On Knowledge... On An Auspicious Day

If my favourite god is Bhola, then my favourite goddess is Saraswati, the goddess of learning, of music and the arts. And today is Saraswati Puja. A good day to reflect on the sublime truth that Knowledge is not The State.

What is Knowledge?

What is The State?

At a cursory glance, The State is politicians and bureaucrats, while Knowledge comes from knowledge workers. And the work of producing and disseminating knowledge has little to do with the work of The State, which is to apprehend criminals and nothing more. Indeed, if The State interferes with Knowledge, society is doomed, because the (mis)use of force is rationalized by its cronies in the universities and the media. We see this in India, we see this in Pakistan. We also see this in the US of A.

One particular kind of knowledge that the US State has patronized over the decades is Keynesianism. Indeed, all those who did not accept the logic of central banking, fiat currency, centralized setting of the interest rate, fractional reserve banking, the chasing of the chimera of “full employment” through constant inflation, and the “macroeconomic” rationalization of these policies using aggregates – like Ludwig von Mises and his student Murray Rothbard – lived their lives in the US of A as a long and hard struggle in conditions close to obscurity. This, in a capitalist society.

These Keynesians who dominated US academia for decades, emboldened with the latest Nobel prize in economics going to one of their own, Paul Krugman, have all been loudly demanding and supporting a “stimulus package” of government spending in order to tackle the current crash. So much so that both Obama as well as Biden have publicly claimed that there is “no disagreement among economists” that a government spending based stimulus package is the right medicine for the US of A right now.

Fortunately, ever since the Thatcher-Reagan years, there have emerged a host of libertarian “think tanks.” These think tanks produce and disseminate knowledge outside the university complex, and their work is often directly political. I call it the “politics of knowledge.” One of the oldest and most established libertarian think tanks in the US of A is Cato Institute, based in Washington DC.

Now, Cato Institute has issued a full-page advertisement in newspapers across the USA, signed by over 200 respected economists who do NOT agree with the stimulus package. I quote the text below which their signatures are placed:

“Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today.

“To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.”

The signatories include two Nobel laureates: James M Buchanan, the founder of “public choice theory” (which is still not taught at the Delhi School of Economics); and Vernon Smith. Also on the list is our very own Deepak Lal.

(Click here for the pdf of the ad.)

Of course, the stimulus package is going through. But we were discussing Knowledge and The State. If the Keynesians are wrong, as our side believes, there will be hell to pay.

Note that The State always appoints advisors who advise them to do exactly what they had decided to do anyway.

This, precisely, was the case with the majority report of economists on Nehru’s ambitious Second 5-Year Plan – to which Professor BR Shenoy remained the only dissenter. Nehru was wrong. His advisors were but yes men. Perhaps a similar disaster is unfolding in the US of A.

I am not at all happy about the Obama administration. Here he is strengthening their trade unions. Of course, there is a direct link between trade unions, Keynesianism and immigration restrictions – and the late Professor WH Hutt wrote tellingly about these. Somehow, I get the uncomfortable feeling that the US of A is heading downhill at a very fast pace.

I’ll leave my reader with that.

Gotta go, light some incense and offer some flowers to my favourite goddess.

I do not worship at the altar of The State.