BackThe peas are not inflated
When the price of peas rises, whether due to steady inflation or short term shortages, it is empty-headed to tom-tom the rise of revenues from selling peas
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The price of my favourite vegetable has fluctuated wildly of late. Motoring along at somewhere between ₹ 30 and ₹ 45 a kilo for a long time, a couple of months ago peas suddenly got more expensive, peaking at ₹ 130 a kilo. In our home, this meant they were off the menu for a long time. Luckily, they’re now back to about ₹ 40. We’re gorging on peas again.
Basic economics, of course. For whatever reason, peas got scarce. Therefore their price rose sharply. Bad news for pea-fanatics like me, but routine stuff for economists.
Suppose peas go, over a week, from ₹ 40 to ₹ 130. Imagine that at the peak, we hear a vendor of peas crow in delight: “We set a new record in pea revenues! Last weekend we sold ₹ 60 crore worth, this weekend we broke the ₹ 100 crore mark!"
What would you think? Probably that he’s mildly stupid. (Maybe the same about me for asking this trivial stuff). For one thing, if prices rise but he sells the same amount of peas—unlikely, but bear with me—he rakes in more cash. Naturally. For another, but if prices rise, sales will fall, and that’s what happened above. If you do the arithmetic, he actually sold less peas the second weekend. Crowing is meaningless. No sane vendor would do it—except if he did sell more peas.
All right, bear with me some more. Now I don’t know what the price of peas was a decade ago. But for many years in India, inflation has averaged about 7.5%. Use that to extrapolate backwards: if peas are ₹ 40 now, they were about ₹ 20 in 2003.
Imagine that same vendor crowing: “We set a new record in pea revenues! In November 2003 we sold ₹ 60 crore worth, this November we broke the ₹ 100 crore mark!"
What would you think? Probably still that he’s stupid. By those numbers, he sold fewer peas this November than ten years ago. What’s he crowing for?
There is a simple point here. Really. When the price of peas rises, whether due to steady inflation or short term shortages, it is empty-headed to tom-tom the rise of revenues from selling peas—except if you actually sell more peas than before. Absent evidence of that, no reasonable vendor of peas, or anything, would do such tom-tomming. Because of inflation, these are “misleading and inaccurate comparisons", writes Charles Wheelan in his freewheeling book Naked Economics.
And yet there’s at least one commodity with which this kind of comparison happens all the time. Think about it: of how many Bollywood films in recent times have you heard it said that they set a record by making ₹ 100 crore in their first weekend, that sort of thing? ("Hollywood is an egregious offender" too, Wheelan writes, “proclaiming summer after summer that some mediocre film has set a new box office record.")
Most recently it was Chennai Express, a few years ago it was 3 idiots. Such names as Rowdy Rathore and Dabangg 37 also make the top-10 list, almost all of which were released this decade. All made huge money. So are they all beloved all-time classics? Is this a golden age for Bollywood? Will anyone remember Rowdy Rathore fondly even two years from now?
Still, there are plenty of long-beloved Bollywood films. One is Sholay. It was released in 1975 and ran to packed houses for weeks that turned to years. (In Bombay’s Minerva theatre, five years straight). I don’t know how much it grossed in its first weekend. But estimates are that its first run brought in ₹ 15 crore. With plenty of releases and re-releases since, with more to come, it has certainly grossed well over ₹ 100 crore by now.
And I remember this: ticket prices for films in 1975 were in the single digits. Say ₹ 10, tops. Compare that to what I paid for the last film I saw, two weeks ago, name already escapes me: ₹ 350.
That is, film-goers pay 35 times as much for their tickets today as they did in 1975. (A price rise that handily beats inflation). So if Chennai Express and Sholay both grossed ₹ 100 crore, Chennai Express got there 35 times faster than Sholay did. Nice? But look at it this way: to get there, Chennai Express sold 35 times fewer tickets than Sholay did. So which one is more popular?
Aside: Not quite right, because we’re comparing the first run of Chennai Express to 38 years of Sholay. So compare instead to Sholay’s first run of ₹ 15 crore. Simple arithmetic shows that Chennai Express sold five times fewer tickets than Sholay.
Yes, so which one is more popular?
Here’s the thing: Sholay is considered one of Bollywood’s great classics. Whereas I’m not sure if I’ve even got the name Dabangg 439 right. Not even the misleading comparisons that inflation allows can fix that.
Once a computer scientist, Dilip D’Souza now lives in Mumbai and writes for his dinners. A Matter of Numbers will explore the joy of mathematics, with occasional forays into other sciences.
To read Dilip D’Souza’s previous columns, go to www.livemint.com/dilipdsouza-
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