Economics of Patterns

Kapil Viswanathan has good piece in Livemint on economics of modern vs traditional. Some excerpts:

"Friedrich von Hayek, the Nobel prize-winning economist, believed that there are no laws in economics; only patterns, and we must learn to recognize these. Doing so involves breaking away from a Newtonian mindset of definitive and predictive models and equilibria, and approaching the study of economics from a fundamentally different perspective."

"As Hayek advises, we must attempt not to shape results as a craftsman shapes his handiwork, but rather to cultivate growth by providing the appropriate environment, as a gardener does for plants."

Prof F A Hayek & Narendra Modi

"Friedrich August Hayek, the Austrian-born philosopher and economist best known for his defence of classical liberalism, seemed to think it did, claiming that market economy inevitably required cultural underpinnings in the form of a set of “modern” values based on individualism. It’s a view echoed by American political scientistYoshihiro Francis Fukuyama for whom modernization, westernization, and democratization are all part of a single, unilinear process that will conclude when other cultures essentially ape the West. As opposed to this are the theories of cultural variation, which assert that there are different roads to modernization and different conclusions to the process of modernization." More here.

All good works

Austrian School of economic thought gaining influence as nations tackle debt

A tribute to the Late James Buchanan, Noble Prize winner

"The source of confusion here is that there was a Good Hayek and a Bad Hayek"

Prof Solo has very interesting book review article in NTR on Professor F A Hayek: A bit from it:

• "The source of confusion here is that there was a Good Hayek and a Bad Hayek. The Good Hayek was a serious scholar who was particularly interested in the role of knowledge in the economy (and in the rest of society). Since knowledge—about technological possibilities, about citizens’ preferences, about the interconnections of these, about still more—is inevitably and thoroughly decentralized, the centralization of decisions is bound to generate errors and then fail to correct them. The consequences for society can be calamitous, as the history of central planning confirms. That is where markets come in. All economists know that a system of competitive markets is a remarkably efficient way to aggregate all that knowledge while preserving decentralization.
• But the Good Hayek also knew that unrestricted laissez-faire is unworkable. It has serious defects: successful actors reach for monopoly power, and some of them succeed in grasping it; better-informed actors can exploit the relatively ignorant, creating an inefficiency in the process; the resulting distribution of income may be grossly unequal and widely perceived as intolerably unfair; industrial market economies have been vulnerable to excessively long episodes of unemployment and underutilized capacity, not accidentally but intrinsically; environmental damage is encouraged as a way of reducing private costs—the list is long. Half of Angus Burgin’s book is about the Good Hayek’s attempts to formulate and to propagate a modified version of laissez-faire that would work better and meet his standards for a liberal society. (Hayek and his friends were never able to settle on a name for this kind of society: “liberal” in the European tradition was associated with bad old Manchester liberalism, and neither “neo-liberal” nor “libertarian” seemed to be satisfactory.)"

Prime time ahead for F A Hayek

"To an Austrian, the economy is incomprehensibly complex and constantly changing; and technocrats and politicians who claim to have figured out how to use government are deluded or self-interested or worse. According to Hayek, government intervention in the free market, like targeted tax cuts, can only make things worse." More here.

Its, Hayek's Time

From Desai's article:

• "All this is so old-fashioned that it has been forgotten. On the eve of the Keynesian Revolution, Hayek was warning of mal-investments induced by the market rate of interest being below the natural rate for any length of time. This was the Wicksell model, tweaked by Ludwig von Mises and Hayek to accommodate bank credit in the Walrasian framework. It flopped spectacularly in the 1930s and was forgotten. But good ideas never die in economics. They only wait till their time comes. This is Hayek’s time.
• Sadly, in Hayek as in Marx, economics is not a policy science and there are no tool kits to fix the problem. Time will restore the equilibrium perhaps not at the old trend but a new one. When that will happen is not within economists power to predict. Just wait and see."

But it clearly shows that Mr Desai is confusing what Wicksell or for that matter Walrasian argued with that of Hayek and Mises views on regulating rate of interest at particular level in an economy. The underlying truth is that Mr Desai never got it right the original arguments of Hayek and Mises. Rather he always looks at them through the wild eyes of Keynes!

Economics is truth

"Later in life, when speaking before a group of economics students, Hayek bared his soul about this problem of the moral choices economists must make. He said that it is very dangerous for an economist to seek fame and fortune and to work closely with political establishments, simply because, in his experience, the most important trait of a good economist is the courage to say the unpopular thing. If you value your position and privileges more than truth, you will say what people want to hear rather than what needs to be said." More here.

Two men were six feet tall with meticulous mind

It has been a week now with a new book in hand. Unlike previous book on these two men, this one has many many interesting facts about their life and works which is nothing but quite contrasting and that may be the truth for their ideas which is living so long. OK, I am talking about the new book "Keynes Hayek The Clash That Defined Modern Economics" by Nicholas Wapshott.

The book has 18 chapters dividing the life and works of Keynes and Hayek. You don't need to go through all the 18 chapters to judge about the quality of book. I dare say, its enough for to judge after crossing third or forth chapters.   

But I must confess that if you have already read so much about their works and life separately. Well, I am sure that you will find this book some what irritating to read in non-stop.

I better suggest you should read some of the below reviews (also some excerpts) of this book before you buy your copy:

In the author’s view, Hayek’s influence was seen in the 1994 “Contract With America,” the Republican pledge to shrink big government; in the later balanced-budget legislation of President Bill Clinton; and in the operations of the Federal Reserve under Alan Greenspan.

Classical economists and conservatives don’t fare much better than socialists and communists in Hayek’s stark analysis.

At the height of the crisis, there were few in the short run who countered this resurgence of Keynesianism, even fewer who with a straight face promoted the Hayekian solution, to let the market find its own level.

Hayek took an absolutist position, that because noone could know what was in the minds of every member of society, and that thebest indicator of their conflicting needs was market prices, all attempts todirect an economy were misplaced.

"...according to Stanford economist John B. Taylor, bring the “Keynes-Hayek fight of the 20th century back to life, making the clash both entertaining and highly relevant for understanding economic crises of the 21st century.”  

Keynes’ economic theory was more mechanistic, as economies could be manipulated in a machine-like fashion to behave according to the wishes of economic planners. 

I Don’t Recommend Nicholas Wapshott’s Keynes Hayek: The Clash that Defined Modern Economics.

Moneyball vs Blink

Many people are exploring the inner wilderness. Kahneman and Tversky are like the Lewis and Clark of the mind.

Don’t Blink! The Hazards ofConfidence

Fiction of central bank

From The Economist on Milton Friedman (His centenary birthday is on coming Saturday 31^st July):

"…central banking is an essentially illegitimate criminal enterprise freer rein. When a significant portion of a political movement's activists believe that the whole point of central banking is "systematic robbery", and that inflation is the means by which this robbery takes place, widespread, reflexive opposition to inflation is not surprising." 

My Ambedkar article in the ANU’s South Asia Masala!!

On 1^st of July, a slightly different version of my Ambedkar article was published in the Blog (South Asia Masala) maintained by The Australian National University. There were some reasons due to which I did not posted here. It is done now!! Here is the article which talks about Ambedkar’s views on English language, urbanization, whether free market is good for dalit or not etc.

Propagating Ambedkar’s free market ideas is not that easy!

Professor Mohammed Arif says:

“It has become a lot easier to propagate Ambedkar’s ideas of the capability of moral force to challenge the powers of vested interests. Today, information cannot be controlled. Information has been democratised. The internet has changed everything. Technology has changed the parameters of political and social debate. Today we communicate via email, Face book and Twitter which are available to everyone worldwide. Babasaheb said ‘If the depressed classes gained their self-respect and freedom, they would contribute not only to their own progress and prosperity but by their industry, intellect and courage would contribute also to the strength and prosperity of the nation’.”

F A Hayek’s double cheers!!

1. Hayekian Courage
2. The Economics of Abundance by F A Hayek

The Beast G, back Ahead

Some excerpts from a review article by Francis Fukuyama on new edition of F A Hayek's 1960s book The Constitution of Liberty. The current President of Mont Pelerin Society is Prof.Kenneth Minogue. He said to me (during the February's MPS Asia Regional Meeting which I attended) that this book is Prof.Minogue's favourate and the best among Hayek's books!! 

• In an age when many on the right are worried that the Obama administration’s reform of health care is leading us toward socialism, Hayek’s warnings from the mid-20th century about society’s slide toward despotism, and his principled defense of a minimal state, have found strong political resonance. 

• Unlike Beck, Hayek was a very serious thinker, and it would be too bad if the current association between the two led us to dismiss his thought. Hayek always had problems getting the respect he deserved; even when he was awarded the Nobel in economic science in 1974, the awards committee paired him with the left-leaning economist Gunnar Myrdal. With the passage of time, however, many of the ideas expressed in “The Constitution of Liberty” have become broadly accepted by economists — e.g., that labor unions create a privileged labor sector at the expense of the nonunionized; that rent control reduces the supply of housing; or that agricultural subsidies lower the general welfare and create a bonanza for politicians. His view that ambitious ­government-sponsored programs often produce unintended consequences served as an intellectual underpinning of the Reagan-Thatcher revolution of the 1980s and ’90s. Now that the aspirations of that revolution are being revived by Tea Partiers and other conservatives, it is useful to review some of the intellectual foundations on which it rested.

• Hayek’s skepticism about the effects of “big government” are rooted in an epistemological observation summarized in a 1945 article called “The Uses of Knowledge in Society.” There he argued that most of the knowledge in a modern economy was local in nature, and hence unavailable to central planners. The brilliance of a market economy was that it allocated resources through the decentralized decisions of a myriad of buyers and sellers who interacted on the basis of their own particular knowledge. The market was a form of “spontaneous order,” which was far superior to planned societies based on the hubris of Cartesian rationalism. He and his fellow Austrian Ludwig von Mises used this argument against Joseph Schumpeter in a famous debate in the 1930s and ’40s over whether socialism or capitalism offered a more efficient economic system. In hindsight, Hayek clearly emerged the winner.

My Talk in Chennai on May 14th, 2011!!!

Here (sorry its in Tamil!!!) is a link to the announcement for my talk in Chennai on May 14th, 2011. I will be presenting based on my paper presented in the Mises Institute's Austrian Scholars Conference 2011 in March and subsequently published a article in the Pragati's April Issue (PDF). This is the first time I will be engaged in talk in Chennai!! I am looking forward the talk!! If any one or whose friend is interested in attending, please do come!!

Many thanks to Mr.Satya for the arrangement!!

A(mbedkar) means D(alit) not C(apitalism)-WHY?

Friends,

I am unable to post often in this blog (which I loved) due to many responsibility landed on me, my apology for that!!

This is the 10^th year living with the word Economics than my life!! I had great opportunity to study the history of Indian economic thought subject during my B A and M. A Degrees (both in Economics) I am thrilled to dig out more than many economic historian did for many their life time!! I have also met many great economists and people.

I am now more inclined to think that most of them did what they thought is right but ended up producing not only  wrong ideas, but very dangerous ideas, some are even doing right now, to whom the Indian society think a big thinker, but the reality seems to be otherwise.

So, what I am trying to convey you is that I will be posting very limited post hereafter. But will write more on what I have read in the past 10 years on various issues for publications by different agencies.

One of them is the Ambedkar’s economics, is there anything like that? Of course what he wrote during his early career as well as during his higher education is the one which I call it as Ambedkar Economics. More essentially, the core principles on which he had worked of course after deep thinking through it.

 What went wrong with his ideas were mostly the people who took or understood wrongly is the long trend continues which have become stone-age myth now, but not that easy to break! But let me try!!

One peculiar things happens with Ambedkar free market economics is that the people who call themselves as follower of Ambedkar actually ended up misusing his writings, mis-quoting etc.

The current situation is such that the movement you say the word Ambedkar, suddenly people will think that he was Dalit icon etc, I have no problem with that. My problem with them is the word Capitalism which he cherished very much but denied saying he did not utter anything!! for hell reasons which is not quite known!!   

My question is let’s repeat the title of this post WHY A(mbedkar) means D(alit) not C(apitalism)

So, thanks for being patient!!! 

Finally at Mises Institute!!!

I have not able to post any update on this blog for quite some time. The reason is simply that my research paper on liberalism and free banking ideas of Dr. B.R Ambedkar has been selected for the presentation in the Austrian Scholars Conference 2011.

I am now here to present my paper. It was great challenge for me to finally reach the Mises Institute for the Conference. Many great people have helped me in every single thing to make it this trip successful. This is my first visit to United States of America. Indeed, I am greatly thankful to all those who have helped me. I will write in detail about their individual name when I am back from the Conference.

Central banks-The super-fiction

During the MPS 2011 Asia Regional Meeting, I met Dr. Jim Walker, who is an Austrian economist and CEO of Asianomics Ltd.

The following is from his interview with ET:

Is the US economic recovery real? Will more money flow back from Indian stocks to the US this year? 

No, the US recovery is weak, because it's based on artificial stimulus. Once that fades, there would be problems again. But money may still flow back from India if risk-aversion rises. It will go into bonds and gold in 2011. I will remain bullish on gold till central banks change the way they operate. Most central banks are losing their credibility, be-cause of the way they are handling the crisis by pumping in more and more money. For Ben Bernanke, the best thing is to quit the job, because he is not really solving the crisis. 

Do you think the spike in oil price is justified when the US is yet to recover and emerging markets are slowing? 

The jump in oil is an outcome of the loose US monetary policy. There is no shortage of oil supply at the moment. The real problem is Ben Bernanke here. The real economy doesn't want the money he is pumping. So, it is spilling into other assets. A lot of commodities are at least 20-30% higher than what they should be.

Bastard Keynesianism!!

Don’t mistake me!! There is a boon on that title!! (Bastard Keynesianism: The Evolution of Economic Thinking and Policymaking since World War II (Contributions in Economics and Economic History) by Lynn Turgeon)

I indeed wanted to post after the celebration of 75 year old Keynes book on General Theory. The damages done by this book is now history.

Moreover, Ann Pettifor writes in Blooomberg: 

• This “bastard Keynesianism,” as British economist Joan Robinson called it, subverted and continues to block the Keynesian revolution both in vision and in method. Monetarists were concerned with the quantity of money. Keynes’s overwhelming concern was with the rate of interest on money. He argued that monetary policy should always support the private and public economy, stimulate it, and prevent recession. 

The Austrian school of economics main concerns is unlimited money creation and artificial creation of interest rate. So biting the money with extremely low interest rate is the culprit for economics crisis.

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.