Dharma -Individual social responsibility

Author Gurcharan Das has very interesting article in the Times of India about functions of capitalism and revisit of Corporate Social Responsibility in India. What interest me more is the below para:

"Although two decades have passed since the reforms of 1991, capitalism is still trying to find a comfortable home. Indians still believe that the market mostly helps the rich. They do not distinguish between being pro-market and pro-business. Being pro-market is to believe in competition, which helps keep prices low, raises the quality of products, and serves everyone. Being pro-business is to allow politicians to distort the market through excessive intervention, resulting in ‘crony capitalism’. The result of this confusion is the timidity of reform, excessive number of dysfunctional public sector companies, and a nation that is not performing to potential."

Timely articles, must read

Secular smokescreen by Nirmala Sitharaman

Beyond the Muslim quota By Tufail Ahmad 

India’s cocooned intellectual elite by Rajeev Mantri  and  Harsh Gupta 

Dollar’s taking us for a spin by S. GURUMURTHY

S vs B "For us Indians, it’s getting a bit too much. So, some questions."

Subbarao's tenure 'worst era of performance by RBI governor'

"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.)"

Feeding POWER and Friedman on India

Interesting reading:

• Fantasies of power in muddled India by Ramachandra Guha (in case that link is not working, pl see here!!!)

• Poverty falls fastest in high growth of GDP period

• Growth as a tool to alleviate poverty 

• "expenditure onsubsidies, which was 1.6% of GDP when the NDA demitted office, rose to awhopping 2.6% of GDP in FY12—and that’s not calculating the under-recoveriesborne by PSU oil firms; add this and the current subsidy expenditure may wellrise to 3.6% of GDP."

There is a interesting lines in one of Prof Milton Friedman's article which blinks the current political situation of Indian polity. Here is the lines from his 1999 article "No Third way to the market":

• Today, the "market" is said to be either utterly triumphant or a grave threat. Politicians everywhere quest for a "third way" around its rigors, yearning for "national champions" in industries like telecoms capable of holding off globalization. The market, however, is simply a mechanism that can be mobilized for any number of purposes. Depending on the way it is used, the market may contribute to social and economic development or inhibit it.

In the same article Friedman explains the bicycle industry's in Punjab in India:

• In India's Punjab there was a plant producing bicycles. Government rationed steel to users rather than selling it at a market price. The bicycle producer could not get the amount of steel needed at the official price. However, there was a private market in finished or unfinished steel products. So the bicycle manufacturer supplemented his rations through buying semifinished steel products and melting them down - hardly an efficient way to convert iron ore and coal into bicycles.

Read from a Focal Point for Friedman @ 100 a list of very interesting articles by Friedman. 

Friedman's "Tyranny of the Status Quo"

One of the living legend of liberal economists is Prof Sowell. Some excerpts from his article on Friedman:

• "No one converted Milton Friedman, either in economics or in his views on social policy. His own research, analysis and experience converted him.
• As a professor, he did not attempt to convert students to his political views. I made no secret of the fact that I was a Marxist when I was a student in Professor Friedman's course, but he made no effort to change my views. He once said that anybody who was easily converted was not worth converting.
• I was still a Marxist after taking Professor Friedman's class. Working as an economist in the government converted me."

India: Friedman and Galbraith

"Once in the early 1960s, Friedman wrote the then-U.S. ambassador to New Delhi, John Kenneth Galbraith, that he would be lecturing in India. By all means come, the witty but often wrong Galbraith replied: "I can think of nowhere your free-market ideas can do less harm than in India." As fate would have it, India did begin to embrace Friedmanism in the 1990s, and the economy began to soar. China finally caught on too." Full article is here.

Milton Friedman@100

Today, the late versatile economics freedom loving professor Milton Friedman turns 100 year old. World over, celebrations have began, some write a piece of article, some put video contest, some write few blog posts, some organize lecture, some organize debate/discussion, some organize a freedom walk (India, Pune!!), some organize sweet talk among friends and some do it some or all the above for disagreement with whatever Professor Milton Friedman said in his life time.  


To me. Friedman was a kind of window through him and his works I saw the world of argument for and against on economics, of course the free market economics. Regarding his monetary economics stand, I differed to agree with Prof F A Hayek.


Simply, I often tell my peer group to remind and to students by way of introduction that Friedman means the following:

• Four ways to spend money (From most efficient to least efficient)
• The Relation between Economic Freedom and Political Freedom
• Heed the Words of Wisdom 
• Friedman on India's Planned economic crisis

Here is a list of some others:

1. Prof Donald J. Boudreaux's article on "Milton Friedman, a centennial appreciation"
2.  Friedman on India
3. Happy 100th birthday Milton Friedman
4. Milton Friedman’s Century
5. Time's Milton Friedman, Freedom Fighter

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

Goa CM flies the way you and I do 
Giri's Top 10 quotes from Milton Friedman's Capitalism and Freedom

Blinking links

Interesting reading:


From What G-20 Achieved at Cannes by T.C.A. Srinivasaraghavan

• Or, if you like, Keynes, by being instrumental in providing the intellectual basis for removing a metallic anchor for paper currency, got it horribly wrong.
• That is, as long as the amount of currency that a country could issue was tied to its gold reserves by some multiple, there was an automatic limit on how much could be issued.
• The moment this tethering was eliminated by the US in 1971, and it began to finance its war in Vietnam by printing even more notes than it had done in the 1960s, the balloon floated off and, like all balloons, became subject to random gusts of wind blown by speculators.
• That produced volatility in the commodity markets, which was a private problem. But the freedom to print notes without restraint soon became a public problem.

From Time to Rock the Vote by Prem Shankar Jha 

• She did this because her purpose was not, as her party claimed, to reduce the influence of big business on policy-making. The second Industrial Policy Resolution of 1956 had already done this. It was to cripple a rising threat from the right by depriving it of funds. In 1967, the pro-market Swatantra Party, formed by C Rajagopalachari in 1961, and the Bharatiya Jana Sangh (BJS) had fought the elections jointly and become a serious threat to the Congress in three states. These were Madhya Pradesh, where the BJS won 78 out of the 296 seats, Gujarat, where the Swatantra Party won 66 out of 168 seats, and Rajasthan, where, by winning 72 seats, they succeeded in reducing the Congress to a minority.
• The Swatantra, being the most dependent on funds from the corporate sector, simply threw in the towel: most of its members merged with the Jana Sangh. The two socialist parties, the Praja Socialist Party (PSP) and the Samyukta Socialist Party (SSP), weakened rapidly, merged, then joined the Janata Party in 1977 and finally, disappeared altogether. Their place was taken by a host of caste and ethnicity-based political parties that we are familiar with today.

From Nationalised family, privatised state by S. Gurumurthy

• Milton Friedman, regarded as the most influential economist of the second half of the 20{+t}{+h} Century and a Nobel Laureate, denounced social security as creating entitlement for all based on merely age, not an economic or poverty index. It is therefore not an anti-poverty measure. And what started off as support to families slowly expanded to supplant the families themselves.
• The result: by such welfare schemes, the US government gradually took over the responsibilities and burdens of US families, and rendered them duty-free and functionless. By taking over normal functions of almost half the US households, the state has virtually replaced the household — that is, nationalised the families. While the next part of this article will be on the causes and consequences of this fundamental shift in the state-society relation, here is a brief on how this shift seems set to dynamite the US economy itself.

From Economics of Bahuka and Greenspan by S. Gurumurthy

• Milton Friedman declared that ‘as children stopped contributing voluntarily to the support of their parents and began contributing through a system of government fiat, a serious erosion of family values became inevitable' and saw ‘social security system as a detrimental influence on social patterns'. The NBER work also pointed out how ‘family functions such as production of food, clothing and fuel and some other staple items were taken over by business firms, and responsibilities such as education, childcare, and social insurance have been assumed by the state.' What the NBER meant here is that business firms and the state had, together, robbed the families of their functions, leaving them functionless, therefore, dysfunctional.
• Conceding that ‘the market system is the most efficient, and most conducive to individual freedom yet devised', NBER pointed out that the market itself ‘doesn't provide for the organisation of the society' but its ‘success during the last 200 years is attributable in good part to the existence of strong non-market institutions such as the family; also adding that the ‘decline of the family and the growth of the government will jeopardise the market system and associated social, political and cultural freedoms.'

Keynes folly on trial

Keynes, Hayek Preside at Washington Jobs Debate: Caroline Baum

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." 

Make mistakes

On free markets: Mamet loves conservative economists such as Friedrich Hayek, Thomas Sowell and the late Milton Friedman. “Milton Friedman pointed out that the cavil, ‘It would seem that a country that could put a man on the moon could provide free lunches for its schoolchildren,’ missed the point,” he writes. “The country could not supply the free lunches because it put the man on the moon.” What about, say, Karl Marx? According to Mamet, he “lived as a parasite upon [Friedrich] Engels, and never worked a day in his life.”

Says David Mamet who is a playwright and won the 2008 Pulitzer Prize.

No one ever played on that board

Monopoly, Milton Friedman’s Way

Anthony Clifford Grayling on Hayek

I now often think that if the late twentieth-century was the effects of Milton’s economic freedom movement, the twenty-first century will be the true effects of F A Hayek’s thoughts on the economy and our lives, and there is no doubt about.

It is a ironic, illusion and apathy in our academic and research institutions which continue to underestimate the Austrian School of Economics in general and Hayek’s thought in particular. Beside, the underestimating of our own great scholars like BR Ambedkar, BR Shenoy, Ambirajan, Rajaji, C.N Annadurai etc continues for no considerable reason of thoughts. But certainly the nation pays the price for this ignorance and will pay in future also.

In an interview with ET Prof Anthony Clifford Grayling says:

When you look around the world, the ideas of which economic philosophers do you see to have had the most influence? 

• I think the contemporary western regimes are infact influenced by people like Frederich Hayek and Milton Friedman. We have a timeline here of the last fifty years as mainly rightwing political economy.

• Economics always used to be called political economy. We have now allowed the people who control the lifeblood of the economy, those in the financial services industries and others, to separate it from the overall political process and the question of the social good. 

• If we incorporate the government into money—taxation, fiscal policy, redistribution, etc—we get a disaster like the Soviet Union or any socialist economy you can think of. Or even what held India back for so many years under the Nehru-Gandhi economic philosophy. 

• But a realistic one. This is why Dworkin, for instance, argues, that the old socialistic idea of equality, the equality of distribution, is a mistake. Because it terribly distorts the economy. So what a society should have is an equality of concern.   

One should read the full interview here, although one may get disappointed after reading some fiction of thoughts like Amartya Sent et al!! 

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

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.

Franchise of Voting distorts the markets

How did we get here? How can the US have a large political movement — the Tea Party — pushing for the hardest of hardmoney policies when there is no hard-money lobby with its wealth on the line? How is it that the unemployed, and those who fear they might be the next wave of unemployed , do not register to vote? Why are politicians not terrified of their displeasure?

Economic questions abound, too. Why are the principles of nominal income determination , which I thought largely settled since 1829, now being questioned? Why is the idea, common to John Maynard Keynes, Milton Friedman, Knut Wicksell, Irving Fisher, and Walter Bagehot alike, that governments must intervene strategically in financial markets to stabilise economy-wide spending now a contested one?

Let’s bloom the freedom from beast

Finally the great book The Machinery of Freedom is now freely available in web.

I have been waiting for long time!!

Thanks to David

Milton Friedman in Ballia!!

The Ballia district administration website gives some famous quotes by different personalities. One of them is certainly not so famous among economists in India but the world!

The district administration mentions Milton Friedman’s one of very often quoted, probably misquoted one. What is that quote?

“If you give the Sahara Desert to the government, there would be shortage of sand in few years”. -Milton Friedman