If Markets Are Scissors, What Do They Cut?
When I took admission to G.B. Pant University in 1971 to pursue graduation in mechanical engineering, I experienced a cultural shock. I had never seen such a lush green campus with trees lining both sides of the roads, the backdrop of the Kumayun Hills on the northern horizon, and neatly constructed buildings with elegant facades – imposing yet not intimidating. The first Agricultural University of India, G.B. Pant University was established in collaboration with the University of Illinois and had an engineering college that I attended. Several faculty members were U.S.-returned and spoke English with an accent I found hard to understand. However, perhaps the most significant challenge was the course on elementary economics, taught by a young professor from Visakhapatnam. I hardly understood what he said in class. Hapless and clueless, I wondered why an engineering student needed to study economics.
After a few weeks, when my ears and brain got accustomed to my teacher’s accent, I heard him say one day that markets are like scissors. As the two blades of a scissor act upon a cloth to cut it, so do supply and demand set market pricing. Demand for a product means nothing if there is no supply, and supply is worthless without demand. This made perfect sense to me, and my happiness at finally learning something important was unbound. The teacher said that while one of the two might play a more active role in price determination in the short run, both are essential for the market to exist. However, I was stuck on a question: If markets are scissors, what exactly do they cut? But I was too timid and handicapped by my lack of fluency in English to ask.
As I grew older, I overcame the language barrier. I did well, if not excelled in my studies and realised the importance of economics — not just in engineering, but in every field. Economics plays a crucial role in shaping the world and influencing various aspects of society, politics, and the environment. Transactions are a fundamental part of our daily lives. Even interacting with the environment is involved – for example, we must breathe air to live, have sunlight, drink water, have soil to grow food and so on. When our exchanges are fair, they benefit individuals and promote a more harmonious and sustainable community. Striving for fairness in all transactions can enhance the quality of life for everyone involved. Economics, in this sense, is the axis around which the world moves.
In 2006, I visited Tokyo and witnessed an economic miracle. Having risen from the ashes of World War II, Japan’s astoundingly rapid and complete financial recovery seemed surreal. During this trip, I met many thoughtful people. Though they did not speak fluent English, their expressions were flawless. I was told that Japan’s “economic miracle” was made possible by the cooperation between manufacturers, suppliers, distributors, and banks, organised in close-knit groups called “keiretsu”; the annual wage negotiation between factory owners and workers, called “shunto”; and the guarantee of lifetime employment, called “shushin koyo”, in large corporations.
During a beautiful week in Japan, I observed three school children travelling on the Metro, their school bags tagged with RFID to ensure their safety. They joyfully played a game where each child made a sign behind his back with his hand and then showed his hand. They would either lose or win, depending on the combination of the signs made. My host explained that the game was “Rock, Paper, Scissors”. Each player simultaneously formed one of three shapes with an outstretched hand — a fist signalled a “rock”, a palm represented “paper”, and a fist with the index finger and middle finger extended, forming a V symbolised a pair of “scissors.” Rock wins over scissors as it can blunt them, scissors win over paper as they can cut it, and paper wins over rock because it covers it. If all players choose the same shape, the game is tied and replayed. It’s such a simple yet profound game! This game has stayed with me since then. I often play it when in doubt to guess the outcome.
My friend Suresh Patel at the G.B. Pant University, younger than me by a few years, graduated in agriculture and later entered the banking sector and excelled there. His rise to the position of the Managing Director and CEO of Andhra Bank brought him to Hyderabad. Thus, we met four decades later and had a good time during his stay for over two years. Once, I shared with him about this “game” and brought up my long-standing unanswered question from 1971 – if markets are scissors, what do they cut? A man of a few words, Mr Patel gave me the perspective of a banker – the purpose of money is to provide solid financial support to organisations and projects for economic development. He kept speculative trading and risky investment out of the equation. Mr Patel superannuated in 2017 and later became the Central Vigilance Commissioner of India.
This metaphor of markets as scissors led me to study more. The COVID-19 lockdown and my health issues gave me a lot of time to read books by some great authors. Two such books were The Theory of Moral Sentiments and The Wealth of Nations, written by the Scottish philosopher Adam Smith and published respectively in 1759 and 1776. Running into several hundreds of pages and dotted with examples from that era, a modern reader may wish the books had been more manageable. Still, these books are of immense value as they provide a deep understanding of the origins of economic theories and principles that still underpin much of today’s economic thinking. Smith’s emphasis on individual liberty, free markets, and limited government intervention continues to shape monetary policy and ideology debates.
Just as scissors can cut or divide things, markets have the potential to create both opportunities and societal disparities. So, just as scissors need a tailor’s hand, markets, too, need guidance and control – which can even be intrinsic. Balancing free markets and government intervention involves finding a middle ground for competition and innovation while addressing market failures and ensuring fairness. Some ways to achieve this balance include implementing regulations to prevent monopolies, protecting consumer rights, providing social safety nets, promoting fair competition, and investing in public goods and services. The goal is to harness the benefits of free markets while mitigating their potential negative impacts on the environment and livelihoods. Will this be possible in the emerging digital economy and AI-driven world?
Will the AI, as it becomes mature, be Smith’s “invisible hand” regulating the economy? Will it ensure that technological innovations are deployed responsibly and equitably? Will it make a fair deal for livelihoods, businesses and the environment? By harnessing technology’s potential while mitigating its negative impacts, societies can work towards inclusive and sustainable development for all. Not growing is not an option in the 21st century, but neither is compromising on moral principles. I believe, in the emerging world, it will be possible and even easier to flourish by following righteous and ethically correct ways.
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Like how a scissors cut a cloth depends upon the tailor, the market shapes an industry. Take for example healthcare economics. It involves labour, equipment, supplies for medicine and surgery, salaries, repairs, and incentives. Patient safety and care come first and should never be sacrificed, even though all of these costs are significant. Clinical guidelines and evidence-based techniques facilitate resource utilisation. Examples of technological integration include electronic health records, telemedicine, and advanced medical devices.
To maintain their financial stability, hospitals rely on a variety of sources of income in addition to traditional patient billing. Among the notable sources of income are insurance reimbursements, government funding, philanthropy and donations, grants from the pharmaceutical industry for research and clinical trials, strategic infrastructure investments, facility expansion, and the acquisition of state-of-the-art medical equipment. Effective patient care and careful financial management are essential in the complicated topic of hospital economics. Without making well-informed decisions that maximise revenue, optimise resources providing great patient care remains a pipe dream.
Brilliant blog Prof Tiwariji, with your characteristic style of elucidating complex concepts in simple way !
Your guarded approach of harnessing technological potential for sustainable and inclusive development for all is sensible !!
Thank you, Sir, for sharing this excellent blog.
As you rightly said, ” Will AI, as it becomes mature, be Smith’s “invisible hand” regulating the economy? Will it ensure that technological innovations are deployed responsibly and equitably?”
I have the same question about the use of AI in various medical fields. For instance, it can be used for diagnosis and treatment recommendations, patient engagement and adherence, and administrative activities.
While we can’t predict the future, I believe we can be optimistic about the diligent use of AI in medicine.
This blog is so true, Sir. Economics is everywhere. Financial constraints in the hospital sector can worsen patient outcomes, restrict investments in innovative medical treatments, and create healthcare inequities. Policymakers, healthcare administrators, and stakeholders must work together effectively to build sustainable economic models that balance budgetary responsibility with the best patient results.
Hospital administrators play a role in strategically allocating funds, highlighting a number of important projects that have the potential to transform healthcare delivery and raise the institution’s profile in the medical community. The distribution of, the rise in online consultations, and the focus on using EC funds in hospitonomical and sustainable energy sources are some of the other significant topics covered here. Thank you for posting, Sir.
बाजार भटकती आत्माओं का पड़ाव है
जुगाली करने वालों के लिए एक अच्छा आश्रय है
प्रत्येक दुकान एक तीर्थस्थल है,
इस हाथ दे, उस हाथ ले की जादुई गुफा जैसा।
सौदेबाज़ी में मगन सभी लोग
फायदे की तलाश में जेब कटवाते हैं
बाजार एक कैंची है।
A walk through old Delhi – Chandni Chowk, Sadar Bazar and alike – the traditional market is configured differently. It tends to attract a rowdy crowd of people who have wandered from faraway homes without conveniences, good food, and pleasures. The market is not only distant from the house but requires that we are displaced and leave our families behind to come to this other space where we can meet others who have had to leave their homes.
The market also signifies a movement from the familiar to the strange. And whoever can bear the unfamiliar thrives in the marketplace. This is the sense poets have declared: “The world is a marketplace” and not a home. As you always write thoughtfully, your blog makes us think of the world, not as a property over which we assert ownership or dominion. Instead, the world is a market where we all gather to peddle goods or gods or merely wander. The market is a scissors that cuts through the deception we all are born with.
It is always a pleasure to read your blogs Sir. The depth as well as breadth of your writings always takes my breath away. “Not growing” is certainly not an option. The need of the hour is to help us all better appreciate the value of moral principles – “enlightened self interest”. AI does seem to offer a lot of scope. Perhaps it is time for an expanded version of Asimov’s Laws – for AI.
Namaste, Shri Arun ji. This was, again, an absolute pleasure to read. Your clever analogy of markets as scissors effectively encapsulates the dual nature of market forces, revealing both their constructive and destructive potential. It’s an interesting perspective on the complex dynamics of economics that made me pause and reflect on how these forces shape not just the economy but the social fabric as well.
The way you’ve combined economic insights with relatable and engaging storytelling is impressive. Your blog serves as a thoughtful reminder of the delicate balance markets must maintain and our role in that equilibrium. Thank you for sharing such meaningful reflections.
Dear Tiwari sir, I am one of the avid readers of your blogs. The diversified subjects in your writings always give me a new insight into the subject. I wish you good health, peace and happiness.
Professor Tiwari Ji, your blog offers a fascinating exploration of the intersection between economics, technology, and societal development. As an alumnus of G.B. Pant University, I can certainly relate to your initial cultural shock and the subsequent insights you’ve gained.
The metaphor of markets as scissors is a particularly illuminating analogy, providing a clear understanding of the interplay between supply and demand. Your discussion on the importance of government intervention in balancing free markets and the potential impact of AI is thought-provoking and timely.
Your optimistic outlook for the future, emphasizing the importance of ethical considerations in technological advancements, is both inspiring and essential. Thank you for sharing your valuable insights and perspectives
Thank you Prof Tiwari for the insightful yet candid reflection on what drives lives in the geopolitical world leading to the disparities that we see all around us, yet as those Japanese children and their society live, each of us can have a piece of the peace emanating from the balanced happiness all around us and some to spare! As a Bible believing Christian, I subscribe to the position where we need to love others as we love ourselves!
We are here for a purpose, as you correctly said “Not growing is not an option in the 21st century, but neither is compromising on moral principles, it will be possible and even easier to flourish by following righteous and ethically correct ways.” this is our daily challenge, may we live up to it, by God’s grace.
Dear Sir, Once again, great article.
I appreciate your depth.
Honestly, I liked this phrase —- Not growing is not an option in the 21st century, but neither is compromising on moral principles.
You are class apart! Keep encouraging us !!
A very good piece of writing! Thanks Prof!
Like Hoang from Australia, we should be concerned about AI’s impacts on markets. Human conscience and morality are protected, or at least represented, by those in government authority. Governments are expected to protect the public’s “good.”
Will this “public good” continue to be protected if we let AI drive markets? I submit that AI, just like there are no 100% free markets, should be regulated and utilized for purposes that create effectiveness in processes and sectors that humans believe to be critical. The human conscience should drive the planet.
Superb piece of writing. Great example of how simple fundamentals can be drilled in your brain by a great teacher. Such teachers are rare find. During our school time there was a book on principles of physics by Resnik and Halliday. Very popular book. I joined my MS course in an American university: Rensselaer Polytechnic Institute (RPI), Troy, NY. On my first day the fellow Indians told me the Prof Resnik teaches at RPI and also he teached Physics 101 fundamental course. And as the luck would have it..they also showed me a lanky bearded Prof.Resnik. I was overwhelmed. I ran to him, told him I have read your book and asked why you teach only 101 level course. He smiled and said: This is all I know.
Such beautiful words, Professor, and how true they are. I’ve never heard of the scissors metaphor, but it encapsulates supply and demand well.
I may respectfully add that although modern economics preaches a free market, particularly in the Western world, it isn’t a free market at all. If it was a free market, then the companies after the GFC should have been left to go bankrupt, the USA would not be printing money every time it runs out of cash, and France would give true economic freedoms to the 15 countries or so it still to this day forces them the use the French Francs even though France itself doesn’t use the Francs.
In the end, my view is that it doesn’t matter what system someone lives under. It inevitably leads to the same result, just at what time that all. This is because it is the same humans driving that system. Whether it’s India, China, Russia, the USA or Europe, the same people exist in all these cultures.