 23, 2007
The World of Non-conventional commodities ?
The World of Non-conventional commodities ?
Having been in the business of commodity trading ever since I passed out of engineering in the year 1996 has made me look at this business through different cycles and also through different perspectives.
The world of Non conventional commodities,i.e commodities that are truly not commodities but people at large are considering them to be commodities.
Nature's commodity outputs
Commodity thinking is undergoing a more direct revival thanks to the theorists of "natural capital" Natural capital, as described in the book Natural Capitalism, is a metaphor for the mineral, plant, and animal formations of the Earth's biosphere when viewed as a means of production of oxygen, water filter, erosion preventer, or provider of other ecosystem services. It is one approach to ecosystem valuation, an alternative to the traditional view of all non-human life as passive natural resources, and to the idea of ecological health. However, human knowledge and understanding of the natural environment is never complete, and therefore the boundaries of natural capital expand or contract as knowledge is gained or lost Natural Cpital whose products, some economists argue, are the only genuine commodities - air, water, and calories we consume being mostly interchangeable when they are free of pollution or disease. Whether we wish to think of these things as tradeable commodities rather than birthrights has been a major source of controversy in many nations.
Most types of environmental economics consider the shift to measuring them inevitable, arguing that reframing political economy to consider the flow of these basic commodities first and foremost, helps avoids use of any military fiat except to protect "natural capital" itself, and basing credit-worthiness more strictly on commitment to preserving biodiversity aligns the long-term interests of ecoregions, societies, and individuals. They seek relatively conservative sustainable development schemes that would be amenable to measuring well-being over long periods of time, typically "seven generations", in line with Native American as well as the Hindu 'Saptha kula' thought.
Weather trading
However, this is not the only way in which commodity thinking interacts with ecologists' thinking. Hedging began as a way to escape the consequences of damage done by natural conditions. It has matured not only into a system of interlocking guarantees, but also into a system of indirectly trading on the actual damage done by weather, using "weather derivatives". For a price, this relieves the purchaser of the following types of concerns:
"Will a freeze hurt the Brazilian coffee crop? Will there be a drought in the U.S. Corn Belt? What are the chances that we will have a cold winter, driving natural gas prices higher and creating havoc in Florida orange areas? What is the status of El Niño? How is Hurricane Dean going to affect Crude oilt prices ?"
Emissions trading
Weather trading is just one example of "negative commodities", units of which represent harm rather than good.
"Economy is three fifths of ecology" argues Mike Nickerson, one of many economic theorists who holds that nature's productive services and waste disposal services are poorly accounted for. One way to fairly allocate the waste disposal capacity of nature is "cap and trade" market structure that is used to trade toxic emissions rights in the United States, e.g. SO2. This is in effect a "negative commodity", a right to throw something away.
In this market, the atmosphere's capacity to absorb certain amounts of pollutants is measured, divided into units, and traded amongst various market players. Those who emit more SO2 must pay those who emit less. Critics of such schemes argue that unauthorized or unregulated emissions still happen, and that "grandfathering" schemes often permit major polluters, such as the state governments' own agencies, or poorer countries, to expand emissions and take jobs, while the SO2 output still floats over the border and causes death.
In practice, political pressure has overcome most such concerns and it is questionable whether this is a capacity that depends on U.S. clout: The Kyoto Protocol established a similar market in global greenhouse gas emissions without U.S. support.
The Community we live as commodity?
This highlights one of the major issues with global commodity markets of either the positive or negative kind. A community must somehow believe that the commodity instrument is real, enforceable, and well worth paying for.
A very substantial part of the anti-globalization movement opposes the commodification of currency, national sovereignty, and traditional cultures. The capacity to repay debt, as in the current global credit money regime anchored by the Bank for International Settlements, does not in their view correspond to measurable benefits to human well-being worldwide. They seek a fairer way for societies to compete in the global markets that will not require conversion of natural capital to natural resources, nor human capital to move to developed nations in order to find work.
Some economic systems by green economists would replace the "gold standard" with a "biodiversity standard". It remains to be seen if such plans have any merit other than as political ways to draw attention to the way capitalism itself interacts with life.
Is human life a commodity? Cloning et all
While classical, neoclassical, and Marxist approaches to economics tend to treat labor differently, they are united in treating nature as a resource.
The green economists and the more conservative environmental economics argue that not only natural ecologies, but also the life of the individual human being is treated as a commodity by the global markets. A good example is the IPCC calculations cited by the Global Commons Institute as placing a value on a human life in the developed world "15x higher" than in the developing world, based solely on the ability to pay to prevent climate change.
Is free time a commodity? Time is money right ?
Accepting this result, some argue that to put a price on both is the most reasonable way to proceed to optimize and increase that value relative to other goods or services. This has led to efforts in measuring well-being, to assign a commercial "value of life", and to the theory of Natural Capitalism - fusions of green and neoclassical approaches - which focus predictably on energy and material efficiency, i.e. using far less of any given commodity input to achieve the same service outputs as a result.
Indian economist Amartya Sen, applying this thinking to human freedom itself, argued in his 1999 book "Development as Freedom" that human free time was the only real service, and that sustainable development was best defined as freeing human time. Sen won The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel in 1999 and based his book on invited lectures he gave at the World Bank
Having been in the business of commodity trading ever since I passed out of engineering in the year 1996 has made me look at this business through different cycles and also through different perspectives.
The world of Non conventional commodities,i.e commodities that are truly not commodities but people at large are considering them to be commodities.
Nature's commodity outputs
Commodity thinking is undergoing a more direct revival thanks to the theorists of "natural capital" Natural capital, as described in the book Natural Capitalism, is a metaphor for the mineral, plant, and animal formations of the Earth's biosphere when viewed as a means of production of oxygen, water filter, erosion preventer, or provider of other ecosystem services. It is one approach to ecosystem valuation, an alternative to the traditional view of all non-human life as passive natural resources, and to the idea of ecological health. However, human knowledge and understanding of the natural environment is never complete, and therefore the boundaries of natural capital expand or contract as knowledge is gained or lost Natural Cpital whose products, some economists argue, are the only genuine commodities - air, water, and calories we consume being mostly interchangeable when they are free of pollution or disease. Whether we wish to think of these things as tradeable commodities rather than birthrights has been a major source of controversy in many nations.
Most types of environmental economics consider the shift to measuring them inevitable, arguing that reframing political economy to consider the flow of these basic commodities first and foremost, helps avoids use of any military fiat except to protect "natural capital" itself, and basing credit-worthiness more strictly on commitment to preserving biodiversity aligns the long-term interests of ecoregions, societies, and individuals. They seek relatively conservative sustainable development schemes that would be amenable to measuring well-being over long periods of time, typically "seven generations", in line with Native American as well as the Hindu 'Saptha kula' thought.
Weather trading
However, this is not the only way in which commodity thinking interacts with ecologists' thinking. Hedging began as a way to escape the consequences of damage done by natural conditions. It has matured not only into a system of interlocking guarantees, but also into a system of indirectly trading on the actual damage done by weather, using "weather derivatives". For a price, this relieves the purchaser of the following types of concerns:
"Will a freeze hurt the Brazilian coffee crop? Will there be a drought in the U.S. Corn Belt? What are the chances that we will have a cold winter, driving natural gas prices higher and creating havoc in Florida orange areas? What is the status of El Niño? How is Hurricane Dean going to affect Crude oilt prices ?"
Emissions trading
Weather trading is just one example of "negative commodities", units of which represent harm rather than good.
"Economy is three fifths of ecology" argues Mike Nickerson, one of many economic theorists who holds that nature's productive services and waste disposal services are poorly accounted for. One way to fairly allocate the waste disposal capacity of nature is "cap and trade" market structure that is used to trade toxic emissions rights in the United States, e.g. SO2. This is in effect a "negative commodity", a right to throw something away.
In this market, the atmosphere's capacity to absorb certain amounts of pollutants is measured, divided into units, and traded amongst various market players. Those who emit more SO2 must pay those who emit less. Critics of such schemes argue that unauthorized or unregulated emissions still happen, and that "grandfathering" schemes often permit major polluters, such as the state governments' own agencies, or poorer countries, to expand emissions and take jobs, while the SO2 output still floats over the border and causes death.
In practice, political pressure has overcome most such concerns and it is questionable whether this is a capacity that depends on U.S. clout: The Kyoto Protocol established a similar market in global greenhouse gas emissions without U.S. support.
The Community we live as commodity?
This highlights one of the major issues with global commodity markets of either the positive or negative kind. A community must somehow believe that the commodity instrument is real, enforceable, and well worth paying for.
A very substantial part of the anti-globalization movement opposes the commodification of currency, national sovereignty, and traditional cultures. The capacity to repay debt, as in the current global credit money regime anchored by the Bank for International Settlements, does not in their view correspond to measurable benefits to human well-being worldwide. They seek a fairer way for societies to compete in the global markets that will not require conversion of natural capital to natural resources, nor human capital to move to developed nations in order to find work.
Some economic systems by green economists would replace the "gold standard" with a "biodiversity standard". It remains to be seen if such plans have any merit other than as political ways to draw attention to the way capitalism itself interacts with life.
Is human life a commodity? Cloning et all
While classical, neoclassical, and Marxist approaches to economics tend to treat labor differently, they are united in treating nature as a resource.
The green economists and the more conservative environmental economics argue that not only natural ecologies, but also the life of the individual human being is treated as a commodity by the global markets. A good example is the IPCC calculations cited by the Global Commons Institute as placing a value on a human life in the developed world "15x higher" than in the developing world, based solely on the ability to pay to prevent climate change.
Is free time a commodity? Time is money right ?
Accepting this result, some argue that to put a price on both is the most reasonable way to proceed to optimize and increase that value relative to other goods or services. This has led to efforts in measuring well-being, to assign a commercial "value of life", and to the theory of Natural Capitalism - fusions of green and neoclassical approaches - which focus predictably on energy and material efficiency, i.e. using far less of any given commodity input to achieve the same service outputs as a result.
Indian economist Amartya Sen, applying this thinking to human freedom itself, argued in his 1999 book "Development as Freedom" that human free time was the only real service, and that sustainable development was best defined as freeing human time. Sen won The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel in 1999 and based his book on invited lectures he gave at the World Bank
Thursday, July 19, 2007
Commodity derivative markets newest and boldest contract
Commodity derivative markets newest and boldest contract " HEDGE STREET BINARY OPTIONS CONTRACTS" will it be the most sucessfull every ?
HedgeStreet is an Internet-based government regulated (CFTC) derivatives exchange where traders can hedge against or speculate on economic events and price movements.
HedgeStreet targets retail speculators and hedgers by offering $100 contracts. The CBOE owns a minority interest in HedgeStreet.
HedgeStreet offers a variety of contracts designed to give private individuals the ability to manage the particular risks they face.
HedgeStreet's contracts span a range of markets, from commodities and currencies to economic indicators, employment, fuel, housing prices, inflation, hurricane insurance estimates, and interest and mortgage rates. HedgeStreet members can use the site to put in order entries, find out about market depth, historical data, and position reporting.
Although the liquidity on HedgeStreet contracts is low as of this submission, as a regulated exchange that offers binary option contracts--a contract format which they pioneered--they do add value in the derivatives marketplace.
Liquidity for the exchange has recently risen due to the $10 million investment by market makers Susquehanna International Group (SIG) and DRW Trading Group in March of 2007.
Based in San Mateo, California, the company is subject to regulatory oversight by the Commodity Futures Trading Commission. Membership is only open to people residing in the United States. Member funds are held at the Union Bank of California.
What is a binary Option ?
A binary option is a type of option where the payoff is either some fixed amount of some asset or nothing at all. The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The cash-or-nothing binary option pays some fixed amount of cash if the option expires in-the-money while the asset-or-nothing pays the value of the underlying security. Thus, the options are binary in nature because there are only two possible outcomes. They are also called all-or-nothing options or digital options.
For example, suppose I buy a binary cash-or-nothing call option on XYZ Corp's stock struck at $100 with a binary payoff of $1000. Then if at the future maturity date, the stock is trading at or above $100, I receive $1000. If its stock is trading below $100, I receive nothing.
In the popular Black-Scholes model, the value of a digital option can be expressed in terms of the cumulative normal distribution function.
HedgeStreet is an Internet-based government regulated (CFTC) derivatives exchange where traders can hedge against or speculate on economic events and price movements.
HedgeStreet targets retail speculators and hedgers by offering $100 contracts. The CBOE owns a minority interest in HedgeStreet.
HedgeStreet offers a variety of contracts designed to give private individuals the ability to manage the particular risks they face.
HedgeStreet's contracts span a range of markets, from commodities and currencies to economic indicators, employment, fuel, housing prices, inflation, hurricane insurance estimates, and interest and mortgage rates. HedgeStreet members can use the site to put in order entries, find out about market depth, historical data, and position reporting.
Although the liquidity on HedgeStreet contracts is low as of this submission, as a regulated exchange that offers binary option contracts--a contract format which they pioneered--they do add value in the derivatives marketplace.
Liquidity for the exchange has recently risen due to the $10 million investment by market makers Susquehanna International Group (SIG) and DRW Trading Group in March of 2007.
Based in San Mateo, California, the company is subject to regulatory oversight by the Commodity Futures Trading Commission. Membership is only open to people residing in the United States. Member funds are held at the Union Bank of California.
What is a binary Option ?
A binary option is a type of option where the payoff is either some fixed amount of some asset or nothing at all. The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The cash-or-nothing binary option pays some fixed amount of cash if the option expires in-the-money while the asset-or-nothing pays the value of the underlying security. Thus, the options are binary in nature because there are only two possible outcomes. They are also called all-or-nothing options or digital options.
For example, suppose I buy a binary cash-or-nothing call option on XYZ Corp's stock struck at $100 with a binary payoff of $1000. Then if at the future maturity date, the stock is trading at or above $100, I receive $1000. If its stock is trading below $100, I receive nothing.
In the popular Black-Scholes model, the value of a digital option can be expressed in terms of the cumulative normal distribution function.
can there be a derivative exchange for Intellectual proprieatry rights ?
Derivatives Exchange for IP rights ?
Current methods of intellectual property exchange are inefficient and often hinder companies from easily realizing value from existing IP assets. In addition, intellectual property enforcement is costly and uncertain and entails lengthy negotiations or legal actions.
As a result, necessary IP rights are not effectively transferred, the “best price” for IP is rarely achieved, and the process itself inhibits the market adoption of new technology based products and hence their companies’ economic growth.
What is Intellectual capital ?
Intellectual capital is a term with various definitions in different theories of economics. Accordingly its only truly neutral definition is as a debate over economic "intangibles". Ambiguous combinations of instructional capital and individual capital employed in productive enterprise are usually what is meant by the term, when it is used to actually refer to a capital asset whose yield is intellectual rights.Such use is rare, however, and the term rarely or never appears in accounting proper - it refers to a debate, and to the assumed capital base that creates intellectual property, rather than an auditable style of capital.
Perhaps due to their industry focus, the term "intellectual capital" is employed mostly by theorists in information technology, innovation research, technology transfer and other fields concerned primarily with technology, standards, and venture capital.
It was particularly prevalent in 1995-2000 as theories proliferated to explain the "dotcom boom" and high valuations. During this period it was often observed that computer code and programmers were bearing a substantial premium when combined in new unproven companies.
It is hard to see how this differs from the tulip boom, however, when it would have been just as likely to assign a high value to the seemingly-magical combinations of tulip bulbs and, say, the pots they grew in.Brand as an AssetWhether flags, brands, labels or simple fear dominate economic decisions, it seems that the underlying theories of intellectual capital and of human capital don't explain them.
When attached to "capital" as prefixes, the terms "intellectual", "knowledge" and "human" often conceal more than their use can reveal. Thus the terms intellectual capital, knowledge capital and human capital more properly describe debates, not assets, as internally generated assets do not appear on a balance sheet, however International Financial Reporting Standard 3 on Business Combinations requires acquired intangible assets to be accounted for during the purchase price allocation exercise.
They produce neat abstractions but so far poorly explain what actually occurs in the biologically real world: individuals buying in a social setting based on instructions.So far, the more specific terms "individual", "instructional" and "social" from human development theory, have been preferred in Wikipedia as adjectives describing classes of capital. In part this is because these terms have definitions that arise from academic categories and practices rather than faddish marketing or management theories.
There are standards for assigning value to these, e.g. the UN Human Development Index which literally ranks flags (of countries) for quality of life.Extending such standards to labels (via mandatory labelling) and applying them positively in brand management, e.g. positioning a brand for appeal to an ethical minority, is increasingly common.
Projects by Consumerium and AdBusters seek to make comprehensive outcomes more important in buying decisions. This in turn is part of a trend towards more moral purchasing.When viewed as an asset, then, a brand is simple social capital that may have an increasing amount of instructional capital attached to satisfy an ever-rising demand for more information about product origin, production and distribution.
Why should any asset be intangeible ?
Intangible assets are defined as those non-monetary assets that cannot be seen, touched or physically measured and which are created through time and/or effort.
There are two primary forms of intangibles - legal intangibles (such as trade secrets (e.g., customer lists), copyrights, patents, trademarks, and goodwill) and competitive intangibles (such as knowledge activities (know-how,knowledge), collaboration activities, leverage activities, and structural activities.
Legal intangibles generate legal property rights defensible in a court of law. Competitive intangibles, whilst legally non-ownable, directly impact effectiveness, productivity, wastage, and opportunity costs within an organization - and therefore costs, revenues, customer service, satisfaction, market value, and share price.
Human capital is the primary source of competitive intangibles for organizations today. Competitive intangibles are the source from which competitive advantage flows, or is destroyed.
The development of new IP exchange practices ultimately may lead to the creation of an operating Intellectual Property Rights Exchange in the future, providing for the efficient open market trading of various direct(spot/cash) and derivative IP-based license, debt equity and hybrid investments.
Such an exchange could bring together IP owners, consumers and investors with a solution for current market inefficiency and provide companies with a mechanism for funding additional innovation, reducing their exposure to legal actions, and increasing their access to underutilized patents and technologies. The objective that as a result, faster commercialization of technology will accelerate long-term economic growth.
Different types of trading activities may be developed, bound by the common principles of consistent transaction termsand market pricing. Transactions might be for license rights (e.g., for a specific quantity of production), for ownership rights (e.g., via an open auction), or for various kinds of derivative rights based on specific conditions affecting the underlying asset value.
The derivatives exchange will direct the manner in which the intellectual property rights, either owned by these companies or acquired on their behalf, will be transferred to third parties in accordance with the owners’ objectives. This will relieve the company of the burden of establishing andadministering a licensing program to maximize the value of their IP and will provide investors in IP an avenue for marketing those rights instead of engaging in inefficient, costly and unfamiliar licensing negotiations.
Where all could the applications be ?
1. Under the most recent context global sporting events like the current (2007) world cup, an exchange for derivatives comprising of notional cash value of say runs scored by a batsman, a basket of such values could be securitized and be traded on an exchange, in lay man terms an Exchange which will have an instrument SachinAPRIL 30, i.e a derivatives instrument whose pay off would be linked to the runs scored by sachin as of april 30th or AUSTRALIAWC07APRIL30 this market could then attract participants like advertisers,media channels,branders,consumers investors and speculators.
2. Film and Movie Industry : an active and liquid market comprising of actors,technicians,financiers,producers,investors,distrubutors,advertisers media channels and end consumners(the guy who pays money and buys ticket/dvds)
3. Software and Products company.
4. Architectural firms,building, construction and realt companies,REITS. Eg RELIANCESEZNEAR MUMBAI 2011 futures.
5. Art and artwork.
Current methods of intellectual property exchange are inefficient and often hinder companies from easily realizing value from existing IP assets. In addition, intellectual property enforcement is costly and uncertain and entails lengthy negotiations or legal actions.
As a result, necessary IP rights are not effectively transferred, the “best price” for IP is rarely achieved, and the process itself inhibits the market adoption of new technology based products and hence their companies’ economic growth.
What is Intellectual capital ?
Intellectual capital is a term with various definitions in different theories of economics. Accordingly its only truly neutral definition is as a debate over economic "intangibles". Ambiguous combinations of instructional capital and individual capital employed in productive enterprise are usually what is meant by the term, when it is used to actually refer to a capital asset whose yield is intellectual rights.Such use is rare, however, and the term rarely or never appears in accounting proper - it refers to a debate, and to the assumed capital base that creates intellectual property, rather than an auditable style of capital.
Perhaps due to their industry focus, the term "intellectual capital" is employed mostly by theorists in information technology, innovation research, technology transfer and other fields concerned primarily with technology, standards, and venture capital.
It was particularly prevalent in 1995-2000 as theories proliferated to explain the "dotcom boom" and high valuations. During this period it was often observed that computer code and programmers were bearing a substantial premium when combined in new unproven companies.
It is hard to see how this differs from the tulip boom, however, when it would have been just as likely to assign a high value to the seemingly-magical combinations of tulip bulbs and, say, the pots they grew in.Brand as an AssetWhether flags, brands, labels or simple fear dominate economic decisions, it seems that the underlying theories of intellectual capital and of human capital don't explain them.
When attached to "capital" as prefixes, the terms "intellectual", "knowledge" and "human" often conceal more than their use can reveal. Thus the terms intellectual capital, knowledge capital and human capital more properly describe debates, not assets, as internally generated assets do not appear on a balance sheet, however International Financial Reporting Standard 3 on Business Combinations requires acquired intangible assets to be accounted for during the purchase price allocation exercise.
They produce neat abstractions but so far poorly explain what actually occurs in the biologically real world: individuals buying in a social setting based on instructions.So far, the more specific terms "individual", "instructional" and "social" from human development theory, have been preferred in Wikipedia as adjectives describing classes of capital. In part this is because these terms have definitions that arise from academic categories and practices rather than faddish marketing or management theories.
There are standards for assigning value to these, e.g. the UN Human Development Index which literally ranks flags (of countries) for quality of life.Extending such standards to labels (via mandatory labelling) and applying them positively in brand management, e.g. positioning a brand for appeal to an ethical minority, is increasingly common.
Projects by Consumerium and AdBusters seek to make comprehensive outcomes more important in buying decisions. This in turn is part of a trend towards more moral purchasing.When viewed as an asset, then, a brand is simple social capital that may have an increasing amount of instructional capital attached to satisfy an ever-rising demand for more information about product origin, production and distribution.
Why should any asset be intangeible ?
Intangible assets are defined as those non-monetary assets that cannot be seen, touched or physically measured and which are created through time and/or effort.
There are two primary forms of intangibles - legal intangibles (such as trade secrets (e.g., customer lists), copyrights, patents, trademarks, and goodwill) and competitive intangibles (such as knowledge activities (know-how,knowledge), collaboration activities, leverage activities, and structural activities.
Legal intangibles generate legal property rights defensible in a court of law. Competitive intangibles, whilst legally non-ownable, directly impact effectiveness, productivity, wastage, and opportunity costs within an organization - and therefore costs, revenues, customer service, satisfaction, market value, and share price.
Human capital is the primary source of competitive intangibles for organizations today. Competitive intangibles are the source from which competitive advantage flows, or is destroyed.
The development of new IP exchange practices ultimately may lead to the creation of an operating Intellectual Property Rights Exchange in the future, providing for the efficient open market trading of various direct(spot/cash) and derivative IP-based license, debt equity and hybrid investments.
Such an exchange could bring together IP owners, consumers and investors with a solution for current market inefficiency and provide companies with a mechanism for funding additional innovation, reducing their exposure to legal actions, and increasing their access to underutilized patents and technologies. The objective that as a result, faster commercialization of technology will accelerate long-term economic growth.
Different types of trading activities may be developed, bound by the common principles of consistent transaction termsand market pricing. Transactions might be for license rights (e.g., for a specific quantity of production), for ownership rights (e.g., via an open auction), or for various kinds of derivative rights based on specific conditions affecting the underlying asset value.
The derivatives exchange will direct the manner in which the intellectual property rights, either owned by these companies or acquired on their behalf, will be transferred to third parties in accordance with the owners’ objectives. This will relieve the company of the burden of establishing andadministering a licensing program to maximize the value of their IP and will provide investors in IP an avenue for marketing those rights instead of engaging in inefficient, costly and unfamiliar licensing negotiations.
Where all could the applications be ?
1. Under the most recent context global sporting events like the current (2007) world cup, an exchange for derivatives comprising of notional cash value of say runs scored by a batsman, a basket of such values could be securitized and be traded on an exchange, in lay man terms an Exchange which will have an instrument SachinAPRIL 30, i.e a derivatives instrument whose pay off would be linked to the runs scored by sachin as of april 30th or AUSTRALIAWC07APRIL30 this market could then attract participants like advertisers,media channels,branders,consumers investors and speculators.
2. Film and Movie Industry : an active and liquid market comprising of actors,technicians,financiers,producers,investors,distrubutors,advertisers media channels and end consumners(the guy who pays money and buys ticket/dvds)
3. Software and Products company.
4. Architectural firms,building, construction and realt companies,REITS. Eg RELIANCESEZNEAR MUMBAI 2011 futures.
5. Art and artwork.
Tuesday, July 17, 2007
Crusader of Rights to Information is no more
Transparency in Public Life15 Jul, 2007
Transparency in public life
By Prakash Kardaley
(Prakash Kardaley, a crusader for the Right to Information passed away of 15 July 2007. This article was written a three days before his demise and reflects his views on transparency)
The greatest adversary of the law on of transparency is not really the bureaucracy. Not every bureaucrat is opposed to transparency; in any case, the bureaucracy can always be tamed or disciplined. The worst opposition to the spirit of transparency is our own hypocrisy.
We want every piece of paper in government offices to be made accessible to the people and yet we fiercely resist any suggestion to open up our own income tax returns – which in fact is our declaration of our liability to the government and thereby to the people at large. There are many organizations that make ear-splitting noise to force the government to enforce every word and comma of the transparency law but are significantly silent when it comes to opening up their own transactions.
What is wrong with transparency unless one desperately wants to cover up one’s own misdeeds? Transparency in public life either in spirit or as a piece of legislation, when codified into a law knows its legitimate laxman rekha. It does not cause any unwarranted invasion of individual privacy. It does not expect disclosure of information that would be detrimental to the society at large. On the other hand, it attacks excessive secrecy, which is in fact is injurious to the well being of society. Any opposition to the spirit of transparency, therefore, must be seen as profound disrespect to society.
Many of us tend to take a myopic view of the law on transparency. We identify it as a weapon bestowed upon people to root out corruption in government. Of course, that is one of its objectives. But the purpose of creating such legislation goes much beyond. The Transparency law - rightly called `sunshine law’ in USA - is a potent instrument that ushers in good governance. It ensures that all bodies or institutions in the public domain function under the watchful eyes of stakeholders. This will curb malpractices and corruption.
Stakeholders of every public venture therefore, have an inherent right to demand transparency from those who function in public interest. Students and parents have a right to demand a reasonable level of transparency from educational institutions. Depositors, investors have a right to expect the same from financial institutions.
Justice P B Sawant, former judge of the Supreme Court, as the Chairman of the Press Council of India, presented the first draft of the RTI Act in India and is an ardent advocate bringing the private sector under the purview of the transparency law. The private sector gets its funds from shareholders and depositors money as well as from financial institutions, he says, which shows that they too use public resources to run their companies. All major scams, he points out, have been in the private sector, especially in banks and financial institutions and yet, secrecy is greater in the private sector, whereas truth comes out sooner in the public sector.
Justice Sawant says it is imperative to extend the RTI Act to the private sector lock and stock and barrel especially at a time when many public services and public sector undertakings are being privatized. He emphasizes that all institutions that carry out activities that are of public interest, must come under the purview of the RTI law.
The draft of the Right to Information Bill, 1996, as suggested by Press Council of India, therefore, defined “public authority” as:
(i) The Government and Parliament of India and the Government and Legislature of each of the States and a local or other authorities within the territory of India or under the control of the Government of India; and
(ii) A company, corporation, trust, firm, society or a cooperative society, whether owned or controlled by private individuals and institutions whose activities affect the public interest; [The expressions company, corporation, trust, firm, society and cooperative society shall have the same meaning as assigned to them in the respective Acts under which they are registered.]
The Right to Information Act, 2005, did not incorporate Justice Sawant’s radical definition of a public authority, but it came fairly close to his concept when it included bodies ``owned, controlled or substantially financed’’ by the government as well as ``non-Government organization substantially financed, directly or indirectly by funds’’ provided by the government.
These ``non-government organizations’’ do not merely mean the jholawala NGOs but all ``authorities, bodies or institution of self government established or constituted by or under the Constitution; by any other law made by Parliament; by any other law made by State Legislature or by notification issued or order made by the appropriate government’’, thus bringing under the purview of the RTI Act, therefore, companies, corporations, trusts, firms, societies or cooperative societies, as envisaged by Justice Sawant, irrespective of the nature of their ownership, except for the condition that these be either ``controlled or substantially financed’’ by the government.
Going by the letter and spirit of the Act, information commissions have begun giving their rulings on the interpretation of ``controlled’’ with respect to various types of these private bodies. The Gujarat Information Commission on May 15 decided that all co-operative societies, including cooperative banks, are bodies ``controlled’’ by the government and therefore are required to abide by the provisions of the RTI Act.
The Central Information Commission (CIC) on June 7 declared in unambiguous terms that functioning all recognized stock exchanges are under the ``deep and all pervasive close control’’ Central Government and hence are public authorities, being obliged to give information to any requisitioner under the Act.
In support of its observations that stock exchanges, undoubtedly are controlled by the government, the CIC cited, apart from pronouncements of the apex court, a whole array of provisions in the SEBI Act including its preamble which declares that it is "An Act to provide for the establishment of a Board to protect the interest of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto".
Any right thinking person would have expected stock exchanges not to have opposed a requisition under the RTI Act in the first place or at least have decided to honour the decision of the Central Information Commission. After all, what is there to hide? What is there in any disclosure of information that would go against the public interest?
Yet, the National Stock Exchange (NSE) in its wisdom has approached the higher judiciary challenging the interpretation pronounced by the CIC. All one can do at the moment is to wait and watch, but at the same time wonder how the NSE that claims to be totally autonomous is being represented in the court by an additional solicitor general!
This article was ctrlc ctrlveed from suchetas website www.suchetadalal.com, and is copyrighted to her site, my sincere apologies are to sucheta who had to remind me of copy right violation my apologies mam i respect you and wanted people in my yahoogroups to know about RTI crusader
Transparency in public life
By Prakash Kardaley
(Prakash Kardaley, a crusader for the Right to Information passed away of 15 July 2007. This article was written a three days before his demise and reflects his views on transparency)
The greatest adversary of the law on of transparency is not really the bureaucracy. Not every bureaucrat is opposed to transparency; in any case, the bureaucracy can always be tamed or disciplined. The worst opposition to the spirit of transparency is our own hypocrisy.
We want every piece of paper in government offices to be made accessible to the people and yet we fiercely resist any suggestion to open up our own income tax returns – which in fact is our declaration of our liability to the government and thereby to the people at large. There are many organizations that make ear-splitting noise to force the government to enforce every word and comma of the transparency law but are significantly silent when it comes to opening up their own transactions.
What is wrong with transparency unless one desperately wants to cover up one’s own misdeeds? Transparency in public life either in spirit or as a piece of legislation, when codified into a law knows its legitimate laxman rekha. It does not cause any unwarranted invasion of individual privacy. It does not expect disclosure of information that would be detrimental to the society at large. On the other hand, it attacks excessive secrecy, which is in fact is injurious to the well being of society. Any opposition to the spirit of transparency, therefore, must be seen as profound disrespect to society.
Many of us tend to take a myopic view of the law on transparency. We identify it as a weapon bestowed upon people to root out corruption in government. Of course, that is one of its objectives. But the purpose of creating such legislation goes much beyond. The Transparency law - rightly called `sunshine law’ in USA - is a potent instrument that ushers in good governance. It ensures that all bodies or institutions in the public domain function under the watchful eyes of stakeholders. This will curb malpractices and corruption.
Stakeholders of every public venture therefore, have an inherent right to demand transparency from those who function in public interest. Students and parents have a right to demand a reasonable level of transparency from educational institutions. Depositors, investors have a right to expect the same from financial institutions.
Justice P B Sawant, former judge of the Supreme Court, as the Chairman of the Press Council of India, presented the first draft of the RTI Act in India and is an ardent advocate bringing the private sector under the purview of the transparency law. The private sector gets its funds from shareholders and depositors money as well as from financial institutions, he says, which shows that they too use public resources to run their companies. All major scams, he points out, have been in the private sector, especially in banks and financial institutions and yet, secrecy is greater in the private sector, whereas truth comes out sooner in the public sector.
Justice Sawant says it is imperative to extend the RTI Act to the private sector lock and stock and barrel especially at a time when many public services and public sector undertakings are being privatized. He emphasizes that all institutions that carry out activities that are of public interest, must come under the purview of the RTI law.
The draft of the Right to Information Bill, 1996, as suggested by Press Council of India, therefore, defined “public authority” as:
(i) The Government and Parliament of India and the Government and Legislature of each of the States and a local or other authorities within the territory of India or under the control of the Government of India; and
(ii) A company, corporation, trust, firm, society or a cooperative society, whether owned or controlled by private individuals and institutions whose activities affect the public interest; [The expressions company, corporation, trust, firm, society and cooperative society shall have the same meaning as assigned to them in the respective Acts under which they are registered.]
The Right to Information Act, 2005, did not incorporate Justice Sawant’s radical definition of a public authority, but it came fairly close to his concept when it included bodies ``owned, controlled or substantially financed’’ by the government as well as ``non-Government organization substantially financed, directly or indirectly by funds’’ provided by the government.
These ``non-government organizations’’ do not merely mean the jholawala NGOs but all ``authorities, bodies or institution of self government established or constituted by or under the Constitution; by any other law made by Parliament; by any other law made by State Legislature or by notification issued or order made by the appropriate government’’, thus bringing under the purview of the RTI Act, therefore, companies, corporations, trusts, firms, societies or cooperative societies, as envisaged by Justice Sawant, irrespective of the nature of their ownership, except for the condition that these be either ``controlled or substantially financed’’ by the government.
Going by the letter and spirit of the Act, information commissions have begun giving their rulings on the interpretation of ``controlled’’ with respect to various types of these private bodies. The Gujarat Information Commission on May 15 decided that all co-operative societies, including cooperative banks, are bodies ``controlled’’ by the government and therefore are required to abide by the provisions of the RTI Act.
The Central Information Commission (CIC) on June 7 declared in unambiguous terms that functioning all recognized stock exchanges are under the ``deep and all pervasive close control’’ Central Government and hence are public authorities, being obliged to give information to any requisitioner under the Act.
In support of its observations that stock exchanges, undoubtedly are controlled by the government, the CIC cited, apart from pronouncements of the apex court, a whole array of provisions in the SEBI Act including its preamble which declares that it is "An Act to provide for the establishment of a Board to protect the interest of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto".
Any right thinking person would have expected stock exchanges not to have opposed a requisition under the RTI Act in the first place or at least have decided to honour the decision of the Central Information Commission. After all, what is there to hide? What is there in any disclosure of information that would go against the public interest?
Yet, the National Stock Exchange (NSE) in its wisdom has approached the higher judiciary challenging the interpretation pronounced by the CIC. All one can do at the moment is to wait and watch, but at the same time wonder how the NSE that claims to be totally autonomous is being represented in the court by an additional solicitor general!
This article was ctrlc ctrlveed from suchetas website www.suchetadalal.com, and is copyrighted to her site, my sincere apologies are to sucheta who had to remind me of copy right violation my apologies mam i respect you and wanted people in my yahoogroups to know about RTI crusader
Buy Uranium ?
1. SupplyBetween the late 1980s and early this decade secondary supplies hung over the market, resulting in very low prices and inducing little to no investment in uranium exploration and output capacity. Since the late 1980s primary mine supply has not been sufficient to meet demand and so large quantities of non-recyclable secondary supplies were 'used up' in filling this gap over this period.
2. DemandThe drying up of secondary supply sources and tight uranium market has driven the massive increase in demand for future primary mine supply over the past three years, evidenced by a massive increase in long-term contracting in recent years. Current supply shortage is being exacerbated by speculators/hedge funds entering the market and holding large quantities of uranium (roughly 8-10,000tU is estimated be held of the market).Unlike other metals, the initial boom in the uranium price was not directly tied to China (actual demand from China to date is reportedly negligible), it is more of a traditional underinvestment / tight market related cyclical price boom.
3. Speculative activityHas been playing a big role in the boom in spot prices. On and off-market uranium futures began trading on NYME on 7 May (no physical delivery) - the June 2007 contract is trading at $134.9/lb and the February 2008 contract last traded at $150.0/lb.
Reasons to Buy into the Uranium Story…
2. DemandThe drying up of secondary supply sources and tight uranium market has driven the massive increase in demand for future primary mine supply over the past three years, evidenced by a massive increase in long-term contracting in recent years. Current supply shortage is being exacerbated by speculators/hedge funds entering the market and holding large quantities of uranium (roughly 8-10,000tU is estimated be held of the market).Unlike other metals, the initial boom in the uranium price was not directly tied to China (actual demand from China to date is reportedly negligible), it is more of a traditional underinvestment / tight market related cyclical price boom.
3. Speculative activityHas been playing a big role in the boom in spot prices. On and off-market uranium futures began trading on NYME on 7 May (no physical delivery) - the June 2007 contract is trading at $134.9/lb and the February 2008 contract last traded at $150.0/lb.
Reasons to Buy into the Uranium Story…
- Concerns over future supply fuelled by the delays at Cameco's massive 18mlbpa capacity Cigar Lake project, will keep reactor demand for future mine supply at very high levels in the coming year.
- Recent flooding at ERA's Ranger mine - the world's second highest producing mine – will reduce supply from the mine significantly in 2008, taking much-needed supply off a market already in deficit.
- High levels of reactor procurement of future mine supply is likely to continue to spill over to the spot market
- The Real need for clean fuels ,corelation with carbon credits Global warming.
- Uranium held by speculators/hedge funds appears to be in tight hands (at current prices).
- Producer, consumer and (strategic) government inventory building (China in particular), is likely to keep the market tight in the coming years.
- Uranium futures (no physical delivery) are giving bullish guidance as to uranium prices going forward – with the June 2007 contract trading around $135/lb and the early 2008 contracts at $150.0/lb.
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