Friday, April 20, 2012

Economic theories and human action

Back from a wonderful visit to the India's "Great Canyon" Pachmarhi, Madhya Pradesh. Of course, until I reached the sun raise and sun set points in Pachmarhi, I did not quite understood why many people call the mountains of Pachmarhi as "India's Grand Canyon".

Interesting readings:

A speech by T N Ninan during the book discussion on India's economic reforms and development Prof Rajan speech in the same event here. Those interested in knowing about the differences of why we need faster economic reforms and why its stuck at political runious should read these two speeches all in front of the Prime Minister of India, Dr Manmohan Singh,.

Noeconomic theory please, we are Indians by T C A Srinivasa Raghavan
CowBelt or Buffalo Nation? by Harish Damodaran


  1. I have serious reservations on the article by TCA. Its flawed in all the interpretations:

    1. Railway is a public monopoly and inefficient. The economists differentiate between public and private monopolies and hence they have no confusion about the Railways. Public monopolies usually turn inefficient because of excessive political maneuvering and railways is no different story.

    2. The presence of high fiscal deficit and high growth rate are no miracle. Its because of a 7-8% growth rate that India can support around 5% fiscal deficit. Its a simple case of no-ponzi scheme where high growth prevents the high govt. expenditure and borrowing turn into a ponzi scheme. It is the reason why IMF frowns upon low growth economies indulging into high deficits.

    3. On the Taylor rule, it was again high growth which helped maintain the balance between interest rate and exchange rate and nothing to do with central bank's planning. Right now with the downward trajectory of growth rate has thrown the bank in a policy dilemma and recent fluctuations in the exchange rate points to this factor and constraints on central bank.

    4. On the demand elasticity issue, the author calls FMCG goods as inessentials but the point is that these goods are no longer a luxury but essential goods for the Indians now. So, am not surprised with the demand inelasticity shown by beauty-care products. So, we need to check our definitions of essentials and inessentials before reaching any conclusion.

    All in all I have not seen an article endorsed by you, and which is flawed in all the economic reasonings presented.

    And yes, thanks for sharing the speeches from the book discussion.

  2. I'm planar for your article writings and contents fortunately.
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