Monday, April 1, 2024

Famous Behavioural Economist Daniel Kahneman Passed Away (1934-2024)

 “everything I’ve done has been collaborative.”

The famous behavioural economics Prof Daniel Kahneman passed away few days ago. He was aged 90. His many great insightful and pathbreaking works has paved many new dimensions in economic analysis.

He was awrded with the Nobel Prize in Economic Sciences in 2002 for his works - “for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty”

Different thoughts of people on his life and works:

He wrote in his popular 2011 book, “Thinking, Fast and Slow.”

Dr. Kahneman presented his ideas to a general audience in “Thinking, Fast and Slow,” which distinguished between two modes of thought: System 1, in which the mind, acting quickly, relies on intuition, immediate impressions and emotional reactions; and System 2, in which the mind, slowing down, functions more rationally and analytically and is able to correct errors made by System 1.

“His central message could not be more important,” the Harvard psychologist and author Steven Pinker told The Guardian in 2014, “namely, that human reason left to its own devices is apt to engage in a number of fallacies and systematic errors, so if we want to make better decisions in our personal lives and as a society, we ought to be aware of these biases and seek workarounds. That’s a powerful and important discovery.” More here.

Princeton University obituary 

His major works at Econlib.

Nobel Committee report on his works.

"Economics is a notoriously imperialist discipline: economists are more prone to colonising other scholarly fields than to be colonised by them. The single biggest exception was Daniel Kahneman, the social psychologist who was awarded the 2002 Nobel Memorial prize in economic science for how he revolutionised the field." more here.


Saturday, January 20, 2024

Rama, Modi vs India, Bharat

"Lord Ram’s credos emphasised the sixteen noble qualities of life—unconditional, righteous, assertive, grateful, truthful, steadfast, charismatic, emancipative, thoughtful, capable, presentable, spiritual, dreaded, radiant, admirable and calm, All of this together made him the ideal Maryada Purushottam. These Shodasha Kalyana Gunas, as they are known in Sanskrit, define the human way of living that transcends boundaries making it globally relevant. The Ram temple movement had its own sixteen dimensions due to its religious, social, cultural, spiritual, anthropological, philosophical, judicial, liberal, historical, local, regional, national, global, geographical, mercurial and political contours". More here.

It wasn’t until Sonia took over the Congress that such cooperation became impossible. The current political polarisation started with her. But paradoxically that has worked in favour of the BJP! More here.

An Ode to the doctor’s scribble




Tuesday, January 2, 2024

Thursday, November 23, 2023

Classical economist B R Shenoy warned Sri Lanka in the 1960s

Classical economist B R Shenoy warned Sri Lanka in the 1960s when the country started its first IMF program after printing money (mostly for rural credit re-finance), not to engage in revenue based fiscal consolidation, which he called a ‘statistical alternative of balancing the budget’.


“This alternative is beset with pitfalls,” Shenoy warned in a report commissioned by ex-President J R Jayewardena.


“Past experience in Ceylon, which is in line with experience in virtually all parts of the world, is that in a democratic set up political and other pressures are heavily on the side of more and more spending by the government.


“When Revenues increase, under the weight of these pressures, expenditures too increase to meet, or even exceed, Revenue collections. In Ceylon during the past seven years Revenues rose by 45 per cent and Expenditures charged to Revenues by 48 per cent.”


From December 2014 to November 2019 tax revenues went up 65 percent to 1,612 billion rupees and recurrent spending went up 55 percent to 2,053 billion rupees, before taxes were cut in December to target ‘potential output’.


Revenue based fiscal consolidation, which is in line with a ‘heedless spending’ ideology that emerged among English speaking academics (US ‘progressives’ or post-Keynesians) combined with nationalized central banks, led to a spike in spending to GDP as salaries and subsidies were hiked with no restraint from 2015.


More here.

Prof B R Shenoy is still deemed too dangerous to be taught widely.

A quote from Sanjeev Sanyal:


"The Left dominance over the intellectual establishment has its roots in the systematic “ethnic cleansing” of all non-Left thinkers since the 1950s. One of its early victims was liberal economist B.R. Shenoy who questioned Nehru’s economics. He was squeezed out of the establishment and persecuted, but continued to write against socialist planning. ... The result of the systematic cleansing was that there were no non-Left academics remaining in the social sciences field in India by the early 1990s. ... Since the 1990s, the more explicitly Soviet-derived material has been removed from curriculums, but they remain heavily dominated by the Left. Thus, economics students are mostly taught material written by Amartya Sen and his stable of academics but exposed only in passing to the thoughts of Friedrich Hayek, Milton Friedman or Jagdish Bhagwati, Sen’s intellectual rival. Even when non-Left thinkers are included, their ideas are lumped together as exotic curiosities to be critiqued, rather than imbibed. Shenoy is still deemed too dangerous to be taught widely. The situation is much worse in other disciplines like sociology and history."

More reading see here.

Nani A. Palkhiwala donated Rs.12 crore so Sankara Nethralaya

In 1998, the legal luminary, Nani A. Palkhiwala donated Rs.12 crore so Sankara Nethralaya could buy Lady Willingdon Hospital in the same neighbourhood and expand. Ratan Tata donated Rs 5.5 crore. Today, the multi-storied blocks equipped with state-of-the-art medical infrastructure are buzzing with patients from across the country and the world. Badrinath encouraged his team to find cost-effective, scalable solutions.

More here.


Remembering a stalwart in India's economic landscape

 

S. Venkitaramanan the former Governor of Reserve Bank of India (RBI), passed away at the age of 92 in Chennai on Saturday after a brief illness.

  • He was 8th Governor of the Reserve Bank of India, served in this role for two years from December 1990 to December 1992. Before his tenure as RBI Governor, he held the position of Finance Secretary in the Ministry of Finance from 1985 to 1989.

  • Venkitaramanan's pivotal role in Indian finance came to the forefront during his tenure as the Finance Secretary in the Ministry of Finance from 1985 to 1989. However, it was his term as the 18th RBI Governor from December 1990 to December 1992 that solidified his reputation as a brilliant crisis manager.
  • Addressing the balance of payments crisis, Venkitaramanan took measures to stabilize the exchange rate. His pragmatic approach included the devaluation of the Indian rupee, which contributed to a more competitive export environment.
  • S. Venkitaramanan's legacy is one of resilience, strategic thinking, and steadfast leadership. His contributions have left an enduring impact on the financial sector in India, and his life serves as an inspiration for those navigating the complex world of banking and finance.
Read more here.


A notable exception was C. Rajagopalachari

This is somthing the Indian political leaders forget and forgetten for long time: 

"A notable exception was C. Rajagopalachari, who had held the office of the governor-general of India—the last one to hold it and the only Indian—yet went on to serve in Jawaharlal Nehru’s cabinet and then as chief minister of Madras."

Read more here.

Friday, December 16, 2022

India’s fiscal federalism is still evolving… by B. Chandrasekaran

 India’s fiscal federalism is still evolving… by B. Chandrasekaran

The article titled "The poor state of India's fiscal federalism by Kalaiyarasan. A" published in The Hindu on July 28, 2022, makes several sweeping statements without substantial data to prove on larger policy perspective and beyond taking the ideological position. The author’s statements cannot be taken as academic interest because it has public policy ramifications in many respects, mostly misleading.


At the outset, the article paints abjectly the state of India's fiscal federalism with allegations like the “centralisation of fiscal power”, “political centralisation” and "cultural nationalism", etc., especially since 2014. The pitch is set out very well before any data to substantiate for inferences to be drawn to conclude meaningfully.


One of the greatest economists of twentieth-century India was Dr. B.R.Ambedkar who never advocated for centralised planning or power centre except to protect the country's sovereignty by integrating the regional administrations as one country. Indeed, he always strived for decentralised planning for socio-economic development, and that dream is yet to be fulfilled in Independent India even after 75 years.


While the basic structure of India’s tryst with destiny was always found to be lubricated around conflict of visions with which the democracy unfolds and still drives for bettering. Alas, across the country, the autonomy of administrative power and devolution of financial power are yet to be transferred from State capitals to village panchayats and local bodies which rarely need now to make real growth centres across the country.


Interestingly, most seem to be forgotten now conveniently that unlike before 2014, no Chief Minister is visiting New Delhi now for approval of State’s Annual Plan budgetary provisions finalisation, including sectoral allocations, grants, etc. The Planning Commission structure was reformed with financial devolution power has been decentralised more now than in the past since independence.


The author’s statement “States lost their capacity to generate revenue by surrendering their rights in the wake of the Goods and Services Tax (GST) regime, their expenditure pattern too was distorted by the Union’s intrusion, particularly through its centrally sponsored schemes” is deeply flawed on many grounds.


A dynamic democracy like India had debated for a decade on a comprehensive indirect tax system and had powerfully exercised the tools of consensus building through political dialogs to align the states on their own will with facts and figures on the table at a common goal of the Goods and Services Tax system which may not be the perfect one but it was a fair beginning. The structure is still in evolving state with pros and cons to argue, but not to deny the fact that it can be done away with it completely.


For years, many states did not clean up their own awfully managed already fiscally stressed financial health and wasteful expenditures especially soon after the elections and just before the next elections on the lofty promises made to the electorate. When the states were having provisions of their own tax revenues even then they would not able to fulfill the promises made to the electorate and then invariably asked the union government to provide grants or special funds were underestimated by the author's article under review.


According to the report, titled “Central Transfers to States in India Rewarding Performance While Ensuring Equality” authored by economist M Govinda Rao “in 2012, there were 147 such schemes initiated by various Central ministries and many of them were directly implemented by numerous implementing agencies specifically created for the purpose and the grants were given to them directly bypassing the States.”


Whereas, at present, the union government provides funds to states through Centrally Sponsored Schemes (CSS) which has been effectively reduced to 28 schemes from 66 schemes including flagship schemes. The CSS has been rationalised based on the recommendations of the Sub-Group Report Submitted by the Chief Ministers in 2015. The implementation of CSS was mainly on key sectors of national importance because the state governments were strategically not giving due importance for the past many years.


Unlike in the past, States have more flexibility now to implement certain schemes as per the state-specific requirements with the check and balance systems. As many as 45 Central Sector schemes are implemented by States for specified purposes.


The article talks about the case of Tamil Nadu which took steps “to look at Centre-State fiscal relations and recommend more transfers and taxation powers for regional governments.” The point is well taken. One is tempted to ask why Tamil Nadu’s discom has been ranked as the top worst in the country for many years. Moreover, several state-owned public-sector enterprises continue to make a loss but are buried under the carpet from any reform steps. The author fails to heed some of these deeply poor governance structures.


Also, why the decentralisation of financial and administrative power is still not accorded to local bodies in Tamil Nadu? While its neighbours like Kerala and Karnataka have the best decentralised process of governance in the country despite the challenges of welfare politics and administrative misgovernance. Because the depth of the democratisation process has stopped in Tamil Nadu with power welded at the state capital even now by deep-rooted vested interests in anything and everything.


The fact that regional disparity emanates partly from the fact that the state capital power centre still refuses to transfer the democratic power to local bodies which are duly elected by the people for direct democracy with trusts. Moreover, what is the status of major state's State Finance Commissions are upto? Are they performing the requisite role of the state development and bridging the gaps of disparity like inequalities of rural-urban divide, disparities among intra regions, etc? It seems that not much attention is given either academically or in public policy discourse even in states like Tamil Nadu which is being branded as a developed state.


To sum up, it has been several months since Tamil Nadu’s 6th State Finance Commission report for the period of 2022-2029 was submitted to the state government, acceptance of its recommendations and timeline for implementations are yet to be known to the people. Strangely, the report is not even made public. This is the Dravidian model of governance. None of the academic or policy institutions will raise their voice against such poor governance because they will lose funding from the state government or be humiliated for their right to express in the interest of the public cause.


(The author is an economist and public policy expert)