Twenty-Two / The Missing Middle and Introducing Book Notes

This edition covers the phenomenon of the missing middle within the manufacturing sector in developing economies. Next up, a new section – Book Notes – where I talk about particular excerpts from the book(s) I am currently reading. 

This Week's Article

A Missing Middle Within the Manufacturing Sector

Industries are said to be the backbone of an economy. The growth trajectory of any economy starts with agriculture, leading to industrial development and, finally, the emergence of a service sector. Industries, thus, provide a forward and a backward linkage to services and agriculture, respectively. 

The history of industrialization suggests that technological advancements have facilitated employment opportunities for the masses. This renewal of labor demand in emerging industries has engineered the process of urbanization. However, there is a gap between the concentration of industries, compared by firm sizes, in the developed and developing economies. For context, the mode (the statistical one) of employees within the manufacturing sector firms in the United States is 45, and one worker in India and Mexico.

Read the full article using the link below.

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Lately, I have realized that completing a book within a week or even a month is quite unlikely for me to achieve. One reason behind this remains my urge to pick up new books, making me read three to four books simultaneously. With that in mind, I would like to dedicate a section of this newsletter to highlight noteworthy excerpts from the books I am reading.

Book Notes

An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith

"The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called 'value in use;' the other, 'value in exchange.' The things which have the greatest value in use have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water; but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it."

Reading this classic is a journey on its own. Although the above excerpt refers to the exchange value in a barter transaction, it also reminds us of a paradox – Does the 'value' of a good depend on the consumer's situation? Microeconomics textbooks call it the Paradox of Value

In one of the initial lectures of Microeconomics 101, the professor poses this paradox as a hypothetical problem statement. It goes like this – assume you are in a desert, alone, with no sign of water around. You walk your way, in thirst and exhaustion, to a place where you receive a one-time offer. You have to choose between a glass of water and a glaring rare diamond. Huh! Which one would you choose?

Opting for the diamond might seem like a once-in-lifetime opportunity to you. And why not? It is the most precious jewel you could get your hands on, and that too this easily. But then you are surrounded by this desert, with no water available except that glass. The choice might be (but should not be) puzzling to some (anyone) reading this. 

But it is evident for the person stranded there. They will, unquestionably, pick the glass of water. Primarily two economic concepts govern this behavior which I will be covering in the next week's article.

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