Tuesday, November 30, 2010

People who matter, not the places

From Reinventing the wheel By William Easterly

  • When I worked at the World Bank, management was always checking up on us to make sure our research was relevant for real-world economic development. The standard test question was, "What would your research suggest the finance minister of country X should do?" This question reflected the standard view that has endured since the beginning of development economics six decades ago -- that all countries begin with a blank slate and that development happens when today's government leaders execute wise policies. My job was simply to tell the leaders what those wise policies were.
  • Imagine the dismay of my managers if my advice to the finance minister had been, "Make sure your country was well caught up on technology -- 500 years ago." But seemingly irrelevant as that advice might be, it's actually true. If a country had the printing press and the magnetic compass in 1500, it's a pretty safe bet it has a strong national economy today. Ancient history still matters for today's development, providing unique insight into why the lights are still off in the dark corners of the world and what we might do to change that.
  • Strangely, history has never figured into the equation when it comes to exploring why some countries prosper and others don't. To understand how it might relate, Diego Comin at Harvard Business School, Erick Gong at the University of California, Berkeley, and I started by compiling a list of 11 ancient technologies that were around in 1000 B.C.: Was there written language? The wheel? Agriculture and iron tools? We drew today's boundaries on the ancient world and assigned each separate technology history to the future country that would form within that territory. Then we expanded the survey to 1500 A.D., looking for the adoption of 24 technologies, including oceangoing ships, paper, printing, firearms, artillery, the magnetic compass, and steel.
  • We found that there was a remarkably strong association between countries with the most advanced technology in 1500 and countries with the highest per capita income today. Europe already had steel, printed books, and oceangoing ships then, while large parts of Africa did not yet have writing or the wheel. Britain had all 24 of our sample technologies in 1500. The Democratic Republic of the Congo, Papua New Guinea, and Tonga had none of them. But technology also travels. North America, Australia, and New Zealand had among the world's most backward technology in 1500; today, they are among the wealthiest regions on Earth, reflecting the principle that it's the people who matter, not the places. As migration has transformed parts of the world that were nearly empty in the Middle Ages, technology has migrated with them.

  • So what does this tell us about the prognosis for bringing the world's bottom billion up from poverty? For one, it tells us that we've been doing development wrong. The traditional approach to development was as a top-down process led by great men and benevolent autocrats, advised by great experts. Former World Bank chief economist Stanley Fischer used to joke about a new grammatical tense he called the "World Bank imperative form": Country reports were long lists of things that "must be done" by the authorities, ranging from grandiose infrastructure projects to implementing detailed plans to meet health, nutrition, sanitation, and education needs. But our research shows that development is not about what you dictate, but what you discover. Little penicillin did far more to improve the world's lot than big plans conceived around a conference table.
  • The World Bank imperative approach gave us Africa's stagnation, the failure of economic reforms in the 1980s and 1990s, and the disastrous transition from communism to capitalism in the former Soviet Union. These and many other disappointments over the past half-century do not predict a cheery future for the great-men-cum-great-experts approach.
  • Most importantly, what the history of technology tells us is that the blank-slate theory is a myth. Top-down development programs simply don't work. In fact, the principal beneficiaries of Western largesse today -- African autocrats and dysfunctional regimes -- are themselves the main obstacles to development. If there's anything that "must be done" to spur future development, it's to create the conditions necessary to empower the ordinary individuals who will create new and unforeseen technologies out of old ones. There's a Thomas Edison born every minute. We just have to help them turn the lights on.
Read the full article here

Worldly freedom

Russians: Indians Are Coming by Yoginder K. Alagh

  • There was a fascinating story last week that there is discussion between Russia and India on sending Indian labour for construction in Siberia. Now this is an old reliable. These stories occur every decade or so.
  • In 1988, the PM was in Moscow and discussing reforms and economic ties with Mr Gorbachov. It occurred to them that trade between the two countries should be doubled and that appeared in their official communiqué. I was asked to operationalise that.
  • I was hesitant. We were liberalising. Barter trade was to be phased out. So was it in the Soviet Union. But an order is an order, so off I went to Moscow. We worked out important priorities which would otherwise have slipped and that was the beginning of the chequered history of the VVER nuclear reactors, the GSLV rockets and many other projects. I always regret that the Delhi metro was put on the backburner because I listened to short-sighted economists who felt we couldn’t afford it.
  • There were two interesting features which were reported but not noticed much. The first was that I insisted that trade should be integrated with reform in both countries. The Soviets were first dragging their feet but soon fell in line.
  • The rupee was in the basket of hard currencies that they put in auction in the beginning of exchange reform. We introduced packets of financing outside the trade plan for private and autonomous public sectors. I got IDBI to join and they set up counterpart agencies.
  • The second was that they asked their best men to be a part of the process. These were all hand-picked reformers. They were in their forties and had great achievements to their credit. They were Gorbachov’s phalanx.
  • I met them one by one and then all of them together in a dinner at the Ashoka in Moscow which B K Chaturvedi organised, as then JS in the Commerce Minstry. It was an occasion as they were the crown jewels of Gorbachov’s perestroika.
  • On our side, I got Sam Pitroda to join and he was a hit with them. He was asked to help them in the Azerbejain earthquake with an IT rehab framework. In the next two years, I was to go through the distressing experience in meetings in Moscow and Delhi of these extraordinary men getting frustrated. The Soviets didn’t get their reform institutions working.
  • One of them was the man who had planned the Siberian expansion in the Eighties and had great achievements to himself. He was the first one to moot the idea of Indian labour in the Siberian projects. We were taken up. The young Soviet electronic engineer who was my counterpart in their Gosplan; the first Soviet engineer trained in USA, discussed the plans, but not much happened before the context changed but the idea keeps on coming up again and again as many others of the period.
  • If it works, it would have another property. It could be the first big labour or factor movement in the globalisation period. There are incidentally interesting proposals by Canadian scholars of a World Visa Organisation arguing that labour mobility across borders will be the great reform frontier.

Koreans are fanatic about education, so there is receptive demand for experiments.

From Prof. Tarun Khanna’s new column in Mint

  • From Megastudy in Seoul we can rethink the provision of incentives to our teachers, so that the better ones get more attention and the underperforming ones understand how they must improve.
  • Megastudy’s core idea is that good teachers are videotaped, and then others can subscribe to their lectures via online access to the videos. Good teachers keep a substantial share of incremental revenue, and the best are compensated at superstar Wall Street-like levels, while mediocrity is penalized (the poorest performers earn less than the median Korean college graduate). Measurement is taken seriously, so that the effort is not inadvertently rewarding only rote learning. And relatively simple online technology magnifies these incentive effects.
  • Of course, Megastudy’s is not the only solution to poor incentives. The charter school model under way in the US is another interesting experiment, but no reason not to let several proverbial flowers bloom on this front. Education in the West deserves introspection.

Without restraints, move n

Classical economic theories, validated by long-term experiences from across the world, teach us that unrestricted capital and labour mobility are fundamental for efficient allocation of scarce resources. Such unhindered labour migration, in search of the most suitable economic opportunities, enables frictionless matching of supply and demand, and ensures efficient labour market outcomes.

Was there any sort of ‘transparent?

First and far most it is mockery to argue like the one in below, isn’t it? We all know that the liberalization is good for everyone provided the “increasing transparency” but that did not happen for hell reasons. And now the socialists pundits takes advantages to make themselves insult first and then the people of this country and the whole idea of liberals.

  • “It is to be expected that such instances would increase under liberalisation since the state increasingly dilutes or gives up its role as an agent influencing and regulating the nature and scale of private activity to take on that of being a facilitator of private investment. In fact, the very process of transition to a more “liberal” regime is fraught with potential instances of corruption, as the allegations of under-pricing of public assets in the process of disinvestment of public enterprises illustrates. The process of decontrol and deregulation is also accompanied by efforts at promotion of private investment, involving public-private partnerships and help to the private sector to acquire land and material and financial resources. As a result, besides the old type of corruption where state functionaries demand a price for favouring individual firms with purchase orders or permissions and exemptions, there is a new form in which those benefiting from state support could be called upon to share the transfers they receive with the decision makers involved.

  • Advocates of liberalisation have argued that by reducing state intervention and increasing transparency economic reform would reduce corruption. The allegations of large scale corruption suggest that this is not true. Liberalisation does not mean that the state withdraws from intervention but merely that there is a change in the form of state intervention, which also enables the state to deliver illegitimate gains to individuals and private players.”

(From Corruption in the neoliberal era by C. P. Chandrasekhar).

If any one who has studied the social and economic satiations during the first forty years would know that we are far better then now. Though, it is surprise since the above piece is from JNU Professor!!

Monday, November 29, 2010

Working with bureaucracy is like “streak of adventurism

“I have come across IAS officers who are brilliant but, frankly, I think in today’s day and age you need professionally-specialised people and there’s not enough of them in government.”

Actually it was sycophancy but in the Congress it was called loyalty

‘All its (Congress’s) power comes from the people, who are the real masters, though they might not realise it at the moment. If it betrays them, I am afraid, they would fall a prey to the white robed goondas of society in whose hands all power would pass.’ — M K Gandhi. Harijan: June 1, 1947.

Actually it was sycophancy but in the Congress it was called loyalty

‘All its (Congress’s) power comes from the people, who are the real masters, though they might not realise it at the moment. If it betrays them, I am afraid, they would fall a prey to the white robed goondas of society in whose hands all power would pass.’ — M K Gandhi. Harijan: June 1, 1947.

The real puzzle is Mayawati

Make that connections works for you

Rama Bijapurkar look at branding and market in everything around the clock of life, yet the life reality writes:

  • (S)he was the drag queen, a superb dancer with a troupe of gifted musicians with traditional instruments. When she balanced a flaming sword on her head, I involuntarily shuddered and said “be careful” in English. She looked me in the eye and said, in polished accents of Indian English, “Don’t worry, I will.” In fluent English, she later explained that the sword was from Egypt, used by belly dancers, and she had modified it to be able to add the flame “in order to go with the folk music effect”!

  • The tour guide spoke English with a strange European accent though, much like some of our well-travelled corporate big shots. He then said that he spoke French fluently, learnt it from tourists by writing the words and the pronunciation in Hindi. He couldn’t read and write the language, he said, but he could speak it well. We then discovered lots of little kids in the markets who spoke Spanish, Italian, European-accented English, but couldn’t read and write in any language, including their own. We figured that in a “we are like that only” manner, trickle-down had happened, only it wasn’t the pure economic trickle-down that we were searching for, but global culture that was trickling down. And equally, the global Indian was being born, only not in the way we assumed it would be, and with many global Indian stereotypes.

My Buddies!!!

My buddies gave a very nice view about their work and new culture in Officialdum!!

  • It is this ability to effect change at the grassroots level and create social value for the future that drives young professionals from high-paying corporate careers and international business schools into government offices, says Sukhman Randhawa, a 29-year-old consultant at the office of Sam Pitroda, adviser to the Prime Minister on public information infrastructure and innovation. As someone who works closely with Pitroda on the goals of the National Innovation Council—which he chairs—and on the plan to connect India’s 250,000 panchayats through an optic fibre network, Randhawa says the government affords much-needed perspective.
  • “Working in your little corporate silo, you tend to have a piecemeal view of things,” says the post-graduate in social and political sciences from Cambridge University who was a TV journalist with CNBC before she joined the now-defunct National Knowledge Commission.
  • Randhawa works out of the Planning Commission office in Yojana Bhavan, which, she says, is now “crawling with young people”, thanks to the Young Professionals Programme, the only such institutionalised programme in the country introduced early this year. Says Arunish Chawla, executive secretary to the deputy chairman, Planning Commission, and himself a PhD from the London School of Economics, “The programme was introduced to bring in young people with at least a masters degree. We advertised positions and requirements on our website and conducted interviews. It’s a successful programme—we have over 20 young professionals working actively with us, helping us shape the 12th Plan.”
  • At 24, Astha Kapoor, one of the youngest consultants at the Planning Commission, works with the Voluntary Action Cell and acts as a liaison between government and civil society organisations. “I was contemplating appearing for the IAS exam, but then this opportunity came by,” says the postgraduate in social development from the International Institute of Social Studies, Netherlands. Excited to see policies being framed in front of her eyes, she says she feels as much a part of the Commission as any other employee, but admits to wearing saris to meetings to look older in the company of seasoned bureaucrats. “It’s great to see from such close quarters how the country is run. You get to sit in meetings attended by chief ministers. This is where it all happens and I get to be part of it,” says Kapoor. Six months into the job, she is now accustomed to the ways of the government, but it wasn’t easy when she was new. “We are not used to putting everything in files, or using abbreviations like OM (office memorandum) or DO (draft order) that officers use freely, for instance, and it took a while to get to used to all this. Now I’ve adapted to working here—I drink six or seven cups of chai a day!” she says.

Friday, November 26, 2010

Simply Thanks

Adam Smith called it "the invisible hand" -- the mysterious power that leads innumerable people, each working for his own gain, to promote ends that benefit many. Out of the seeming chaos of millions of uncoordinated private transactions emerges the spontaneous order of the market. Free human beings freely interact, and the result is an array of goods and services more immense than the human mind can comprehend. No dictator, no bureaucracy, no supercomputer plans it in advance. Indeed, the more an economy is planned, the more it is plagued by shortages, dislocation, and failure.

Hayek’s Revenge

That’s how it sounds in the current EPW article by Robert H Wade from LSE

  • The Republican blockage rests on a resurgence of “anti-government”, especially anti-federal government sentiment in the US. One of its strangest aspects is the return to right wing favour of Friedrich Hayek’s book, The Road to Serfdom. As of early 2010 the book stood at number 241 on the Amazon best-sellers list: not bad for a book first published in 1944. Hayek warned that infringements of economic freedom-to-do, such as the Beveridge welfare state, put the UK on the slippery slope to political serfdom. The book’s current popularity stems from boosts by conservative “thinkers” like Glen Beck and Rush Limbaugh, who tell their listeners that The Road to Serfdom is a road map to what the Obama administration is doing. They say that Obama’s healthcare reform, the bank bailouts, and just about everything else the administration has tried to do (excepting military adventures) constitute rising “government intervention” in the economy; and the resulting curbing of economic freedom leads on to the curbing of political freedom. In Rush Limbaugh’s words,

  • Friedrich von Hayek brilliantly laid it right out. It’s all about power. It’s all about control, and that’s what Obama’s about (Farrant and McPhail 2010).

  • The fact that the Beck-Limbaugh version of Hayek fails just about every empirical test one can think of has not stopped many millions of Americans from believing the argument and using it to fuel up the McCarthyite tendencies of the Tea Party movement and the Republican right.

The Madras School of Orientalism

In his book review Tirthankar Roy writes:

  • They touch on some of the issues that engaged the Madras orientalists that have received less attention than they deserve. Trautmann argues that the Mirasi tract was motivated by an implicit aim to show the antiquity of private property right in land in south India, in an attempt to question the administrative orthodoxy that eventually led to the ryotwari settlement.

Dr. Manmohan Singh, J M Keynes and Politicians

Radhika Ramaseshan’s introduction is necessary for this post. Radhika writes in The Telegraph:

  • Prime Minister Manmohan Singh today quoted John Maynard Keynes to suggest that “practical politicians” should not become enslaved to “defunct economics”.

  • The quote didn’t figure in a speech Singh delivered as part of a series of “thought” lectures organised annually by the Khazanah Nasional, whose past speakers have included Grameen Bank founder Mohammed Yunus and American economist Joseph Stiglitz.

  • It was part of an answer he gave a young student this morning. She asked: “To what extent are you guided by theoretical reasoning as against gut instinct?

  • Singh said: “I have no definitive answers to this. But I do know that Lord Keynes had said that the most practical politicians are slaves to some defunct economics. Everybody who is in politics and who seeks to influence the course of economic policy and history has some notion about what is workable and feasible. He must have some theoretical proposition while formulating (his) views.”

‘Can’t remain slaves of defunct economics’ said Prime Minister Singh recently but P. Vaidyanathan Iyer writing in the IE ask is it a “THEORY vs GUT FEEL” and Singh answer:

“I have no definite answer, but I do know Lord (J M) Keynes once said that most practical politicians are slaves to some defunct economics... Real challenge is not to remain slaves of defunct economics.”

Veteran of industry urges that:

  • Old theories cannot show the way. Economists have begun to speculate about the ‘new normal’ into which the world is moving . They know that the world must not revert to the old normal in which dilemmas remained unaddressed and crises brewed. There is a tension in their minds between the need for a new capitalism , founded on different principles than the gung-ho casino capitalism that has driven big economies to the brink, and the need for a new socialism as well, to include masses of people who are insufficiently included in the benefits of economic growth, that does not require large state hand-outs and large governments . What will be the architecture of this new economy?

Thursday, November 25, 2010

The leaders pooh-poohed

Oh what a zeal? To write the below sentence!!

  • “There are winds of change in India that can only further gladden the hearts of eternal optimists — and even bring cheer to the pessimists.

And who has said is none other than the “No Proof Required” walla!! And he continues:

  • “While the Congress has been busily, and arrogantly, spending wasteful money on high corruption in the name of the poor, in, for example, programmes like NREGA (only 50 per cent of jobs claimed to have been created by the government seem to have actually been created according to NSS figures) Nitish started a cash-transfer scheme for girls. Rs 2000 was set aside for any girl that entered the ninth grade. This programme has been so successful that high school girl enrollment has nearly tripled since it started three years ago. Starting this year, the bicycle programme will also be extended to the boys. Nitish Kumar brought development to the poor and they rewarded him. The Congress has constantly tried to legislate morality and development, and has lost embarrassingly.

But forget about the “development” for a movement and I wonder how a chaotic The State can legislate morality of human actions?

Wednesday, November 24, 2010

“There isn’t much else for the Opposition to do”

Abheek Barman writes:

  • ….this autumn with one subject: corruption. This avalanche of moral outrage began in the drawing rooms and cocktail lounges of Delhi around July or August with well-heeled folks shaking their heads and muttering their doubts whether the city would be ready for the Commonwealth Games .

  • It took little time for tales of delay and ineptitude to snowball into charges of graft. Then the focus shifted to Mumbai’s Adarsh Society , built for war widows, gifted to military and political bigwigs. One chief minister and one sitting MP were gone by the time Barack Obama’s aircraft took off from Delhi. But the biggest charges of graft have been levelled at former telecom minister Andimuthu Raja , who’s being accused of having caused losses of up to . 1.7 lakh crore to the exchequer. Raja too has left government.

  • Most Indians, from the humble truck driver buying his way through toll gates to the homemaker who has to bribe the agency to supply cooking gas, live with graft every day. So why are we suddenly convulsed by sleaze in government? The answer, most probably, is because there isn’t much else for the Opposition to do. The scandals were headlined before and during this session of Parliament and an Opposition bereft of issues or ideas to debate, seized it gratefully with both hands to block both Houses.

“It appears that not all these laws have had the intended good effects that we would like to see on the ground”

India’s Prime Minister say's (I don’t know to whom he ask these questions, whether it is for Labour Minister etc,.)

  • ……..we have enacted several progressive labour laws since independence and some even before that. But it appears that not all these laws have had the intended good effects that we would like to see on the ground. We need to consider the possible role of some of our labour laws in contributing to rigidities in the labour market which hurt the growth of employment on a large scale. Is it possible that our best intentions for labour are not actually met by laws that sound progressive on paper but end up hurting the very workers they are meant to protect? Do we have empirical evidence on the changing nature of employment generation with changes in labour legislation, not just in our own country but in the neighbourhood as well? If we want to draw more and more workers into the organized sector where they can claim the benefits that currently cover such a very small proportion of our labour force, do we need to rethink the nature of the laws that enforce such benefits?

Tuesday, November 23, 2010

How does sentiment of Fraternity of fellow feeling arise?

J. S. Mill says that this sentiment is a natural sentiment:

  • "The social state is at once so natural, so necessary, and so habitual to man, that, except in some unusual circumstances or by an effort of voluntary abstraction he never conceives himself otherwise than as a member of a body; and this association is riveted more and more, as mankind are further removed from the state of savage independence. Any condition, therefore, which is essential to a state of society, becomes more and more an inseparable part of every person's conception of the state of things which he is born into, and which is the destiny of a human being. Now, society between human beings, except in the relation of master and slave, is manifestly impossible on any other footing than that the interests of all are to be consulted. Society between equals can only exist on the understanding that the interests of all are to be regarded equally. And since in all states of civilisation, every person, except an absolute monarch, has equals, every one is obliged to live on these terms with some body; and in every age some advance is made towards a state in which it will be impossible to live permanently on other terms with any body. In this way people grow up unable to conceive as possible to them a state of total disregard of other people's interests."

Some interesting readings

More here.

Money lending and grassroots capitalism

Barun wrote long back a great piece on Grassroots Capitalism Thrives in India. It is still worth to read even today and ponder the misconceptions about the money lending business at local and global.

There are a lot of interviews against the money lending business: Some of them are:

Caste and patents revenge

As always something new, Mr.Harish Damodaran writes:

  • These men were the forerunners to a succession of American inventor-businessmen in diverse fields: Matthias Baldwin (improved coal-fired steam locomotive); Samuel Colt (revolver); Elisha Otis (elevator); Isaac Singer (sewing machine); George Babcock (water-tube boiler); Alexander Bell (telephone); Thomas Edison (1,093 patents!); George Westinghouse (alternating current power systems); George Eastman (roll film); Charles Hall (aluminium-making process); Emile Berliner (gramophone); Henry Timken (tapered roller bearings); Benjamin Holt (crawler tractor); Herbert Dow (brine chemicals extraction); King Gillette (disposable razor); Henry Ford (automobile); Harvey Firestone (pneumatic auto tyres); Leo Baekeland (bakelite); Glenn Curtiss (aircraft design); Willis Carrier (air-conditioning); Arnold Beckman (pH meter inventor and funder of William Shockley's silicon transistor firm that gave birth to Silicon Valley); Bill Lear (car radio/Lear Jet); Walt Disney (multiplane camera); Edwin Land (Polaroid camera); and Malcolm McLean (shipping container).

  • To the above, one may add the more recent Silicon Valley ‘garage' innovators: Bill Hewlett and Dave Packard (HP); Robert Noyce and Gordon Moore (Intel); Bill Gates and Paul Allen (Microsoft); Steve Jobs and Steve Wozniak (Apple); John Warnock and Charles Geschke (Adobe); Leonard Bosack and Sandra Lerner (Cisco); Jerry Yang and David Filo (Yahoo!); Larry Page and Sergey Brin (Google); Chad Hurley, Steve Chen and Jawed Karim (YouTube); and Mark Zuckerberg, Dustin Moskovitz, Eduardo Saverin and Chris Hughes (Facebook).
More interestingly:

  • This kind of capitalism is quite different from the one in India, where businessmen have arisen more from the bazaar than the fields, labs or the shopfloor. Examples of inventor-businessmen and industrialists with original engineering bent are few, barring a G.D. Naidu, Laxmanrao Kirloskar or the Seshasayees. Naidu designed and developed his own ‘Rasant' electric razor-cum-blade, valve radios, fruit-juice extractor and even the first indigenous electric motor in 1937. One can further point to the ingenious machine tools, bearings and diesel engine makers of Rajkot or Ludhiana's Ramgarhia Sikh cycle parts and textile machinery fabricators. However, these entrepreneurs, for all their replication and reverse engineering talents, have failed to outgrow their smallness.

Friday, November 19, 2010

Dr.Ambedkar is NOT a "Scotch-American"

“I don’t care how smart you are, you can’t keep track of all this s**t.”

Bill Frezza wrote in 2008:

  • Macroeconomics is the practice of looking for correlations between poorly defined and badly collected aggregates over cherry picked time intervals meticulously ignoring inconvenient factors in order to justify preconceived notions. What makes this different from astrology?

  • I confess that the only Hayek book I made it through without my eyes glazing over was “The Fatal Conceit.” It’s a slim volume written later in life, apparently after Hayek discovered humbleness, an unusual discovery for an economist. His thesis is simple – “I don’t care how smart you are, you can’t keep track of all this s**t.”

  • Economists who believe they can centrally plan a national economy and optimize – what, some flaky set of poorly defined aggregates? – are deluded. Politicians who promote these delusions to arrogate power to themselves are knaves. And voters who buy this fantasy are dupes. Yet Hayek be damned, here we go again.

Virtue of individual right

In an interview to ET Janata Party president Subramanian Swamy said:

After all, rights of the individuals have to be protected. Governments are not known anywhere in the world to be responsive to an individual’s rights. It’s the courts which sanctify the rights of the people...

Thursday, November 18, 2010

Denationalize Money: First Ambedkar, and NOT Hayek!!

From Cafehayek:

George Will’s superb column on the Fed’s over-expansive “dual mandate” ends with an apt warning from the late Nobel laureate economist F.A. Hayekthat any attempt to engineer economies – even via monetary policy – is evidence of a “fatal conceit” (“The trap of the Federal Reserve’s dual mandate,” Nov. 18). It’s unsurprising, therefore, that Hayek was among the first economists to call for removing government from the business of supplying and regulating money.

In 1976, Hayek published a pioneering monograph entitled Denationalisation of Money* in which he argued that not only can markets supply sound money, but that markets are likely to do so far more reliably than will any government or central bank.

Hayek’s work is the font of a fertile river of research on the history and theory of ‘free banking’ (whose chief contributors are my GMU colleague Lawrence White and my former GMU colleague George Selgin**). This research leaves no doubt that, had money been supplied privately from the start of the republic, U.S. economic growth would have been both steadier and steeper.

Donald J. Boudreaux

* F. A. Hayek, Denationalisation of Money (London: Institute of Economic Affairs, 1976). A substantially revised second edition was published in 1977.

** See, e.g., George A. Selgin and Lawrence H. White, “How Would the Invisible Hand Handle Money?” Journal of Economic Literature, Dec. 1994, Vol. 32, pp. 1718-1749.

Dr.Ambedkar said in 1924-25 (Statement of Evidence to the Royal Commission on Indian Currency):

  • One of the evils of the Exchange Standard is that it is subject to management. Now a convertible system is also a managed system. Therefore by adopting the convertible system we do not get rid of the evil of management which is really the bane of the present system. Besides a managed currency is to be altogether avoided when the management is to be in the hands of the Government. When the management is by a bank there is less chance of mismanagement. For the penalty for imprudent issue, or mismanagement is visited by disaster directly upon the property of the issuer. But the chance of mismanagement is greater when it is issued by Government because the issue of government money is authorised and conducted by men who are never under any present responsibility for private loss in case of bad judgement or mismanagement.

Rediscovering Ambedkar, and NOT Nehru!!

Years ago Prof.Ambirajan said in his Ambedkar Memorial Lecture:

  • I am somewhat distressed to see that he is portrayed as a leader of the ‘dalit’ community and nothing else. Partly it is the fault of the Indian political leadership in the post-independent era. It succeeded in its effort to marginalise him politically. But equally it is the fault of the community itself for having projected him exclusively as its own leader. This led to the repercussion of other much inferior people propelled as leaders of other communities, and the result was that Ambedkar got equated on a politico-intellectual plane with regional pygmies devoid of any significant national presence.

  • It is my conviction that in reality we have had only two major personalities who could be considered the founding fathers of modern India. Vallabhbhai Patel unified and organised whatever bits and pieces left of a brutally partitioned geographical entity into a nation state. Ambedkar provided the cementing framework in the form of a Constitution that gave the newly born state a measure of feasibility and stability. All the remaining leaders were mere bit-players in this great story of the building of our sovereign democratic republic.

According to him Nehru was a “much inferior…. propelled as leaders” as compared to Dr.Ambedkar!!

There is a wrong propaganda even today. Just see what Y K Alagh says’s:

  • To Nehru the harnessing of modern technology to economic development was very important. There were two implications of this. The first was an acceptance of the emphasis on heavy industries in the process of industrialisation. While there has been considerable controversy in India on large scale vs small scale industrialisation, Nehru himself had clinched the issue in his own mind even in his early economic thinking. This was perhaps one of the few economic choices he really made. Discussing the issue of the big machine vs cottage industries, he stated emphatically that “it is not a mere question if adjustment of the two forms of production and economy. One must be dominating and paramount, with the other as complementary to it, fitting in where it can. The economy bases on the latest technical achievements of the day must necessarily be the dominating one.” The second, wider implication of this approach was his emphasis on scientific education and research. He seems to have a particular fascination for the idea that under “proper” social conditions, experimentation with the machine would inculcate the “scientific temper” and widen the experience and outlook of men. Formal economics is now accepting this idea in the shape of the productivity implications of “learning theory approach”.
  • The economic implication of this to him was the emphasis on basic minimum needs. His earlier emphasis on rural development was argued with this end in view. (Later speeches accept the role of agricultural production as a constraint in the process of economic development). The role of cottage industries, albeit a secondary one, was argued from this objective, as also the long-term employment potential of heavy industrialisation.
  • Another basic economic idea for Nehru seems to be a concept of “national self-sufficiency”, with a strong autarchic element in it. Heavy industrialisation and a scientific research policy were argued partly with this end in view. The emphasis was conditioned by early experience. (“We were anxious to avoid being drawn into the whirlpool of economic imperialism.”)
  • There was in Nehru a genuine concern about the need for a peaceful transition through consensus in the developmental phase. There is frequent emphasis on the “social” implications of economic ideas and programmes. The late Prime Minister was liable to discuss it sometimes along “wider” national, international or even philosophical lines. The earlier method of “democratic collectivism” remains later in the shape of “democratic socialism” and the “mixed economy”. Equality of opportunity for all remains a basic theme.

All roads led to low level of growth, low level of development, no choice and no freedom.

No license please!!

Simply need a sound private property right

A professor from DSE comes close to say that there is a need for private property right but he does not say it directly, why, because they do not believe in it!

He writes:

The new law must create strong incentives for companies to buy land directly from owners.

What incentive is worth more than a sound private property right? However, his analysis has some interesting insights:

  • Generally, acquisitions for companies have been undertaken under Part II of the Act. This part concerns acquisitions by government entities for public purpose. It does not impose the above restrictions on acquisition for companies, but requires the compensation to be paid out of public funds. In order to justify acquisition for companies under this part, states have been contributing nominal amounts toward the cost of acquisition. Some governments have gone to the extent of contributing just. 100! Due to such legal ambiguities, states have been able to violate the law with impunity.

  • Ostensibly, partnerships are formed to provide infrastructure and public services such as education and health. In reality, however, excess land is acquired and the company is allowed to use a part of it for real estate projects — partnerships for Delhi airport, and Yamuna and Ganga expressways are a few of the many cases in point. So, the company gets the land it needs and that too without any cost!

  • Since the legal ownership of the land rests with the state, the acquisition, technically speaking, is not for the company. Therefore, the above-mentioned limit on acquisition for private companies, howsoever small, is irrelevant. An increase in compensation rate is also of no avail here, since the cost of acquisition is borne not by the beneficiary company, but by the taxpayer!

Double strokes- echoed (dis)similar sentiments

A 95 year old hardcore socialist follower Mr.VR Krishna Iyer writes:

  • First, to get a Mahatma Mandir built. This, he hopes, would be the starting point of all non-violent movements in the future. Second, he expressed his desire to erect the tallest statue of Sardar Patel, who performed the great task of unifying this country. I think both are great ideas.

  • Jawaharlal Nehru was a great visionary who struggled for socialist liberty, a creative dynamic swaraj that was aimed at eliminating poverty, generation of a socialist industrial employment potential, a healthy relationship between agriculture and industry, for Panchsheel foreign policy, for peace in the world, which would look up to Gandhiji’s ideals and vision.

Don’t forget to read Shekhar Gupta's So Nehru killed Gandhi!!!

  • “Because, from all evidence, Godse did not kill Gandhi. And you know what,” he continued, “Nehru made sure no post-mortem was conducted on Gandhi’s body. Because he did not want the truth to come out.”“So then, Sudarshanji, who killed Gandhi?” I asked.“Why ask me?” he said, with a smile that was as conspiratorial as QED. “You can see who stood to benefit from Gandhi’s assassination.

  • Everybody knows Gandhi was going to make Patel prime minister.”“But, Sudarshanji, somebody did shoot Gandhi in front of hundreds of people,” I asked.“Yes, somebody did. But not saamne se, kintu peechhe se,” he explained. “It was a do-dhaari ki talwar (two-edged sword),” a conspi-racy to give the Nehru parivar unfettered power and to blame the Hindus for killing Gandhi.

My fellow younger’s

Do not learn what is not to be learned but learn what needs to be pondered at any cost. You must read what Arthur Schopenhauer wrote in his essay on Thinking For Oneself.

My favourite line from his essay is “Thinking must be kindled like a fire by a draught and sustained by some kind of interest in the subject.

Indeed, the great all time Austrian economist Henry Hazlitt wrote in his book Thinking As A Science (pdf) about the Arthur’s essay that “The last is especially recommended. It is only about a dozen pages long, and is the most stimulating essay written on the subject.”

Wednesday, November 17, 2010

Need a 100-day apprenticeship programme NOT nrega?

Manish Sabharwal of Teamlease writes:

  • NAC is upset that the NREGS violates the Minimum Wages Act. But everybody knows that NREGS violates 37 labour laws, including the Provident Fund Act, ESI Act, Industrial Disputes Act and Contract Labour Act. I have never received a reply to my repeated letters to the government asking for the rationale of the temporary job apartheid under which a non-fiscal, minimum wage and social security paying 100-day job offered by the private sector is viewed as a disease to be eradicated, while the inefficient, non-market, non-real job based NREGS is considered the labour market innovation equivalent of cell phones.

  • But NREGS is here to stay and the good is not the enemy of the great. So we must tweak the current structure of NREGS payments to be apprenticeship stipends for 100 days of on-the-job training. These apprenticeships could be complemented or combined with 100 days of classroom or satellite training to produce skilled manpower that earns wages which reflect productivity. If the NAC really wants to innovate, it must propose a solution that amends the Apprentice Act of 1961 and transfers some NREGS money to the starving but effective modular employment skills programme of the ministry of labour. A 100-day apprenticeship under NREGS that combined learning-while-earning and learning-by-doing would surely move the needle on the horrible skill deficit that keeps our people out of jobs or in working poverty. The current campaign to equate minimum wages with NREGS payments almost legislates that the bridge to productivity becomes the destination. In the name of our poor who need a chance and not charity, it must be resisted

Stephens, Delingpole win 2010 Bastiat Prizes

From IPN:

Last night at an awards dinner in New York City,

Julian Morris announced the winners of the 2010 Bastiat Prize

and the 2010 Bastiat Prize for Online Journalism.

The ten finalists' articles are available in an online PDF.

Bastiat Prize

First Place - Bret Stephens, Wall Street Journal

Second Place (tie) - Tim Harford, Financial Times,

and Jamie Whyte, freelance

Bastiat Prize for Online Journalism

Winner - James Delingpole, blogger for telegraph.co.uk

2010 Bastiat Prize Finalists

Simply Hayekian!!

In an interview to ET British Historian Mr. Simon Schama says:

Ideas and learning

  • ….we have become, in a difficult world, much more utilitarian about useful knowledge, with a very narrow range of what counts as useful

  • Teachers have to be storytellers, in addition to teaching their students analysis and how to ask questions and that does take time.

Indian Revolution

You also said British students should study the rise of Empire in South Asia, why not the fall as well…

  • Of course, about that too. I was specially speaking of the 18th century. For some extraordinary reason, because of the way the British curriculum was designed, the entire 18th century is missing. And that’s the time when what Britain became was decided, Britain as an entrepreneurial innovator, as a ruthless commercial empire, and Britain still very surprisingly loses the part of the empire you would think would naturally fit with it, in the shape of the American colonies, and extraordinarily has an Indian presence which grows bigger and bigger.

  • It is very important to understand that because of what the Raj became, the ruthless exploitation of sovereignty, but it started as a different kind of ruthlessness. It started as a kind of commercial plunder without the strings of government, and it was because Bengal in particular was disintegrating, was becoming this centrifugal sink-hole in which neither the Mughals had power nor did the indigenous governors, and the British found that they had to actually control the revenue system if they were going to pay for their trades.

  • So it became backwards, they went into India backwards — which didn’t make them less imperialist. So, it’s a fantastic exercise in unintended consequences, what happened to British power in Bengal in particular. It’s a sort of thrilling, tragic, ferocious story. There’s this huge South Asian population in Britain, why wouldn’t this story be interesting to them as to pink people from Exeter and Liverpool? I was someone who did Indian history as an undergraduate, and loved it, I did the lay the 18th and early 19th century in India, after Warren Hastings, and nearly became an Indian historian. And I thought it very complicated and thrilling, and thought why not make it part of what kids are taught.

Jagdish Bhagwati to address Indian Parliament

There is a news in BS which says:

  • Renowned economist Jagdish Natwarlal Bhagwati will address a joint session of Parliament on December 2, the second such address after US President Barack Obama. Bhagwati, professor of economics and law at Columbia University, will talk about “Indian reforms: Yesterday and today” in the third Prof. Hiren Mukerjee Memorial Annual Parliamentary Lecture.
  • Vice-President and Chairman of Rajya Sabha Hamid Ansari will preside over the function and Prime Minister Manmohan Singh will be the chief guest. Singh will also speak a few words on the occasion before Bhagwati takes the podium.
  • For Manmohan Singh, currently facing the heat of the Opposition on corruption issues, the evening of December 2 is going to be a happy reunion too — for Singh and Bhagwati were classmates at Cambridge in the 1950s.

Tuesday, November 16, 2010

Issue of Kashmir

From ET Citings:

  • TAKE the issue of Kashmir. We are not going to give in to threats. We cannot take any step which is detrimental to Kashmir’s interests. Kashmir is an integral part of India and we are going to endorse any further truncation of the country. We shall not budge from our principles. Yet we are fully aware of the need for friendship with Pakistan and will continue to make sincere efforts in that direction. The problem is that the government of Pakistan places great reliance on armaments and threats of force. Unfortunately, the Great Powers are aiding and abetting Pakistan by supplying arms to it on a lavish scale. This adds to its reliance on armaments. You may have read in the newspapers that the Prime Minister of Pakistan has requested the Baghdad Pact countries for nuclear weapons. (Iran, Iraq, Pakistan, Turkey and the UK were members of the Baghdad Pact. Speaking at the meeting of the Baghdad Pact countries, held in Ankara from 27 to 30 January 1958, Prime Minister of Pakistan Firoz Khan Noon emphasised on 27 January, the urgent need for equipping the member-countries with “weapons similar to those which they may have to encounter should peace in this area be unfortunately disturbed.” US Secretary of State John Foster Dulles also attended this meeting as an observer).

  • I do not know if the report is correct and if it is so whether there is anyone in Pakistan with the technical knowhow and expertise to be able to use nuclear weapons. But they have asked for them.

(Jawaharlal Nehru: SELECTED WORKS (VOL 41)

The seventh sense

That is the title of upcoming Tamil movie starring blockbuster Ghajni (Tamil) Surya and Kamal Haasan’s daughter Shruti Haasan.

Why seven matters? Yes there is news now on:

-Renowned Indian-origin academician Raghuram Rajan has been named alongside US Federal Reserve Chairman Ben Bernanke and Nobel laureate Paul Krugman among the list of seven.

"India's villages have become a hot bed of innovation, as its rural poor develop inventions out of necessity. Several of the people on this list have no more than an elementary school education," Gupta says.

  1. Jagani developed a motorcycle-based tractor for India's poor farmers, which is both cost effective - costing roughly USD 318, and fuel efficient (it can plow an acre of land in 30 minutes with two liters of fuel).
  2. A farmer, Patel invented a cotton stripping machine that has significantly cut the cost of cotton farming and revolutionised India's cotton industry.
  3. Prajapati, a potter, invented a clay non-stick pan that costs Rs 100 and a clay refrigerator that runs without electricity for those who cannot afford a fridge or their electricity and maintenance costs, Gupta said.

In the feminist category, Indian environmentalist Vandana Shiva has been named as one of the seven most powerful feminists in the world.

See here for more such lists.

Monday, November 15, 2010

Sans ideology or supra ideology

Short sight conclusion is evil. Really that is what it seems to be to me from Haseeb A Drabu writing in today’s Mint. He writes:

  • It is interesting to see how the larger intellectual sphere is developing and social democracy and globalisation are being confronted at the thought leadership level. In the post-liberalisation period, the traditionally dichotomous categories of the dissident intellectual and the establishment intellectual have become irrelevant. Of late, there has been a restructuring of links between the state and the intellectuals: The latter are now open and willing to be part of the establishment. Be it the eminent Leftist economist Prabhat Patnaik, or the liberal thinker-entrepreneur Nandan Nilekani or the radical social activist Mihir Shah or right-wing economist Kaushik Basu, all have been absorbed in the government.

My problem with above paragraph is the line reading right-wing economist Kaushik Basu. If any one who have read his earlier and until recent writings would not really say the word “right-wing” if they, its no doubt, it would turn to be an absolute stupidity!!

Particularly one should read his book Economic Graffiti: Essays for Everyone (Oxford University Press. 1991) and ponder before wording him as “right-wing” or become “right-wing”