Three beautiful books

This is the first time in my life received three beautiful books in January (2011) month. First (received on January 1^st) one on “Institutional Theory of Poverty: A General Theory of Change from Poverty to Plenty” by Prof. Vedagiri Shanmugasundaram. It is a must read one. Few lines from his this book is worth to validate my likeness (don't forget to read the last line in the below points): 

• Many errors in reasoning left the economist blindly trailing one or other of the hypotheses… 
• The blind adherence of Keynesian deficit financing by Dr. VK.R.V Rao and his associates preferred their advice to Pandit Jawarhalal Nehru thus “Buckets of cement in Bhankra Nangal were better than of gold in the Reserve Bank of India vaults” 
• The brilliant brains in the bureaucracy were put to work in wrong directions and much of the blame attributable to those in authority and policy making….. Bureaucracy to my mind is more sinned against than sinned. 
• Keynesian fiscal extra veganza or model builders who are oblivious of important limitations which the centralized planned economy is unable to overcome.. 
• ……the blunders of socialism in early decades 
• Bureaucrats have kept the experts under their thumb, and politicians in their turn have sent the bureaucrats on wrong scent. The consequence is domestic poverty of ideas under the illusion of planning.  
• Poverty is real. It is deliberately caused, and purposefully maintained. 

The second book (received on 10th) is “The New Asian Hemisphere: The Irresistible Shift of Global Power to the East” by Professor Kishore Mahbubani. I have already posted about the book here.

And the third book (received on 21st) is “Remaking India: One Country, One Destiny” by Arun Maira.

 I am currently reading this book and will post few things about the book and perhaps need of writing it!

Back to blog!!

I had another great opportunity to present my paper here and meet few interesting people also. I was also away from the NET world so I could not post anything that I think is important for this blog.

Some good news:

Prof.Ken is very kind to include my few words in his For News of Jonathan Gullible and the Philosophy of Liberty. You can see me by scrolling down!!!!

The other good news is that we have new Seminar:

The Mises-Hayek-Shenoy Seminar
Economics Beyond Keynes and Friedman
February 9-10, 2011
New Delhi

If any one of you interested to participate please do write to me, or to vipin.veetil@gmail.com andghanshyamsharma1985@gmail.com

Who spoke what is letter matter, than what they did in decision making?

The new Food Minister of India tells, I spoke to this and that, but correctly admits that the NREGA is a crook which kills the labour productivity.

From his interview with ET: 

• In my younger days the question was scarcity. In Kerala very often we got rice only one time of the year. For the rest of the time we had to manage with things like tapioca. From that period of scarcity now there is availability. No one questions the availability. 

• Then comes the question of purchasing capacity. Purchasing capacity has increased, especially after the NREGA. Recently I went to Tamil Nadu. In one of the villages, sugarcane farmers said they are not getting agricultural labour because of NREGA. Kerala doesn’t have enough rubber tappers.  

To be sure, inflation has increased after the NREGA, subsidies, unlimited money printing, etc

Mutiny of our native astrologers

I think you should introduce a new law for Coastal Zones forbidding the creation of a handsome metropolis by violating the coastlines and destroying mangrove forests.

10 things I really hate about R-Day

If you read this story I am certainly sure that you will be disappointed!! But you have to do just only one thing remember is the political junkies love of scam!!!

Manis mantra: “uninterrupted and uninterruptible dialogue”

• Should the Pakistan government assist the Indian government in this manner to return to the negotiating table, then the first task would be to consolidate the gains of the 13-year old Composite Dialogue. Irrespective of whether progress on the back-channel is acknowledged or not, the official position of the two governments has grown so much closer to each other's than ever before that even by returning to the front table and taking up each component of the Composite Dialogue, including, above all, issues related to Jammu & Kashmir, we could dramatically alter the atmosphere in which to pursue the outstanding matters.

• In such a changed atmosphere, it would be essential to immediately move to the next phase of what I hope and pray will be an “uninterrupted and uninterruptible” dialogue. Let me place before you, in outline, what I envisage as the essential elements to be structured into an “uninterrupted and uninterruptible” dialogue: One, the venue must be such that neither India nor Pakistan can forestall the dialogue from taking place. Following the example of the supervision of the armistice in Korea at Panmunjom for more than half a century, such a venue might best be the Wagah-Attari border, where the table is laid across the border, so that the Pakistan delegation does not have to leave Pakistan to attend the dialogue and the Indians do not have to leave India to attend.

• Two, as in the case of the talks at the Hotel Majestic in Paris which brought the U.S.-Vietnam war to an end, there must be a fixed periodicity at which the two sides shall necessarily meet. In the Hotel Majestic case, the two sides met every Thursday, whether or not they had anything to say to each other. Indeed, even through the worst of what were called the “Christmas bombings” — when more bombs were rained on Vietnam than by both sides in the Second World War — the Thursday meetings were not disrupted. In a similar manner, we need to inure the India-Pakistan dialogue from disruption of any kind in this manner.

(From Way forward in India-Pakistan relations by Mr.Mani Shankar Aiyar)

Poor, weak: man or woman?

That is what it seems after the Sunday column by Tavleen Singh in IE: 

• It is important to remember when we wring our hands over Dr Manmohan Singh’s timidity that he has a boss and that Sonia Gandhi has the most enviable political job in the world. She has immense power without any accountability. Everything that goes wrong is blamed on poor old Dr Manmohan Singh who after a long and illustrious career in government will now end up being remembered as the man who failed to improve governance at a time when India needs it more than anything else.

• If we had a semblance of modern governance, we could overtake our old rival China in less than two decades. 

I terribly hate the words “overtake our old rival” because when we ‘overtaken’ we always leave behind someone!!

Nevertheless, get on: 

• A meaningful Cabinet change would have been to scrap the ministry of Human Resource Development altogether. 

•  Since the last general election we have seen the National Advisory Council take more decisions than the Government of India. It is to Soniaji’s private Cabinet that we owe almost every major policy decision taken in the past two years. This is why it is probably a waste of time criticising the Prime Minister’s feeble attempts to stir the dead roots of his government with a reshuffle.

Old man with old mind

Rather even polluted mind!! Isn’t it?

I mean Mr. Narayana Murthy says:

"He (Netaji Subhas Chandra Bose) would have continued and perhaps would have accelerated our efforts to control population through fair and transparent method".

However, Mr.Murthy is very right in saying that:

"India would have embraced modern methods of scientific agriculture and made us food surplus year on year. India would have embraced industrialisation better and become more export oriented than relying on import substitution which has led to all kinds of problems,"

Liberals in UPA government

Sauvik has already commented on what Niranjan wrote: 

• The motives behind the schemes to provide guaranteed jobs and food cannot be questioned. But the road to hell is often paved with good intentions. These schemes will push up food prices and also harm public finances.

What is even more interesting and in fact exuberantly feeling comes, when Niranjan used the words “outstanding economic liberals in government”. However, the meaning of liberals here may slightly vary from the understanding of the word “liberals” as such. Is there any one in the present UPA government? Of course I am aware of whom he refers!!

• No reforms have been rolled back and economic policy is nowhere as interventionist as it was during the Indira Gandhi years, but it is quite clear that the UPA political leadership does not have a deep commitment to economic reforms despite having some outstanding economic liberals in government.

• First, Prime Minister Manmohan Singh put his foot down and rejected the ridiculous suggestion by the influential National Advisory Council (NAC) that wages paid for work on the Mahatma Gandhi National Rural Employment Guarantee Scheme should be on a par with the minimum wages in each state, a move that would raise rural wages without any commensurate increase in productivity as well as put an immense strain on government finances. Second, a committee on food security set up by the Prime Minister and headed by economist C. Rangarajan rejected the NAC proposal that three out of every four families should be covered by the proposed right to food law.

Nothing says about outputs

All you really have to do is to get all children in school, make sure they are not beaten up, and promote everyone to the next standard till they complete eight years of schooling, he said. This way, you will have delivered RTE.

Those who toiled over the RTE Act will squirm at this anecdote and protest, but ultimately, something very complex does boil down to a simple representation far away from its origin. In marketing terms, it is amply clear that the product is the school with classrooms and teachers, price is zero, promotion is uniforms, books, midday meals and guaranteed promotion, and place is within 1 km of each habitation. The product was never promised to be learning achievement. Small surprise then that it was not delivered.

The resistance to outcome measurement of every kind is tremendous. We talk of the demographic dividend but cannot see that we are courting a demographic disaster as we sacrifice the possible good for the illusive perfect.

From Dr.Madhav Chavan’s Elementary education: Not just enrolment, improve learning.

After Hayek, it’s now Coase

Many years ago Chinese Hayek Society was formed and it continuously organizes Annual Meeting of the Chinese Hayek Society. See here for last year meeting.
Now Coase China Society is underway. It is great news for China!!

Literally I am nervous!! After reading this news, when India will have such Societies? Of course my inner feeling tells me that, look the same India is (yesterday years) is not bothered about its own men like Prof.B.R Shenoy, Rajaji, etc how can one think of Hayek, Coase, Milton Friedman?

Outliers

• ……….why did the centralized state seem like such a great idea in the 1940s and 1950s? And how has the economic unshackling affected people’s lives? 

• A lot of Indian bureaucrats in the 1970s and 1980s wanted the unshackling to happen but probably thought that it was impractical. Don’t forget how bad it was in the 1970s. Emergency and the JP movement (named after its leader Jayaprakash Narayan) have their roots in economic failure—people forget that now.  

Any people in the book you met who stand out?

• C.K. Ranganathan from Cuddalore in Tamil Nadu, a chemistry graduate who sold shampoo packaged in a sachet. Now, he employs a thousand people. And Venkatesh and his wife, who worked in a stone quarry in Mysore and who were chained (by their employer) just 100 miles from Bangalore. There was no action from the local police or bureaucracy. 

From Patrick French interview with Mint on his latest book.

And moreover: 

• ………..the historical roots of that process—everything from the conceiving of India as a universal democracy where potentially disadvantaged groups can band together and kick out the existing people in power…….. 

• …………..how every Lok Sabha MP got into Parliament. Did they get there because they had risen up a student organisation, did they get there because their father was the chief minister, etc? What the information showed was that 70 per cent of women MPs are hereditary, two-thirds of MPs under the age of 40 are hereditary, an overwhelming nine-tenths of Congress MPs under 40 are hereditary. It was a surprise to me. Well, it’s not just politics, it’s true of certain kinds of business families, it’s true of medicine, law, media, Bollywood, and other regional film industries. 

• They don’t shock me and I don’t think that political families are a bad thing. I think in any democracy, it’s quite normal to have political families. But the issue to me in India at the moment, is purely that of the scale. If you look at the people of the older generation in their 60s, it’s one in five or six politicians coming from a political family. That doesn’t strike me as being a particular problem. But if you look at people under 40 and you find that nine-tenths of Congress MPs are hereditary, then that is a serious problem. And the thing that does surprise me a bit is why that is not debated more. Why is that simply taken for granted as normal? People should justify why it’s good that nine-tenths of their younger MPs are hereditary. 

From Patrick French interview with IE.

Compared to here that end is green too

The other problem with your rhetoric is that you see it as a substitute for proper governance. Over the past four years, I have witnessed Chennai change in a variety of ways. The most obvious is when you look out the window, or walk down the street, or drive across town. I have driven from Adyar to Ambattur and back, via Vadapalani, via Porur and via Nungambakkam, and I can authoritatively say that Chennai’s traffic has deteriorated alarmingly. Driving in Chennai is now a worse experience than driving in Bangalore. Ten days ago I visited Delhi and I saw the change in the city where I lived and worked for 20 years before coming South. Perhaps it is not a fair comparison, for many resources were pumped into Delhi’s infrastructure to better it for the Commonwealth Games. It has worked: Delhi has an uncluttered and aesthetically pleasing look, even in the suburbs. This is not the case with Chennai.

The age of foolishness or slaves of defunct economists

• To go back to Dickens, it was also the worst of times. It was the age of foolishness. It was the epoch of incredulity. It was the winter of despair. “In economics, there is no accountability for the consequences of your advice. And that is particularly so in an ascriptive society like India.” Jagdish Bhagwati said this and this is relevant because today’s policy-making environment is increasingly harking back to the late 1960s to mid-1970s, policies that led India to losing two development decades. It is fashionable to blame policy-makers for what went wrong then. But one tends to forget that those policy-makers were, to quote Keynes, slaves of defunct economists. We had the Hazari Committee report in 1967, Dutt Committee report in 1969 and the Wanchoo Committee report in 1971. We also had the Dagli Committee report in 1978. There were several such committee reports.

• It was economists who were important in policy-making who drew the wrong conclusions from Hazari/Dutt/Wanchoo and ignored Dagli. Without naming them, they have never quite been held to task. On the contrary, they have been rewarded with awards. In simple terms, what did those policies do? They restricted supply and made India a shortage economy.

• Post-1991 policies removed supply bottlenecks, where reforms were introduced. We now have a situation where policy-makers don’t know what is driving either growth or inflation. On inflation, we were earlier told it would slow down, hopes riding on the base effect. The base effect is wearing thin, and food price inflation shows no signs of easing, because agri-products are still supply-constrained. The finance minister, the deputy chairman of the Planning Commission and the Chief Economic Adviser have now told us inflation is a good thing, because it is reflective of higher growth and greater demand in rural areas.

• How about including policy-making economists within the ambit of the proposed Public Services Delivery Act, making them liable for the opportunity costs of lost economic growth? 

From Bibek’s Wonky policy wonks.

Knowledge problem- None of them truly understood the machine they were put in charge of……

The Lords of Finance Liaquat Ahamed on precisely what happened in 1920s depression: 

• ………..in the 1920s who made grave mistakes and led the world to the Great Depression — was one that called it an “autopsy of a generation” of policymakers and their follies. Ahamed says “autopsy” is a reasonably good description. 

• “It is about a group of men who made terrible blunders...they killed their patients...I don’t know if it is so much an autopsy as an inquest, but I don’t disagree with that generally.” 

• Ahamed feels Federal Reserve chairman Ben Bernanke has done a good job lately. “Listen, he is like a doctor who allowed his patient to do all the wrong things: smoke, eat fattening foods, and then when the patient had a heart attack, he started doing the right things,” he says 

Read the full interview here. 

My earlier post is here. 

Nobel Prize for Mises!!

Prof Pete Boettke of George Mason University says that:

• Important to recognize that Mises, despite the fact that he was always a little bit out of step with the profession, he also was recognized. He was the Distinguished Fellow of the American Economics Association (AEA) in 1969; there was a large segment of people who pushed to try to get him the first Nobel Prize in economics. He won the highest medal of honor for scientific accomplishment from his own country, Austria. 

Listen the talk here. Also another one on Hayek is here.

Super power dance-America, China, India

Professor Deepak Lal writes: 

• A rough measure of this relative power is provided by data on relative GDP. From the most recent set of comparable PPP data compiled by the late Angus Maddison, it seems that the US remains way ahead of all possible competitors at the moment, and despite prognostications of its economic decline (as I have argued in earlier columns), it would be foolish to write off the US. The US is and is likely to remain the sole superpower for the foreseeable future. 

• It should be noted the possession of nuclear weapons is a necessary but not sufficient condition for being a superpower or great power, nor is membership of the Security Council either necessary or sufficient: as witness the role of Pakistan, or North Korea for the former, and the UK and France for the latter. China and India are already regional great powers. They are both trying to expand their global influence. But, until they can provide a credible challenge to US naval power, they are unlikely to be able to compete.

• In a brilliant book, Walter Russell Mead (God and Gold, Knopf, 2007) has argued that world politics in the last 400 years can best be explained by the maritime system first created by the Dutch in the 17th century, and then adopted by the British and subsequently the US to create their imperia. In each version, sea power was used to build up “global systems of trade and might”. The open, dynamic and capitalist society this created “generated innovations in finance, technology, marketing, and communication”. The wealth generated provided the basis for military power. “The basic formula of an open society, world trade, and world power was the power secret… and the major driving force in the history of the 400 years”.

Happy Pongal

 Yes, it is a Tamil country's important festival.

The Sun itself stands for all the ideals of the Pongal festival. Its message is that of light, unity, equality and true selflessness. These are the ideals of Karma Yoga. Hence, the sun is the greatest Karma Yogi. 
                                                                                                                 -Swami Sivananda


The Sun is not merely a huge orb of atomic energy as the physicists would tell us, but a radiant mass of life-giving vitality to everyone. And it is this Surya that is worshipped on Pongal. 
                                                                                                                       -Swami Krishnananda

All those shalas!!

Don’t mistake me!!

That is what Ritu Birla says "to dharamshalas, pathshalas, gaushalas... all those shalas!" 

From a good review by Vikram Doctor:

• .....found explicit categories of donation: "anukampa-dan, a gift given out of compassion; ucit-dan, a gift given out of duty; kirti-dan, a gift given to earn fame; abhay-dan, a gift of fearlessness; supatra-dan, a gift of religion." 

• She started researching this and it lead to the subject matter of her Ph.D. thesis and a recently published book entitled Stages of Capital: Law, Culture and Market Governance in Late Colonial India. Recently in Mumbai she delivered a lecture on the subject, the fifth in the excellent series of annual lectures on Indian business history organised by the Godrej and Tata archives.  

• This synthesis took the form of (and was influenced by) legislation like the Indian Companies Act (1882), the Indian Income Tax Act (1886) and the Negotiable Instruments Act (1881), as well as infrastructure like the telegraph and railways. But it also took the less tangible form of a cultural view of the market and of Indian merchants by the British government that mixed suspicion and support (and which one could argue was later inherited by the Indian government, persisting till today).  

Birla writes, “The standardization of trust procedure saw attempts to align the family firm and other forms of customary association with contractual models. Case law that had coded the endowment as a trust opened new possibilities for governing custom as analogous with the social relations of the market” (p. 105).

Let’s see what others said about the book: 

• G Balachandran, writes: The three chapters of the first part of the monograph explore the constitution of Marwari commercial groups and actors as economic subjects. The first chapter studies three pieces of legislation dating to the 1880s, viz. the Negotiable Instruments Act, the Companies Act, and the Income Tax Act, to uncover the construction of a public market in opposition to the ‘kinship-based’ exchange relationships of vernacular capitalism. Interestingly, while the latter two pieces of legislation promoted the constitution of the Hindu Undivided Family (HUF) as an economic entity fenced in as a cultural institution, debates over the negotiable instruments act mobilized both tropes of difference and similarity to justify subordinating local usages conditionally to practices and conventions familiar to British businesses in India.   

• B. R. Tomlinson writes: While Birla shows clearly how the Marwari community adapted its traditional behavior to new market structures, she does not explore the degree to which the market imperfections of twentieth-century India have made possible the continued dominance of family firms there.  Problems of information, knowledge, and trust limited the development of market institutions in colonial India; since independence, the state’s deliberate policy of preventing the growth of fully functioning capital markets—through  restrictions in the form of import licenses, planning controls on plant size and location, and limits on foreign exchange—dominated the process of economic development, at least until the mid-1990s.  Many analysts of India’s current “economic miracle” ascribe the imposition of these restrictions  to the close relations between the Indian government and major family-based business groups  until  the 1980s.  Cronyism, corruption, and political favoritism have characterized the growth of Indian big business during recent decades. Under  such circumstances, it may be that the Marwari community had a better chance of succeeding within the particular business structures that emerged over the course of their history than might have been possible within a more open and institutionally evolved market structure.  The continued growth of the Indian economy under increased economic openness may provide the answer to such questions. 

• Ishita Pande writes: In offering these insights, Birla's work cuts sharply through the popular slogan of "India shining" and images of the "corporate guru" that circulate in the premature celebration of India's future as an "economic powerhouse" on the global stage. For this reason, one hopes that Birla's work might also find an audience beyond the circle of postcolonial critics and interdisciplinary scholars of South Asia that Birla engages and addresses here. For this latter group this work might indeed be indispensable.

Watch it loud FULL VOLUME

There is a amazing video on Insane Japanese Politician. It is a great fun!!

India in World Economic Freedom Index 2010

As usual Hong Kong is number one. But very soon it may drop down because it has not the crude Minimum wage Act.

On this year ranking the countries like Sri Lanka (107), Brazil (113), Indonesia (116), Pakistan (123), Kenya (106), Mongolia (94), etc are all ahead of India (124).

But countries behind India in this year Index are China (135), Russia (143), Bangladesh (130), Cuba (177) etc.

Total countries ranked are 179.  

For more see here.

A case against income tax-now in India!!!

Of the 2 trillion rupees ($44 billion) net direct tax collected by the end of Dec. 2010, the personal income tax contribution was just over750 billion rupees ($16 billion). Now that’s a huge number and one would assume that our country needs such a large sum of money to sponsor the rapid urbanisation and infrastructural development. Well yes, it does but that’t not where these 750 billion go! Instead, as I mentioned earlier, they go in plugging holes – you and I pay our hard-earned money to keep alive the mismanaged, loss-making government enterprises! We pay for our government’s incompetence. Simple as that. We pay to make good the over 45 billion rupees loss of Air India, over 400 billion rupees loss of public sector petroleum companies andover 350 billion rupees loss incurred by the power sector among others.

For more read here (Indian Liberals.org).

Reading the ASER 2010

What is the relevant of India’s Right of Children to Free And Compulsory Education Act, 2009? When we have the out of school children which is of the order of 3.5 percent (rural) in the age group of 6-14 years, the out of schools children is simply children who are in the age group of 6-14 are not in any schools run by both government and private.

Rural: In 2010, 26.0% of all boys (age 6-14) were enrolled in private school and 22.3% of all girls (age 6-14) were enrolled in private school.

Read more here.

Business of fear and favours

…. fears are being expressed by no less than Prime Minister Dr Manmohan Singh regarding crony capitalism. Economists like Raghuram Rajan have called it oligarchic capitalism in which few businessmen have a close nexus with the policy establishment and have made fabulous fortunes in land, real estate and natural resources like iron ore and coal in which proximity to the government obviously helps.

Rediscovering the mercantilism

Arvind Subramanian writes:

• A second lesson stems from one crucial difference between the two episodes of Chinese mercantilism. Back in the early 1800s, China was mercantilist and closed. The paradox is that today China is mercantilist but highly open. China’s surplus in the earlier episode was a consequence of unquenchable foreign demand for China’s tea combined with a closed-door policy that virtually extinguished Chinese demand for foreign products. Put simply, China exported a fair amount and imported very little. Today, China exports a lot, exports a lot more than it imports, but it also imports a lot. 

• Taking account of China’s size and the regularity that large countries tend to trade less than small countries, China is an exceptionally big importer and trader. My calculations suggest that the degree of China’s openness, measured in terms of trade outcomes, is far greater than anything achieved by the United States in the post-war period and resembles the levels of openness achieved by the United Kingdom at the height of empire. 

• So, one reading, perhaps overly optimistic and naive, is that a China that moves away from mercantilism will be a China that is an exceptionally large and fair trader with strong stakes in maintaining an open trading and financial system. Post-World War II, the United States fashioned such a system out of enlightened self-interest. In contrast, China’s stake in openness might be less enlightened but more direct and important because its rise to prosperity, on which is predicated the legitimacy of its government, will depend upon an open system.

The government is the problem, not the solution bank

Bibek on....... the MGNREGA is already distorting the labour market. The way it has been constructed, it was probably deliberately intended to do so.

Aruna Roy on: The government will not have any moral authority to implement the Minimum Wages Act when it is itself a defaulter. It also opens the door to any other legislation over-riding the minimum wage and creating conditions of forced labour.

Best at 100

Coase's specialty is the economics and law of property rights. He brilliantly explained how private property rights give us incentives to cooperate productively in ways that went largely overlooked before he pointed them out. Before Coase published his most famous article -- his 1960 classic "The Problem of Social Cost" -- scholars never realized that (as I like to put it) legal rights are like cars.

But pioneering work is rarely presented cleanly, and Coase is a true pioneer. 

Micro farming the farmers

• Who is the real culprit? Is it the government's neglect of the agrarian economy, the lending practices of microfinance institutions, liberalisation or globalisation? 

• A large number of studies conducted by social scientists across the country point to the following: there is no single culprit. Crop failure, debt burden, loss in non-agriculture activities and failure of borewells have as often been found to be associated with households with suicides as are person-specific factors such as alcoholism, gambling, property disputes and factors that point towards social problems such as burden of dowry, caste issues and other related social problems.  

• Clearly, to blame suicide among farmers on largely external factors such as liberalisation and globalisation misses a major part of the story.  

• Almost all the burden of the risk, e.g., crop failure due to draught or excessive rains, falls on farmers.

• Instead of creating institutions that allow farmers to hedge their risk, politicians have opted for short cuts that provide instant votes, but not long-terms solutions that rescue farmers from the clutches of landlords, cooperatives, microfinance institutions and reduce risks on account of crop failures.  

Excerpts from Neeraj Kaushal’s Article.

Not reforming is a bad idea

“This will only result in a feeling of disempowerment among the people and leave them disenchanted,”

“China’s New Confucianism.”

Confucius shows up on Tiananmen Square

China boasts the world's second-largest economy, delivering double-digit economic growth on a seemingly permanent basis. It pursues the world's most ambitious program of military modernization, emphasizing the projection of power beyond its borders. It is the planet's biggest steel producer, car market, commodity consumer and exporter. 

India and Human Action by Ludwig von Mises

Years ago when I heard first time about the Professor Mises book Human Action, I wondered what Mises would have thought and probably said about India when he was writing this book. It is not surprise as the book runs about thousand pages. In the form a article I have now compiled the essential from the book Human Action to see what Mises actually wrote on India, M.K.Gandhi, Indian businessmen, British India, landlords etc.

It is quite amazing to read all those views which are very lucidly expressed and of course make you muse. The most interesting are the below seven paragraphs. Yes only the SEVEN WOUNDERS!! My favourate one is the FIRST and the SEVENTH WOUNDER!!

Mises wrote: 

1. Mahatma Gandhi disavowed his whole philosophy when he entered a modern hospital to be treated for appendicitis (p.85). 
2. A comparatively insignificant number of Britons could rule many hundred millions of Indians because the Indian princes and aristocratic landowners looked upon British rule as a means for the preservation of their privileges and supplied it with the support which the generally acknowledged ideology of India gave to their own supremacy. England’s Indian empire was firm as long as public opinion approved of the traditional social order (p.190).   
3. In the long run it is impossible to withhold the better arms from the members of the majority. Not the equipment of their armed forces, but ideological factors safeguarded the British in India (p.191). 
4. If capitalist entrepreneurs had not succeeded Lord Clive and Warren Hastings, British rule in India might one day have become such an insignificant historical reminiscence as are the one hundred and fifty years of Turkish rule in Hungary (p.650). 
5. The poverty of Asia and other backward countries is due to the same causes which made conditions unsatisfactory in the early periods of Western capitalism (p.747-748). 
6. Mere technological knowledge is of no use if the capital needed is lacking. Indian businessmen are familiar with American ways of production. What prevents them from adopting the American methods is not the lowness of Indian wages, but lack of capital (p.774). 
7. Indian nationalists take pleasure in speaking of traditional Hindu democracy! (p.842-843).

Scrap the Right to Education Act (RTE)

The Right to Education Act comes when there is no issue of enrollment but huge drop-out ratio. What it makes mockery of school education in this chaotic democracy is for the private schools and that is too by law!! Read the article and ponder what else more one need for scraping this RTE!!

Some excerpts:

• It is said that one of most damaging virtues of George W Bush was his steadiness; he believed the same thing on Wednesday that he believed on Monday - no matter what happened on Tuesday. Unfortunately, the well-meaning or self-interested people - these are the only two kinds pushing for swifter implementation of the Right to Education Act (RTE) - seem to share this dangerous steadiness despite new information. 

• As a company at the exit gate of the education system - we have hired somebody every five minutes for five years but only 5% of the kids who came to us for a job - we see and suffer the tragic consequences of India's education emergency. True impact in public policy – unlike election campaigns - does not lie in poetry but in plumbing.  

• RTE makes it impossible for education entrepreneurs to compete on price since many states propose to regulate fees and uncertainty has paused the Cambrian explosion of energy in school entrepreneurship. This means lower capacity and lower competition. And that means schools don't have clients, but hostages. 

• Third as enrolment ratios cross 100% it fights yesterday's war of quantity and fails to focus on quality and learning outcomes. We don't need more cooks in the kitchen but a different recipe. RTE not only fails this test but poisons the ecosystem by sabotaging other ways to get India educated.

Information vs resources

Read the below two articles before start reading the article on Ask and you shall be killed.

I really do not know how many of you have already read the Hayek’s one of the most important works the Why I Am Not a Conservative (published in The Constitution of Liberty (Chicago: The University of Chicago Press, 1960). 

• Before I consider the main points on which the liberal attitude is sharply opposed to the conservative one, I ought to stress that there is much that the liberal might with advantage have learned from the work of some conservative thinkers. To their loving and reverential study of the value of grown institutions we owe (at least outside the field of economics) some profound insights which are real contributions to our understanding of a free society. However reactionary in politics such figures as Coleridge, Bonald, De Maistre, Justus Möser, or Donoso Cortès may have been, they did show an understanding of the meaning of spontaneously grown institutions such as language, law, morals, and conventions that anticipated modern scientific approaches and from which the liberals might have profited. But the admiration of the conservatives for free growth generally applies only to the past. They typically lack the courage to welcome the same undesigned change from which new tools of human endeavors will emerge.

Also read Who’s Afraid of Friedrich Hayek? The Obvious Truths and Mystical Fallacies of a Hero of the Right by Jesse Larner. 

• A complex economy is something no person or institution can understand. But it can generate a sustainable order, with a rational allocation of resources, as individuals respond to their own circumstances and make choices as consumers and entrepreneurs, signaling the subjective value that they place on goods and capital stock through the price mechanism: One of Hayek’s most original contributions to economic theory is the insight that economic systems are based primarily on information rather than resources. To plan an outcome and to direct economic inputs and outputs toward this outcome is to stifle the emergence of a spontaneous, democratic response to the needs of the individuals who make up the community—a response that will necessarily have winners and losers, but that will not privilege the vision or depend on the limited information of a governing elite, and that will encourage further experimentation. The responsibility of a government that fosters individual freedom is to set up transparent and impartial rules so that the legal reaction to personal choices can be predicted for all, regardless of social station; to tolerate no privileged access to the law; to provide security; and to protect contracts and private property, so long as doing so does not conflict with the very small set of social assumptions on which there truly is broad consensus (arguably, Hayek’s suggestion that government should be responsible for a minimum standard of living would have fit into this consensus when Road was published.).

The local resources vs local problems

Elinor Ostrom, who won the Nobel Prize for Economics in 2009, says in her interview with DNA:

One of the major theses of your work is that beyond market and state, it is the communities that can manage things.

At different scales. We have ignored enabling local communities to manage water, forests and pasture lands.

You are not an economist in the traditional sense as it is understood in the last 50 years.
My official degree is in political science with a minor in economics. I am very much influenced by Douglass C North, Vernon Smith, James Buchanan, and Amartya Sen.

One of the issues in Indian agriculture is whether farmers should be given free power.

I don’t think anyone should be given free power. Overuse of power is a very great threat, a major threat to us all.

Even if it is meant as an incentive in a sector like agriculture, which is supposed to require some help?

No. I think they should be paying for water and power because you want them to use it efficiently.

Cartoonomics or Federonomics

Amity Shlaes writes: 

• John Maynard Keynes and Milton Friedman preached different philosophies but shared one thing: a withering contempt for students who couldn't keep up with the rest in a seminar. There is a lively debate about whether Friedman himself would have supported QE2. I believe not. But the Friedmanian emphasis on monetary policy helped to make Ben Bernanke's QE2 possible. 

• The seminar culture carried over to the salon of general economic discussion. Journalists don't clarify. Instead, they become graduate students, journeymen who pander to the masters, professional economists. No one dares to suggest that if high-end theory is so difficult to understand it may not be the best theory. No one dares admit he is less than 100% sure, to quote Mr. Bernanke in his recent 60 Minutes appearance. To talk in anything other than Keynesian or monetarist terms is to ensure you'll be shut out of the salon. 

• Hence the cartoon. This medium calls the academics' bluff. Cartoons do not even aspire to the salon. What a cartoon video says, in effect, is: "I don't care if I'm called stupid; I'm a cartoon. What I care about is trying to discuss the economy in plain English." Readers and viewers are so relieved to be free of the obligation to appear erudite that they turn to the cartoon in droves. The same phenomenon has produced another unlikely economic messenger: a rap video. A mock rap debate between John Maynard "Let-the-Spending-Soar" Keynes and the Austrian School economist Friedrich "Too-Much-Aggregation" von Hayek has received 1.7 million hits on YouTube.

Also read Brad DeLong's post on Milton Friedman Supports Ben Bernanke on Quantitative Easing.

China has emerged, more than India

Says Professor Rana Mitter,

Today, as funding for science in the West falls victim to budget cuts and government spending restraints, the Chinese are now at the cutting edge of technology in many areas. Chinese work on solar energy is widely regarded as world-beating. The Chinese space programme has already produced its first astronauts, and few would be surprised if China were to place a man or woman on the moon within the next decade.

The authorities have also sought to clean up the nature of Chinese academic culture. Many journals which publish shoddy or plagiarised work will be shut down. Many other journals have begun to publish in English, on the grounds that this is the only significant international scientific language. For the next few years, then, there is no reason that Chinese scientific research should not forge ahead even while freedom of discussion on political matters remains restricted. 


Read the full article here.

Ideas of Cardinal Newman

M.K. Narayanan of West Bengal Governor says: 

• Students, do not therefore, swerve from the straight and narrow path. In recent months, there have been occasions when students have resorted to tactics like gherao and violence, to demonstrate their protest over perceived grievances. While democratic protests are acceptable in a society, resort to violence needs to be avoided. As privileged individuals, you must understand this better than anyone else. I therefore appeal to you to avoid such tactics. The doors of the Vice Chancellor and the Chancellor are always open to you if you need to talk. The University is a place where to use Cardinal Newman’s words once again, and I quote, “Rashness is rendered innocuous and error exposed by the collusion of mind with mind, and knowledge with knowledge.” 

• Finally, I wish you well as you leave this institution. I only request you to maintain the high ideals of the institution and live by the advice that you have received from your teachers and others.

Keynesian morality often makes for bad policy choices

From Mint editorial: The wage hike, ranging from 17-30%, is likely to prove illusory. Perhaps it already is. For, in a time of spiralling inflation, even frequent wage revisions are no good as a policy measure. The only thing these do is to make poor workers the victim of what economists call “money illusion”: A rise in nominal wages is seen as something satisfying while real wages get constantly eroded by inflation.

Fritter them away through ban

Ban on exports and other short-term price-cap measures prevent price signals from causing an adjustment in demand. Worse, they prevent farmers from benefiting from the improvement in their terms of trade (the enduring hypocrisy of India’s commitment to farmers). Higher prices would also induce them to increase production and improve productivity of their land. Repeatedly, governments have done the opposite. Yet, farmers’ suicides are blamed on factors and forces other than these short-sighted decisions.

Lords of Finance by Liaquat Ahamed

I got an emergency call yesterday from a friend of mine. He insisted that he will not tell me why he wants to meet. When I reached his place, it was big surprise to me because we together went  for a fascinating discussion with Pulitzer Prize-winning author and investment manager Mr.Liaquat Ahamed on the economic bottom up/down climate and his book the "Lords of Finance: Bankers Who Broke the World." Dr.Sanjaya Baru, Editor, Business Standard had conversation with Mr.Ahamed.

Indeed, it was a great opportunity to meet Mr.Ahamed. Some time back I  read first chapter of his book. It is a must read for all the student of finance, because most of them now take granted about the way in which Central Banks behaves world over.  

Points noted from the discussion:

But one thing I kept on myself asking why I don’t like reading Mr Baru’s articles for quite some time now? It was clear to me from his yesterday discussion. He begun by saying “as a student of Keynes”, and “Keynes is my hero etc”. Let me say here a few words about the BS. In less than two years many key/senior journalists have left the BS. The list includes T.C.A Srinivasa Raghavan, Sunil Jain, Surjit Bhalla etc. The reason you know now.

The book gives great details about biography of four central bankers who were crumbling with money printing machine in 1930s, historic picture of financial crisis, economy, and geopolitics.

As Joe Nocera wrote: The lords of finance who constitute the title of this book are the four central bankers who dominated that postwar era: Benjamin Strong of the Federal Reserve Bank of New York; Montagu Norman, the longtime head of the Bank of England; Émile Moreau of the Banque de France; and Hjalmar Schacht, who headed the Reichsbank.

What was interesting to me was the Mr.Ahamed talk. Of course he said that “Keynes was not a hero” but he merely employed his energy to analyze the financial crisis in fresh way of looking at.

Mr.Ahamed clearly said that all financial crises had have happened till now due to the bad decisions taken by men who were in charge of the Central Banks. He also said that these central bankers were ignorance of not only the real economic situation but also their own field of finance. He even said that there was no established economics in the 1930s.

Thereafter, there were all kinds of questions were thrown from audience. I did ask him what is his take on Austrian School of Economics and its ideas on boom and bust cycles.

Mr.Ahamed said that he agree with what Austrian School of Economics have being saying about the unlimited expansion of credits which inflates the instability of financial crisis. However, he feels that the solutions offered by this school is suffering (let them bust attitude) which is something one would not prefer in any case in the modern world.

On the whole, Mr.Ahamed talk showed that he is all that not friendly to neither the State nor the Central Bankers.

Book review in The Economist. 

Also read Dilemmas in Central Bank Communication Some Reflections Based on Recent Experience: Second Business Standard Annual Lecture delivered by Dr. Duvvuri Subbarao, Governor, Reserve Bank of India.

Skill development for US economy

Prof Raghuram Rajan writes: 

• Government spending—especially on unemployment benefits, aid to states, and some construction projects—probably helped avert a more wrenching downturn, but continued red ink worries households, which are also trying to rebuild savings and reduce debt after a spending binge. 

• Instead of constantly trying to boost spending and potentially creating problems for the future, a more sustainable way to improve job growth is to facilitate the “re-skilling” of the unemployed, especially those who were in construction-related jobs. Eventually, better labour force supply will create healthier and more sustainable demand.

Societies: Open vs closed

On Saturday I attended the Distinguished Gust Lecture delivered by Professor Kishore Mahbubani. The topic was “Will China and India grow together or grow apart?"

No doubt, the lecture was good one. Because it was amazing in two ways: it was simple words but quite meaningful at large and it was also clear in layman language. Among other things which had discussed, one very interesting thing (at least to me) was he said China is sending different teams to study the functions of democracy in different parts of the world. This is something new to me and I wonder what would be the china’s take on Indian democracy?

I was lucky to get a copy of his 2008 book The New Asian Hemisphere: The Irresistible Shift of Global Power to the East. It is very interesting particularly the first chapter. Read the book reviewed by Sunanda K. Datta-Ray.

But two things remains unquestioned, no matter minor or major that may be.

Mr.Kishore writes in his book and also he has written elsewhere that:

• Indian political scientist Pratap Bhanu Mehta once compared India and China by saying,  “India is an open society  with a closed mind; China is a closed society  with an open mind.”

But I read and heard several times the same words as below:

According to Brahma Chellaney:

• Henry Kissinger once said China is a closed society with an open mind, while India is an open society with a closed mind…

The other question which I consider was not at all touched during the lecture was the planning process adopted in china vis-à-vis in India especially during the process of economic reforms in these countries. Because what makes different to masses is the more realistic and decentralized planning process rather than other way around.

Singh vs Singh

Only massive private investment can bring the schools, hospitals and basic living standards that India’s poorest citizens desperately need. For more than sixty years, taxpayers’ money has been poured into government schemes that have served mostly to make some officials very rich. So when a major private investment is delayed or cancelled on flimsy grounds, it is an act of extreme irresponsibility. It is India’s misfortune that this kind of arbitrary action is becoming the leitmotif of Dr Manmohan Singh’s government. As an economist, he knows the irreparable damage being caused. Why does he not stop it?

Indian liberals on right road but wrongly- apart

• We need only look to recent intellectual history for examples where the articulation of ideas can change the course of history. At the end of the Second World War, when ideas of central planning and the primacy of government as a means to manage the economy were ubiquitous, Friederich Hayek, the great libertarian philosopher and economist, assembled a group of like-minded thinkers and founded the Mont Pelerin Society, with the stated goal of countering ideas of collectivism with a renewed emphasis on individual liberty and market-based economics. Hayek made a point then that resonates strikingly with India today: although he decried the ideas of members of the left, he praised them for carrying conviction in those ideas, and in articulating them in a fashion comprehensible to the general populace. Thus, he suggested, they appropriated the moral high ground, a space that had been vacated by a right that had failed to make its case in such a compelling fashion.

Even more crisply asks Vivek H Dehejia in the January issue of Pragati-The Indian National Interest Review (PDF).

• Today, we are just at the beginning of this contest of ideas in India. The consequences will be momentous. Will we remain in thrall to the remnants of a defunct socialist ideology, and plod along with piecemeal and limited economic reforms without a sound intellectual rationale? Or will we boldly strike out on another path? Let the battle be joined.

Rewrite the road ahead

Mr. Surjit Bhalla argues:

• …it is time we considered the writing of a new constitution. 

• First, we need to view India as a very different economy, and polity, than that faced by the founding fathers. Which means we are not a nation of the poor; we are now a nation of middle class, with the poor aspiring to be middle class. We are not a nation of illiterates anymore; and we are more than involved in the democratic process. 

• Dr Ambedkar penned Thoughts on linguistic states. In this volume, he correctly anticipated aspects of the Telangana problem and reminded all that there was more to the sub-division of states than mere language — for example, size. Dr Ambedkar was pioneering, distinguished, and perhaps the most underestimated leader among the founding fathers. It is not a coincidence that the underestimation arises from the fact that Dr. Ambedkar was a Dalit — but that is again a pointer to how India has changed. Today, the minorities (Dalits, STs, Muslims and women) have a significantly improved status, and the future should mean further progress. 

• ............ in case the liberati (no typo, the term refers to the in-your-face “liberal” glitterati) thinks that only the Shiv Sena are bad sorts with their demand for local hiring, they should look at their liberal cousins in Andhra Pradesh. These folks have had a ditto copy of the Shiv Sena rules called the Mulki rules: region-specific reservations in certain categories of jobs. 

One thing all argumentative Indians agree now, irrespective of political parties they represent, or ideologies they believe etc that there is a need for “setting up of the second States Reorganisation Commission”.

Education freedom and choice

Education Minister says:

"Today most private sector players treat education as any other product to be packaged and marketed as a ‘private good’, however I would like to consider it to be a ‘social or a public good’ and thus to be marketed appropriately and responsibly."

Both are right!!