A few years back, The Telegraph (UK) reported a story of cops in the Swedish city of Malmö nabbing a couple of gentlemen who were found stealing designer shoes from store windows and, that too, only those meant for the left feet.

Puzzled by this bizarre theft, the police dug deeper and uncovered a pan-Scandinavian gang of shoe stealers.

It turned out that stores across the border in Denmark mostly exhibited right shoes in their display windows, whereas those in Sweden showcased only the ones for the left feet. Members of the syndicate whose operations the police had uncovered were basically stealing left shoes from stores and right shoes from the public in Sweden and right shoes from stores and left shoes from the public of Denmark, to assemble designer pairs.

I stumbled across the above parable of chappalchori or shoe pinching precisely while looking to highlight the idea of complementary goods: Left shoes and right shoes being the classic textbook examples, I don’t think I could have done better.

Yin and Yang

Complements play a significant role in our lives – bread without butter or jam, rum without coke, elephant without the mahout can all be problematic to varying degrees. Complementarities are equally important in the production process – every programmer needs a computer, just as every call centre person his or her phone and every farmer a ploughing or seedbed preparation contraption.

Using this simple notion, Michael Kremer of Harvard University even put forth an ‘O-Ring Theory of Economic Development’. The idea here is that the skills of workers complement each other. The output in a factory, then, depends on all the skills being present and working together. In essence, the theory holds that even one weak link in the chain of production can have disastrous consequences – just as the single O-ring whose failure caused the 1986 Challenger space shuttle disaster.

An important implication of Kremer’s theory is that if you take a worker from a less productive team and put her in a more productive team or country, her own marginal product or wages will go up.

Coordination failure

This is important to keep in mind when creating teams or task forces, and also for understanding phenomena such as brain drain: It happens because workers from developing countries receive higher wages for the same skills deployed in more productive settings. Another crucial insight from the cross-country shoe thieves’ story is the notion of coordination. If only the Danish and Swedish store-owners had coordinated to have all their stores uniformly display either left or right shoes, the chappalchori syndicate would have been out of business faster than you can say Salvatore Ferragamo (or even Gucci).

Coordination issues are rampant in all spheres of economic activity – from choosing which side of the road to drive on to which software package to use when working with a group of people.

A well-known theory of development is called the ‘Big Push’. Postulated first by Paul Rosenstein-Rodan in 1943, it points to complementarities existing between different sectors of the economy.

Sustained growth requires conscious attempts to invest simultaneously in all the sectors – hence the name Big Push. Often thought of as being similar to central planning, the theory fell into disregard till three smart economists – Kevin Murphy, Andrea Shleifer and Robert Vishny – resurrected it in 1989, noting that the main issue here is one of complementarities and coordination.

Thus, the rail, steel and coal industries feed off each other (complementarities). If investment in either of these sectors lags behind (mis-coordination), it will pull the others sectors down and the economy may experience bad things as the Swedish and Danish store-owners did.

Grey markets

In many parts of India, shoe theft enjoys legitimacy, if not pride of place, in weddings. It involves the bride’s sister(s) hiding the footwear of the groom. The latter gets back his shoes, but only after protracted and often expensive bargaining, causing much mirth and merriment among the onlookers. But a less glorious form of the shoe caper occurs in places of worship and occasionally on trains. Before entering temples, people are required to leave their shoes outside. There are many instances where on returning after darshan , they find their precious footwear missing. The movie Slumdog Millionaire , in fact, picturised the young fake tour guides, Jamal and Salim, pinching shoes from outside the Taj Mahal for reselling in the markets just a few kilometres outside. Apparently, Mumbai even has a well-known market in Kurla for trade in such stolen footwear.

A simple solution to the problem is, of course, is to wear ratty chappals . Alternatively, if you must wear designer stuff, put them in separate cubby holes. People often express shock at the audacity of those who pilfer shoes belonging to others, that too from places of worship. Heterogeneity among economic agents can easily explain this seemingly fearless act. Some people have more faith in the almighty than others; those with lesser faith will gladly steal shoes and sell them.

The ones with less faith will also consciously buy such footwear if the price is right, notwithstanding the possibility of having to inherit the sins of those whose shoes they would now be slipping on.

In economic models, for instance, heterogeneity is a crucial factor that ensures trade can happen: If everyone was equally proficient in producing and wanted to consume the same things, then what is the need for trade? The assumption of identical agents in economic modelling is intended primarily for finding solutions easily. Heterogeneity among agents, therefore, provides a sensitivity check; it tells us how good these (easily found) solutions are in the real world where people are not identical. Ultimately, it is heterogeneity that makes the world go round.

The writer teaches microeconomics and game theory at Louisiana State University. He is also a Visiting Professor at the School of Management, KIIT University, Bhubaneswar.

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