India's malinvestments

The below paragraphs are the concluding part of my friend G P Manish's argumentative article on India's three Plan periods.

• "Most economists have concluded that the institution of planning in India increased the rate of growth of GDP and therefore led to a marked improvement in economic performance. However, the analysis here shows that despite the impressive growth rates of GDP and GDP per capita during this period, the planners’ efforts caused stagnation in the output of the two goods consumed by the masses—cotton cloth and food grain. The growth in availability per capita of both of these goods was far less than the growth rate of GDP per capita in this period. It follows, therefore, that the masses’ living standard did not improve significantly. Nor did it improve in the following period. The per capita availability of cotton cloth fell from 14.23 sq. meters per annum in 1970–71 to 14.05 sq. meters in 1980–81...."

• The vast amount of resources invested in the heavy and basic industries were malinvested. A great deal of capital was invested in producing capital goods and industrial intermediate goods at home that could have been procured from abroad at much lower cost. The bulk of these goods proved to be uncompetitive on the world market. Furthermore, as predicted by the argument of the impossibility of economic calculation under central planning, the forced industrialization was characterized by economic irrationalities—phenomena that never would have occurred in a marketbased system with an operational profit-and-loss mechanism. Thus, many of the capital goods produced were either in excess of domestic requirements or could not be utilized because of the lack of adequate supplies of complementary production factors, and their designs marked them as inefficient and obsolete even by developingcountry standards. Most important, all of this investment in the economy’s “commanding heights” failed in its primary purpose of increasing the future output of consumer goods and agricultural commodities."

India's Great, Forgotten Free-Market Economist

As India celebrates, the twenty years of economic reforms what we all need to do is simply to remember the IMMORTAL words of Professor BR Shenoy!! who alone voice gave many policy suggestions through his writings, lectures etc for more than three decades.

It is sad that no one remembers him!

The title of this post is my latest article published by The Ludwig Von Mises Institute in its Mises Daily.

PS: The earlier draft of this article was rejected by none other than Professor Shenoy's own daughter Sudha Shenoy on some other ground!!!!

Postscript: I sincerely thank my friend M.Saravanan for his critical as well as constructive comments and suggestions on the earlier draft.

Towards a Theoretical Framework for Britiish and International Political Economy

Mises Institute has just released a Sudha’s dissertation in book form:

• Sudha Shenoy (1943-2008) was a legendary figure in the history of the Austrian School. Her father, B.R. Shenoy, was practically the only libertarian in India in his day. His daughter, Sudha, was a student of Hayek and Rothbard and went on to teach in Australia, with a specialization in development economics. She inspired many students with her teaching and her eloquent defense of economic liberty.
• This mighty treatise, her dissertation now in book format, is probably the first full Austrian treatment of development economics, with a model carved out of the writings of Menger, Mises, and Hayek. She traces an economy's progre
• ss from consumption, to distribution, to production, and demonstrates the essential preconditions that must be met for an economy to move through this trajectory.
• In the second part, she reconstructs the history of England in the 200 years before the Industrial Revolution. She shows that the Industrial Revolution was not something that just happened upon England but, rather, was the result of a long build-up of capital and a long expansion of the division of labor.
• In many ways, this book earns for Shenoy a high place in the history of the Austrian School. Even though it is only now being published after her death, it is a book for which she will be long remembered.

Random reading

1. Are High Taxes the Basis of Freedom and Prosperity? By Sudha R. Shenoy
2. The “Stimulus” Stopped the Recession? Not So Fast! By William L. Anderson
3. Chetan Bhagat: The pretty girl is always right
4. Obama half brother steps into spotlight to tell his own story
5. 'Indian religion is such an untouchable subject'

Free market stalwart sadly passed away! By Chandra

I once wrote a biography about her father B R Shenoy that was little hesitantly rejected by Sudha Shenoy for publication, I am now thinking to write a biography about sudha shenoy?

Sudha Shenoy, 1943-2008

A commenter on the Catallaxy blog recently stated that the free-market economist, Dr. Sudha R. Shenoy, had passed away after a long battle with cancer (I have confirmed this via the School of Economics, University of Newcastle).
A native of India, and daughter of prominent Indian economist, Professor B. R. Shenoy, Dr Sudha Shenoy was an Honorary Associate in Economic History at the School of Policy, University of Newcastle, Australia. From 1986 to 2004, she was a lecturer at that institution. Since that time, she was a fellow at the Mises Institute in Auburn, Alabama, United States. In 2003, she delivered the Hayek Memorial Lecture at the Austrian Scholars' Conference, entitled 'An Auxilliary for Historians: The Contribution of the Older Austrians'.
Her publications included Under-Development and Economic Growth, Central Planning in India: A Critical Review, and 'Austrian Capital Theory and the Underdeveloped Areas: An Overview' (in Richard Ebeling, ed., Austrian Economics: Past and Future). Shenoy edited the Centre for Independent Studies publication, Wage-Price Control: Myth & Reality, and, most notably, compiled and edited Hayek's classic Institute of Economic Affairs publication, A Tiger By The Tail.
A brief Internet search illustrates that Sudha was reasonably active on the blogosphere, including as a member of the Liberty & Power group blog, and also presented numerous speeches on elements of Austrian economic thought and market theory all over the world. It is my understanding that she was in the process of writing a book on development, capital structure and the common law in England, c. 1100-1914, and, in 2003, she referred to an ongoing project of hers to write a Hayek biography.
Whilst I never had the pleasure of meeting Dr. Shenoy, I am well aware of her contributions to economic history, Austrian economics and development economics. She holds a place as one of the forerunners of the modern Austrian school, through her attendance at the 1974 IHS Austrian economics conference at South Royalton, Vermont. Her work with the IEA in promoting F. A. Hayek's macroeconomic theory and ideas in currency competition also stand out as significant contributions. An early paper on Austrian monopoly theory is another nice sample of her thinking in the Austrian economic tradition.
Shenoy's work in economic history and economic development were also insightful and original in character. Some good examples of her work in these domains included a note on government monopoly in money from a historical perspective (for a monetary economics paper written by Hayek), capital structure in the global economy, her paper for the Ebeling compilation, and a recent speech entitled 'The New Global Marketplace'. A recent article of hers published in The Freeman, in which she critically assessed Jeffrey Sachs' critique of Hayek, is another item that deserves to be widely read.
Those interested in a more general overview of Shenoy's life work might be interested in an interview she gave to the Mises Institute, where, amongst other things, she referred to the formative influences of the works of Mises and Hayek in her student days.
It also seems clear to me that Sudha Shenoy was well-respected throughout the classical liberal and libertarian communities, judging from the honourable mention that she, and her family, received in the Milton and Rose Friedman memoirs. I also refer to an account of a speech she made in New Zealand: 'Dr. Shenoy's speech was extremely well-received ... The meeting room was packed to overflowing with students and other interested persons - to the extent that many had to sit on the floor or stand in the doorway'. For any academic, these mentions represent welcome praise indeed.
Given recent issues faced by scholars that specialise in economic history, and the history of thought, in Australia, it is sad to hear of the passing of a prominent economic historian. Indeed, the loss of a woman who cherished the ideals of freedom in the economic realm is a telling one. As is the case of all good academics, however, Dr. Shenoy left behind a legacy of quality work and fascinating insights - and none more so than her economic history reading list, posted on the Austrian Economists blog. In fact, one cannot think of a better way for a scholar to encourage the next generation to take up the intellectual challenges that lay ahead of it.