I must thank Aristotle the Geek for drawing my attention to a column written by Mythili Bhusnurmath, a very senior economic journalist, praising pmk ramadoss on his smoking ban, and calling for continuing such coercion on peaceful members of society. “This is for your own good,” kinda stuff.
Actually, 1,30,000 people die on Indian roads every year. In America it is 40,000 – and they have 850 cars per 1000. We have less than 20 cars per 1000. And this number is growing FAST. If nothing is done, many more deaths will occur on roads – a State monopoly. The government can “work” to prevent these unnecessary deaths. What Mythili is inviting is not government work, but government coercion. On people like us, smokers.
Coercion is barbaric.
The Great Ideal of the Natural Order is peaceful and voluntary exchange. No coercion – except upon outlaws. Are smokers somehow “outlaws” that require coercion – like kidnappers or rapists? Which planet is Mythili living on?
And here I am flying the Ganja Flag!
Character is Destiny.
Smoking is an achievement of a very high level of civilization. To the primitive, smoke was something to be scared of, because it meant fire. If he smelt smoke, he ran. Even after fire was tamed, smoke remained something noxious, to be avoided. It took millennia before some humans learnt the art of inhaling the smoke of certain plant products – not noxious smoke, but pleasurable smoke. The ultimate control of fire.
In India, the only smokes for many thousands of years have been ganja and charas, both derived from cannabis, and opium. Tobacco has been a very late entrant, imported from America, where the Red Indians used to smoke it in their “peace pipes.” This is how late the west learnt about smoking. It is again in this respect that we are a far older civilization.
And we all agree that the smoke from Cannabis Indica is better than the smoke from the Tata Indica, and further, that it is also superior to the smoke from India Kings.
The Market must provide us with Bhola Spliffs, advertised as Ganesh ka Baap ka Bidi.
Machine made. So no more lick and paste, no more unnecessary loss of vital body fluids.
From the continent of America we got chillies, potato, maize, cocoa and tobacco. I vote we send the tobacco back – and get the coca!
Ha ha.
I’m flying the Ganja Flag, not the tobacco flag.
Boom Shankar!
Sunday, May 31, 2009
Saturday, May 30, 2009
On Law... And Modern Economics
At the centre of our ongoing discussions on Reason and Ethics (here and here) lies the relationship between Law and Economics, the first based on the “laws of reality,” of things “out there,” their ownership, transfer, mortgage, etc.; and the second based on the “laws of thought,” of things “in there,” or how we think before acting.
In both, there are “prescriptions”: in Law, the inviolability of Private Property; in Economics, Liberty under such Law.
But what I really wanted to focus attention on was what Murray Rothbard called “laws of reality” and Ludwig von Mises, his revered teacher, called “laws of thought.”
Thinking about Law goes back millennia, but we all know that Property arose before the law. It was because there was Property that Law came about.
And now we all know that where the rules of the game were most favourable, the most conducive to Liberty and Property, the greatest flowering of the people resulted. The “common law” predates parliament. America had the “Wild West” – which was not so wild, as it was based on Private Property. But the most important ingredient was Liberty.
The prescriptive lesson to learn from this is that civilization is not in such a sorry state that it needs Law from any group of “lawmakers,” however “legal” they might be: as in the case of a written constitution that is “by law established.” Law always goes back to the past, and the best lawyers are those who know about decisions taken in similar cases of the past. There is this no need for “new law.” There are only some legal “maxims” that should guide the practical application of the Law, such as the inviolability of Property, the legitimacy of original appropriation, or homesteading, the keeping of written promises and contracts, and restitution for damages, or torts. All crimes then are crimes against Individuals. There are no “crimes against The State.” If no one is hurt, there is no crime. It is these that Rothbard has elaborated upon in his Ethics of Liberty. These are based on the “laws of reality”: of the best way to organize the world outside, our Property.
Praxeology, in its present, highly developed form, is a very young science. This modern economics is not Law, and its methods are different from the historical method of Law. Rothbard himself has penned a history of economic thought before Adam Smith, and there is much to be gained from studying it, but we must concede that the academic rigour of the moderns is a very recent phenomenon. Indeed, Rothbard ends this first volume with a severe battering of Adam Smith, whom we all consider a man on the right side, but there were serious problems within the new discipline then, like their inability to solve the “value paradox,” or how gold is more valuable than iron, although iron is more “useful”; and their hilarious “labour theory of value” was an error that had grave practical consequences, in that it lay at the foundation of all Marxist errors.
Thus, there is something uniquely fresh about modern economics, something that makes it a young science eager to capture the attention of all truth-seekers, for it is a vital science. It deals with nothing less than survival itself. It is also, in a deep sense, a moral science. But that apart, the most unique aspect of this science, in its modern form, is that it traces everything back to logical categories present in each human mind. It is based on “laws of thought.” Its method lies in “looking out from within the consciousness.” Its teachings are the fruit of western civilization, of the intellectual culture of 19th-century Vienna, and its scientific rigour. If you are ignorant about the laws that govern interpersonal exchanges in markets, you are missing out on knowledge vital to your very survival.
And if there is a “higher purpose” that lies in the earthly struggles of the pioneers, including both Mises and Rothbard, then it is this: this science must be transmitted to each human mind. There are huge errors only because of bad theories. Socialism is one such theory. Democracy is another. Praxeology and Catallactics are also theory. But they are the only valid theories on the subject. They expose the huge errors in mainstream economics, from its mathematisation to its pretty diagrams, to its fictitious “macroeconomics” and its even sillier “microeconomics” which does not enter the micro-mind, the mind of the individual micro actor, because it is not based on “laws of thought.” Mainstream microeconomics is about the “rational utility maximiser.” It is a mathematical problem.
There is more to human logic than the ability to solve mathematical problems. Indeed, all the math you need to know to successfully engage in even the biggest catallactic ventures are the simple operations of arithmetic: ask Richard Branson or Donald Trump. Serious students of the subject need to ask themselves the question: Have I come here to learn Mathematics, or have I come here to learn Economics?
We trace modern economics back to the “marginal revolution” in 1871, and to three names: Carl Menger from Vienna, William Stanley Jevons from England, and Leon Walras from Lausanne. This settled the “value paradox”: value was seen to lie in the last unit of the good in question, the so-called “marginal” unit. It was the marginal unit of gold that was being exchanged for a marginal unit of iron, and it is these marginal valuations that were the source of their respective values.
But only the Viennese Carl Menger traced value back to the mind of the acting man. His method was “subjective.” And being subjective means “looking inside the mind” for laws of thought that guide all action.
Indeed, of the three, Menger is the man to watch. For he alone inaugurated a methodological individualism combined with subjectivism, and his second book in 1883 was entirely devoted to methodological issues. Mises and Hayek have both added to this foundation, and if there is anything to learn from their works, it is that mainstream economics is cock-and-bull. Menger thus founded a “school of thought” – the Austrian School.
According to the Austrians, the real question is not the “best laws”: the real question is how the order happens on its own, based on “laws of thought” we all follow. This is the new science Menger inaugurated, which Mises called “Praxeology”: the science of human action; praxis being the Latin for “action.” At its core is the Action Axiom: that man enters into acts of peaceful interpersonal exchange. This is a basic human phenomenon, a basic social fact. Indeed, the division of labour is not a “theory” – it is datum, a historical fact.
Thus, getting back to what I was driving at: the “axioms” that Rothbard’s Ethics of Liberty is based on, like property and homesteading, are about reality, while there is something very different about the axioms that Mises listed, which are present in the logic of every individual mind that engages in peaceful inter-personal exchange. It might be expedient to call the former "maxims."
[Which reminds me: Peace is also an important prescription of this science. Its basic lesson is that war destroys, while markets are all about production.]
This is how the two disciplines of Law and Economics interact. Both are vital subjects. But they are different subjects. The first is about laws of reality; the latter about laws of thought. In both we see spontaneous order. We do not see a “common will.”
It was not Rothbard but Bruno Leoni who captured the essence of the ideal legal process when he said that the common law mimics the market in that two people who share a dispute go to two private lawyers, both entrepreneurs, both of whom study the past, and who take the matter before an impartial judge. At the core lies the individual, interacting with another individual – exactly as in the market. Leoni made a powerful case against “inflated legislation.” He showed us how we can achieve a “natural order.”
Law is the old subject, millions study Law. It is modern economics that almost everybody is ignorant of. It requires books that convey its teachings in simple forms to the interested layman. I have recently taken on the task, which I hope to complete in a year or so. Wish me luck.
And Boom Shankar 2 U 2, on this glorious Sunday.
In both, there are “prescriptions”: in Law, the inviolability of Private Property; in Economics, Liberty under such Law.
But what I really wanted to focus attention on was what Murray Rothbard called “laws of reality” and Ludwig von Mises, his revered teacher, called “laws of thought.”
Thinking about Law goes back millennia, but we all know that Property arose before the law. It was because there was Property that Law came about.
And now we all know that where the rules of the game were most favourable, the most conducive to Liberty and Property, the greatest flowering of the people resulted. The “common law” predates parliament. America had the “Wild West” – which was not so wild, as it was based on Private Property. But the most important ingredient was Liberty.
The prescriptive lesson to learn from this is that civilization is not in such a sorry state that it needs Law from any group of “lawmakers,” however “legal” they might be: as in the case of a written constitution that is “by law established.” Law always goes back to the past, and the best lawyers are those who know about decisions taken in similar cases of the past. There is this no need for “new law.” There are only some legal “maxims” that should guide the practical application of the Law, such as the inviolability of Property, the legitimacy of original appropriation, or homesteading, the keeping of written promises and contracts, and restitution for damages, or torts. All crimes then are crimes against Individuals. There are no “crimes against The State.” If no one is hurt, there is no crime. It is these that Rothbard has elaborated upon in his Ethics of Liberty. These are based on the “laws of reality”: of the best way to organize the world outside, our Property.
Praxeology, in its present, highly developed form, is a very young science. This modern economics is not Law, and its methods are different from the historical method of Law. Rothbard himself has penned a history of economic thought before Adam Smith, and there is much to be gained from studying it, but we must concede that the academic rigour of the moderns is a very recent phenomenon. Indeed, Rothbard ends this first volume with a severe battering of Adam Smith, whom we all consider a man on the right side, but there were serious problems within the new discipline then, like their inability to solve the “value paradox,” or how gold is more valuable than iron, although iron is more “useful”; and their hilarious “labour theory of value” was an error that had grave practical consequences, in that it lay at the foundation of all Marxist errors.
Thus, there is something uniquely fresh about modern economics, something that makes it a young science eager to capture the attention of all truth-seekers, for it is a vital science. It deals with nothing less than survival itself. It is also, in a deep sense, a moral science. But that apart, the most unique aspect of this science, in its modern form, is that it traces everything back to logical categories present in each human mind. It is based on “laws of thought.” Its method lies in “looking out from within the consciousness.” Its teachings are the fruit of western civilization, of the intellectual culture of 19th-century Vienna, and its scientific rigour. If you are ignorant about the laws that govern interpersonal exchanges in markets, you are missing out on knowledge vital to your very survival.
And if there is a “higher purpose” that lies in the earthly struggles of the pioneers, including both Mises and Rothbard, then it is this: this science must be transmitted to each human mind. There are huge errors only because of bad theories. Socialism is one such theory. Democracy is another. Praxeology and Catallactics are also theory. But they are the only valid theories on the subject. They expose the huge errors in mainstream economics, from its mathematisation to its pretty diagrams, to its fictitious “macroeconomics” and its even sillier “microeconomics” which does not enter the micro-mind, the mind of the individual micro actor, because it is not based on “laws of thought.” Mainstream microeconomics is about the “rational utility maximiser.” It is a mathematical problem.
There is more to human logic than the ability to solve mathematical problems. Indeed, all the math you need to know to successfully engage in even the biggest catallactic ventures are the simple operations of arithmetic: ask Richard Branson or Donald Trump. Serious students of the subject need to ask themselves the question: Have I come here to learn Mathematics, or have I come here to learn Economics?
We trace modern economics back to the “marginal revolution” in 1871, and to three names: Carl Menger from Vienna, William Stanley Jevons from England, and Leon Walras from Lausanne. This settled the “value paradox”: value was seen to lie in the last unit of the good in question, the so-called “marginal” unit. It was the marginal unit of gold that was being exchanged for a marginal unit of iron, and it is these marginal valuations that were the source of their respective values.
But only the Viennese Carl Menger traced value back to the mind of the acting man. His method was “subjective.” And being subjective means “looking inside the mind” for laws of thought that guide all action.
Indeed, of the three, Menger is the man to watch. For he alone inaugurated a methodological individualism combined with subjectivism, and his second book in 1883 was entirely devoted to methodological issues. Mises and Hayek have both added to this foundation, and if there is anything to learn from their works, it is that mainstream economics is cock-and-bull. Menger thus founded a “school of thought” – the Austrian School.
According to the Austrians, the real question is not the “best laws”: the real question is how the order happens on its own, based on “laws of thought” we all follow. This is the new science Menger inaugurated, which Mises called “Praxeology”: the science of human action; praxis being the Latin for “action.” At its core is the Action Axiom: that man enters into acts of peaceful interpersonal exchange. This is a basic human phenomenon, a basic social fact. Indeed, the division of labour is not a “theory” – it is datum, a historical fact.
Thus, getting back to what I was driving at: the “axioms” that Rothbard’s Ethics of Liberty is based on, like property and homesteading, are about reality, while there is something very different about the axioms that Mises listed, which are present in the logic of every individual mind that engages in peaceful inter-personal exchange. It might be expedient to call the former "maxims."
[Which reminds me: Peace is also an important prescription of this science. Its basic lesson is that war destroys, while markets are all about production.]
This is how the two disciplines of Law and Economics interact. Both are vital subjects. But they are different subjects. The first is about laws of reality; the latter about laws of thought. In both we see spontaneous order. We do not see a “common will.”
It was not Rothbard but Bruno Leoni who captured the essence of the ideal legal process when he said that the common law mimics the market in that two people who share a dispute go to two private lawyers, both entrepreneurs, both of whom study the past, and who take the matter before an impartial judge. At the core lies the individual, interacting with another individual – exactly as in the market. Leoni made a powerful case against “inflated legislation.” He showed us how we can achieve a “natural order.”
Law is the old subject, millions study Law. It is modern economics that almost everybody is ignorant of. It requires books that convey its teachings in simple forms to the interested layman. I have recently taken on the task, which I hope to complete in a year or so. Wish me luck.
And Boom Shankar 2 U 2, on this glorious Sunday.
Friday, May 29, 2009
On Ethics, Reason And "Natural Order"
Travelling around the crowded bazaars and haats of India, it becomes obvious to the trained mind that there exists a “natural order,” that illiterate people are ethical, that they are all “rule-following animals.” The question then arises: Where did these ethics and rules come from?
When I was a student at the LSE, one of my professors, lecturing on the market-state debate, haughtily dismissed anarcho-capitalist thinking with these words:
“Even a village fair requires a policeman.”
Yet, this admonition rings hollow in India. Here, the policeman is invariably a predator. His role in the market is far removed from what my professor at the LSE thought it should be. And it is this fact that reinforces the fundamental truth that a natural order exists. If so, we must study how it comes about. We must study how this ethical behaviour emerged.
It is precisely when we ask ourselves this fundamental question that Friedrich von Hayek’s insight into the evolution of ethics becomes crucial to any understanding of this natural phenomenon. Hayek, as I have recently blogged, wrote that our ethics lie “between instinct and reason.” What this means is that we have overcome our instinct to plunder – but have not reasoned why. These ethics that we follow in markets have evolved. They have not been objectively designed by anyone. They have been passed down from generation to generation, and learnt by imitation. Let us try and understand the process.
We must begin with the fundamental axiom – that man “acts.” We study “human action” – and that is interpersonal exchange. We must theorise as to how human beings came to be possessed of ethics that make peaceful interpersonal exchange possible. At the core of our investigation sits the truth that the “end” we pursue through our actions is always the acquisition of “desired objects.” If we had been governed by our animal instincts, we would snatch and grab all that we desire. We would not exchange. Yet, the fact remains, visible to all who care to observe, that all our illiterates carry out exchanges in the market; they do not grab and run. It is because of their ethics that there is a “natural order.”
Praxeology teaches us that the human mind possesses a logical structure, that there are “laws of thought,” that we are powered by a “sense of gain.” This implies that human minds in ages past came to the realisation that there was more to gain in social co-operation under the division of labour than under either savage barbarism or isolated self-sufficiency. The newcomer to Rome thus followed the “rules of the game” and did in Rome what the Romans do – which is exchange. But no one reasoned more than that. The newcomer, finding life in Rome better than life in the jungle, settled down to it. His children followed his example. People did whatever they thought gave them a better life, whereby they gained.
The Action Axiom does not concern itself with legal niceties like self-ownership and original appropriation of the fruits of nature. Murray Rothbard’s Ethics of Liberty refers to self-ownership and original appropriation as axioms, but these are more in the nature of legal “maxims” than fundamental praxeological axioms.
All human action in markets is directed towards “ends.” The end in question is the acquisition of desired objects. It is in this pursuit that man discovered a novel “means” – giving up something in exchange for whatever was desired. In all these exchanges, both parties gained. The exchanges occur for this reason alone. And, being win-win games, people go on repeating such actions. But no one reasons why.
Hayek’s insight that we learn these ethics by imitation is also worth noting. A child, desirous of a chocolate, will see his father buy it for him. He will learn that if he wants chocolates, or anything else, this is the way in which he must proceed. Thus, it becomes crystal clear, the natural order around us persists not because of any “objective ethics” but rather through an ethical system that lies “between instinct and reason.” Civilisation is artificial. Civilisation is learnt behaviour. And this is how it arose. This is why it persists.
Nowhere else does this conclusion ring truer than in India. Here, police stations are all located in cities and towns, never in villages. The majority of the population lives in a “natural order,” far removed from the attention of the police. And, whenever a policeman is seen ambling around an urban market, all the rule-following animals there know that a barbarian is in their midst, someone who will snatch and grab whatever he wants.
This natural order is India’s strength. It shows that we are a highly civilised people. We are not a nation of barbarians. We are all rule-followers. We all operate “between instinct and reason.” We possess a deep-rooted “commercial culture.”
Thus, liberal democracy is not the “end of history.” There is something higher on the evolutionary scale than democracy.
And that is Natural Order.
When I was a student at the LSE, one of my professors, lecturing on the market-state debate, haughtily dismissed anarcho-capitalist thinking with these words:
“Even a village fair requires a policeman.”
Yet, this admonition rings hollow in India. Here, the policeman is invariably a predator. His role in the market is far removed from what my professor at the LSE thought it should be. And it is this fact that reinforces the fundamental truth that a natural order exists. If so, we must study how it comes about. We must study how this ethical behaviour emerged.
It is precisely when we ask ourselves this fundamental question that Friedrich von Hayek’s insight into the evolution of ethics becomes crucial to any understanding of this natural phenomenon. Hayek, as I have recently blogged, wrote that our ethics lie “between instinct and reason.” What this means is that we have overcome our instinct to plunder – but have not reasoned why. These ethics that we follow in markets have evolved. They have not been objectively designed by anyone. They have been passed down from generation to generation, and learnt by imitation. Let us try and understand the process.
We must begin with the fundamental axiom – that man “acts.” We study “human action” – and that is interpersonal exchange. We must theorise as to how human beings came to be possessed of ethics that make peaceful interpersonal exchange possible. At the core of our investigation sits the truth that the “end” we pursue through our actions is always the acquisition of “desired objects.” If we had been governed by our animal instincts, we would snatch and grab all that we desire. We would not exchange. Yet, the fact remains, visible to all who care to observe, that all our illiterates carry out exchanges in the market; they do not grab and run. It is because of their ethics that there is a “natural order.”
Praxeology teaches us that the human mind possesses a logical structure, that there are “laws of thought,” that we are powered by a “sense of gain.” This implies that human minds in ages past came to the realisation that there was more to gain in social co-operation under the division of labour than under either savage barbarism or isolated self-sufficiency. The newcomer to Rome thus followed the “rules of the game” and did in Rome what the Romans do – which is exchange. But no one reasoned more than that. The newcomer, finding life in Rome better than life in the jungle, settled down to it. His children followed his example. People did whatever they thought gave them a better life, whereby they gained.
The Action Axiom does not concern itself with legal niceties like self-ownership and original appropriation of the fruits of nature. Murray Rothbard’s Ethics of Liberty refers to self-ownership and original appropriation as axioms, but these are more in the nature of legal “maxims” than fundamental praxeological axioms.
All human action in markets is directed towards “ends.” The end in question is the acquisition of desired objects. It is in this pursuit that man discovered a novel “means” – giving up something in exchange for whatever was desired. In all these exchanges, both parties gained. The exchanges occur for this reason alone. And, being win-win games, people go on repeating such actions. But no one reasons why.
Hayek’s insight that we learn these ethics by imitation is also worth noting. A child, desirous of a chocolate, will see his father buy it for him. He will learn that if he wants chocolates, or anything else, this is the way in which he must proceed. Thus, it becomes crystal clear, the natural order around us persists not because of any “objective ethics” but rather through an ethical system that lies “between instinct and reason.” Civilisation is artificial. Civilisation is learnt behaviour. And this is how it arose. This is why it persists.
Nowhere else does this conclusion ring truer than in India. Here, police stations are all located in cities and towns, never in villages. The majority of the population lives in a “natural order,” far removed from the attention of the police. And, whenever a policeman is seen ambling around an urban market, all the rule-following animals there know that a barbarian is in their midst, someone who will snatch and grab whatever he wants.
This natural order is India’s strength. It shows that we are a highly civilised people. We are not a nation of barbarians. We are all rule-followers. We all operate “between instinct and reason.” We possess a deep-rooted “commercial culture.”
Thus, liberal democracy is not the “end of history.” There is something higher on the evolutionary scale than democracy.
And that is Natural Order.
Thursday, May 28, 2009
Comparative Advantage, Clearly Explained
I continue my series on social science in Mint with my latest column on comparative advantage, published today.
Comparative advantage teaches us that free trade and free markets will benefit poor people and poor nations.
Yet, this important principle is little understood today, almost 200 years after David Ricardo first formulated it. In the column, I give the example of a student of economics who called upon me to ask whether comparative advantage still applied to the modern world. Her professors had told her it didn't.
At that time, the girl already had a BA in Economics from Bombay University, and was pursuing a master's degree in the same subject from Delhi's Jawaharlal Nehru University. There is a slight error in the column, which refers to the student as male. The story is otherwise factual - and horrifying. The error is due to last minute re-writing that the editors wanted. Haste caused the error. Sorry, Rathi.
The fault, of course, lies with Ricardo himself, and the weird way in which he presented his argument. The same argument has been parroted by economics teachers ever since. This is why no one really understands the principle involved, and its application to everyday life.
Indeed, I was prompted to write this piece explaining Ricardian comparative advantage after reading Tim Harford's bestseller, The Undercover Economist. Harford is also a Bastiat prize-winner, but his exposition of the Ricardian principle leaves much to be desired. Hence this piece.
The crux of the argument is the powerful case made for free trade, free immigration and free markets.
As far as understanding Society is concerned, comparative advantage is presented as the Law of Human Association - the first law of Sociology.
In case you have not read the earlier articles on social science, I list them below:
First, the differences between science and social science, here.
Second, the defence of Individualism, without which Society cannot be comprehended, here.
Third, on spontaneous order in Society, and how this enables money to emerge on its own, through the actions of trading individuals, here.
And fourth, on comparative advantage, here.
I will be continuing on this theme in future columns, explaining how Society actually functions, as understood by the "exact" laws of praxeology.
Stay tuned.
And keep on pushing the tempo!
Comparative advantage teaches us that free trade and free markets will benefit poor people and poor nations.
Yet, this important principle is little understood today, almost 200 years after David Ricardo first formulated it. In the column, I give the example of a student of economics who called upon me to ask whether comparative advantage still applied to the modern world. Her professors had told her it didn't.
At that time, the girl already had a BA in Economics from Bombay University, and was pursuing a master's degree in the same subject from Delhi's Jawaharlal Nehru University. There is a slight error in the column, which refers to the student as male. The story is otherwise factual - and horrifying. The error is due to last minute re-writing that the editors wanted. Haste caused the error. Sorry, Rathi.
The fault, of course, lies with Ricardo himself, and the weird way in which he presented his argument. The same argument has been parroted by economics teachers ever since. This is why no one really understands the principle involved, and its application to everyday life.
Indeed, I was prompted to write this piece explaining Ricardian comparative advantage after reading Tim Harford's bestseller, The Undercover Economist. Harford is also a Bastiat prize-winner, but his exposition of the Ricardian principle leaves much to be desired. Hence this piece.
The crux of the argument is the powerful case made for free trade, free immigration and free markets.
As far as understanding Society is concerned, comparative advantage is presented as the Law of Human Association - the first law of Sociology.
In case you have not read the earlier articles on social science, I list them below:
First, the differences between science and social science, here.
Second, the defence of Individualism, without which Society cannot be comprehended, here.
Third, on spontaneous order in Society, and how this enables money to emerge on its own, through the actions of trading individuals, here.
And fourth, on comparative advantage, here.
I will be continuing on this theme in future columns, explaining how Society actually functions, as understood by the "exact" laws of praxeology.
Stay tuned.
And keep on pushing the tempo!
Wednesday, May 27, 2009
On Reason... And "Planning"
Yesterday, I commented on the fact that we have 548 MPs but no mayors.
Today, we can add to that and say we have 79 ministers in New Delhi – but no mayors.
In other words, we have a totally centralised State.
We have no “government.”
Now, this centralised State is based on the idea that knowledge itself can be centralised – what they call “rational socialism.” This is the leitmotif of central economic planning, which Chacha Manmohan and his deputy Montek champion.
But what is “reason”? And, more importantly, what are the limits to human reason? Can human reason be used to “plan” an economy? Aristotle the Geek has a post today on reason, quoting Mises. Geek says that both Adam Smith and Friedrich Hayek “placed less emphasis on human rationality.” This confusion over reason and rationality requires thorough clarification. Let us begin with Adam Smith.
In the Wealth of Nations, Book I, Chapter 2, titled “Of the Principle which gives Occasion to the Division of Labour,” Adam Smith begins by saying:
(Read the entire chapter here.)
What Adam Smith means is that the exchange economy has evolved slowly. It was never “planned.” No great thinker thought it up. Like Topsy in Uncle Tom’s Cabin, it “just growed.”
Hayek went one step further. The first chapter of his Fatal Conceit: The Errors of Socialism is titled “Between instinct and reason.” I cannot find a pdf of this excellent book online, but as this review says:
Having understood Adam Smith and Hayek’s views on the instrumentality of reason, let us now turn to Mises. As quoted by the Geek, from Human Action, Mises says:
However, this quote does not really sow the seeds of confusion. The laws of praxeology that Mises discovered, which are laws of thought, are based entirely on the “logical structure of the human mind.” All human action is based on forethought, which uses the categories of thinking already embedded in the mind. But this mind is only capable of directing its owner towards the attainment of his own ends. This mind is incapable of thinking of an entire economic system covering all. In other words, there is no discrepancy between the views of Smith, Mises and Hayek.
Look at it this way: The logical structure of the human mind, which is reason, powers a “sense of gain.” We therefore know what makes us better off and what doesn’t – in the immediate context of our impending action. We "calculate" profit and loss, capital and income, cost and yield. However, this reason has huge limitations. Hayek’s main message is this: The market economy based on the division of labour was not created by reason, and therefore cannot be substituted for by reason. This is the “fatal conceit of reason” that socialist central planners suffer from.
Thus, Chacha, Montek and their gang of 79 ministers in New Delhi do not possess the mental capabilities required to plan an economy. Their reason cannot be used to replace what was not created by reason.
As Mises says, “The division of labour is a fundamental social phenomenon.” This fundamental social phenomenon has come about because each of us sees ourselves benefiting from social co-operation as against isolated lives engaged in mere subsistence. But this has evolved only gradually, and, what is more important, it has been severely stunted in countries like India, whose “great leaders” – from Gandhi and Nehru down to Chacha Manmohan – did not comprehend the market order correctly.
This itself is evidence that the exchange economy lies “between instinct and reason.”
Its corollary is that socialist central planners possess feeble minds.
Today, we can add to that and say we have 79 ministers in New Delhi – but no mayors.
In other words, we have a totally centralised State.
We have no “government.”
Now, this centralised State is based on the idea that knowledge itself can be centralised – what they call “rational socialism.” This is the leitmotif of central economic planning, which Chacha Manmohan and his deputy Montek champion.
But what is “reason”? And, more importantly, what are the limits to human reason? Can human reason be used to “plan” an economy? Aristotle the Geek has a post today on reason, quoting Mises. Geek says that both Adam Smith and Friedrich Hayek “placed less emphasis on human rationality.” This confusion over reason and rationality requires thorough clarification. Let us begin with Adam Smith.
In the Wealth of Nations, Book I, Chapter 2, titled “Of the Principle which gives Occasion to the Division of Labour,” Adam Smith begins by saying:
This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual, consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another.
(Read the entire chapter here.)
What Adam Smith means is that the exchange economy has evolved slowly. It was never “planned.” No great thinker thought it up. Like Topsy in Uncle Tom’s Cabin, it “just growed.”
Hayek went one step further. The first chapter of his Fatal Conceit: The Errors of Socialism is titled “Between instinct and reason.” I cannot find a pdf of this excellent book online, but as this review says:
Hayek approaches ethics from an entirely different angle from most philosophers. While philosophical ethics usually entail rationalistic system-building from certain assumptions about human nature or from bits of empirical data, Hayek’s ethics are non-rationalistic and based upon the historical process. Hayek rejects the explicit, rationalistic construction of most ethical systems because such constructions rest upon the “fatal conceit” of human reason. Reason, Hayek argues, is incapable of commanding the information necessary to design an ethical system.
Hayek believes that ethics lie somewhere between instinct and reason. Ethics—like language, the marketplace, and the common law—are a spontaneous order that, in the words of Adam Ferguson, is the product of “human action, but not human design.”
Our ethical system was not designed by anyone; it is traditional, handed down from generation to generation, and learned by imitation. Its progress and development were achieved by a process of social evolution: those cultures which adopted “good” ethical systems survived and flourished, while those with “bad” ones either floundered or adopted more successful ethical systems. This subtle process of trial-and-error has produced Western ethics, a highly successful system.
Having understood Adam Smith and Hayek’s views on the instrumentality of reason, let us now turn to Mises. As quoted by the Geek, from Human Action, Mises says:
Human action is necessarily always rational. The term “rational action” is therefore pleonastic and must be rejected as such. When applied to the ultimate ends of action, the terms rational and irrational are inappropriate and meaningless. The ultimate end of action is always the satisfaction of some desires of the acting man.
However, this quote does not really sow the seeds of confusion. The laws of praxeology that Mises discovered, which are laws of thought, are based entirely on the “logical structure of the human mind.” All human action is based on forethought, which uses the categories of thinking already embedded in the mind. But this mind is only capable of directing its owner towards the attainment of his own ends. This mind is incapable of thinking of an entire economic system covering all. In other words, there is no discrepancy between the views of Smith, Mises and Hayek.
Look at it this way: The logical structure of the human mind, which is reason, powers a “sense of gain.” We therefore know what makes us better off and what doesn’t – in the immediate context of our impending action. We "calculate" profit and loss, capital and income, cost and yield. However, this reason has huge limitations. Hayek’s main message is this: The market economy based on the division of labour was not created by reason, and therefore cannot be substituted for by reason. This is the “fatal conceit of reason” that socialist central planners suffer from.
Thus, Chacha, Montek and their gang of 79 ministers in New Delhi do not possess the mental capabilities required to plan an economy. Their reason cannot be used to replace what was not created by reason.
As Mises says, “The division of labour is a fundamental social phenomenon.” This fundamental social phenomenon has come about because each of us sees ourselves benefiting from social co-operation as against isolated lives engaged in mere subsistence. But this has evolved only gradually, and, what is more important, it has been severely stunted in countries like India, whose “great leaders” – from Gandhi and Nehru down to Chacha Manmohan – did not comprehend the market order correctly.
This itself is evidence that the exchange economy lies “between instinct and reason.”
Its corollary is that socialist central planners possess feeble minds.
Tuesday, May 26, 2009
548 MPs, But No Mayors
This might sound like obvious questions, but:
Why do we elect an MP?
What is an MP supposed to do in New Delhi in the interests of his constituency?
Can the MP build local roads and provide local water supply? Is that his role in the democratic polity?
Or should there be local bodies responsible for such things?
I ask these questions in the context of an interview published in the ToI today, of a Bengali activist-musician who has just been elected to parliament from Jadavpur, a suburb of Calcutta. He says this is the constituency of Buddhudev Bhattacharya himself. And then he delivers a shocker:
Frankly speaking, this is sheer nonsense. How can an MP provide roads and water? All he has is a seat in the Lok Sabha, from where he can ask questions, and from which he can participate in parliamentary debates and vote in them – according to the directions of his “party whip.” There is no way by which an MP can provide local roads and water supply.
These are under the jurisdiction of institutions of urban local self-government. A Mayor can provide urban roads and water supply; an MP cannot. But in India, mayors do not exist. There are a few, but they are purely ceremonial. The vital role of mayors in liberal democracy has never informed the socialists of New Delhi, obsessed with their centralised The State.
All over the world, even in China, mayors run cities and towns. In India, all talk of “local self-government” revolves around the bogus notion of panchayati raj, or village republicanism. It is this village vision that has destroyed the very idea of urban self-government.
Thus, we are forced to conclude that our socialist democratic The State is designed to fail. It is a totally centralized structure, meant for central economic planning. It is not designed for a free democratic society, where democracy diffuses power rather than concentrating it.
For such a huge country, central government can accomplish very little. Local governments (who possess local knowledge) must be given adequate powers and resources to manage local affairs, especially roads. We will never have urban roads if we all have to depend on the 548 MPs of the Lok Sabha to provide them.
This calls for a government designed on the Principle of Subsidiarity. I have blogged on this principle many times before. This is the governing principle of the EU, whereby the might of Brussels is matched by the independence of all the cities and towns.
Thus, as I stood outside the grand old mayoral building in downtown Frankfurt-am-Main, I was struck by the fact that the building had three flags flying on top. First was the flag of the EU, second was the flag of Germany, and third was the Flag of the City of Frankfurt-am-Main.
Subsidiarity implies that each city flies its own flag and manages its own affairs with its own resources. It does not depend on higher levels of government. It is this principle that we need in India today. Centralized socialism is a disaster.
Why do we elect an MP?
What is an MP supposed to do in New Delhi in the interests of his constituency?
Can the MP build local roads and provide local water supply? Is that his role in the democratic polity?
Or should there be local bodies responsible for such things?
I ask these questions in the context of an interview published in the ToI today, of a Bengali activist-musician who has just been elected to parliament from Jadavpur, a suburb of Calcutta. He says this is the constituency of Buddhudev Bhattacharya himself. And then he delivers a shocker:
Question: As an MP, what is your top priority?
Answer: No development ever took place in my constituency in the last 32 years. There's no water, no roads. Eighty out of 100 patients die on the way to the hospital. Providing water and roads are my priority.
Frankly speaking, this is sheer nonsense. How can an MP provide roads and water? All he has is a seat in the Lok Sabha, from where he can ask questions, and from which he can participate in parliamentary debates and vote in them – according to the directions of his “party whip.” There is no way by which an MP can provide local roads and water supply.
These are under the jurisdiction of institutions of urban local self-government. A Mayor can provide urban roads and water supply; an MP cannot. But in India, mayors do not exist. There are a few, but they are purely ceremonial. The vital role of mayors in liberal democracy has never informed the socialists of New Delhi, obsessed with their centralised The State.
All over the world, even in China, mayors run cities and towns. In India, all talk of “local self-government” revolves around the bogus notion of panchayati raj, or village republicanism. It is this village vision that has destroyed the very idea of urban self-government.
Thus, we are forced to conclude that our socialist democratic The State is designed to fail. It is a totally centralized structure, meant for central economic planning. It is not designed for a free democratic society, where democracy diffuses power rather than concentrating it.
For such a huge country, central government can accomplish very little. Local governments (who possess local knowledge) must be given adequate powers and resources to manage local affairs, especially roads. We will never have urban roads if we all have to depend on the 548 MPs of the Lok Sabha to provide them.
This calls for a government designed on the Principle of Subsidiarity. I have blogged on this principle many times before. This is the governing principle of the EU, whereby the might of Brussels is matched by the independence of all the cities and towns.
Thus, as I stood outside the grand old mayoral building in downtown Frankfurt-am-Main, I was struck by the fact that the building had three flags flying on top. First was the flag of the EU, second was the flag of Germany, and third was the Flag of the City of Frankfurt-am-Main.
Subsidiarity implies that each city flies its own flag and manages its own affairs with its own resources. It does not depend on higher levels of government. It is this principle that we need in India today. Centralized socialism is a disaster.
Monday, May 25, 2009
On Nazis... And Columnists
“Taking on the education Nazis” – the title of this column in today’s Mint was striking. The author says:
Yes, these Nazi’s must go. I second the motion.
But there was another column in Mint, whose title struck a negative note: “Op-eds don’t bring change.” The author advises us columnists to advise the government in a secret, shadowy manner. He says:
I would never do such a thing. The biggest weapon of the columnist is his openness to the public. There is nothing secretive or shadowy about his “politics” – unlike the politicians, bureaucrats and other back-room boys of policy-making. His is “politics as the public actions of free people.” Such people are exactly what the back-room types fear and dread.
This columnist is also not very comfortable with the State-Market dichotomy. He says:
Actually, The Market is “people.”
And The State are hominids who pretend to be people: Nazis.
It’s a Predatory State, buster.
Get that straight – and the rest, as they say, will follow.
The government must remove the qualitative, procedural and quantitative barriers to capacity expansion by abolishing the All India Council for Technical Education (AICTE), allowing for-profit schools, removing the 25% private school reservation in the Right to Education Bill, including school policy in urban planning and forming an outcome-focused regulatory body.
Yes, these Nazi’s must go. I second the motion.
But there was another column in Mint, whose title struck a negative note: “Op-eds don’t bring change.” The author advises us columnists to advise the government in a secret, shadowy manner. He says:
“… credit for success should be dedicated entirely to the political or bureaucratic masters. Intellectuals should be prepared to work behind the scenes with politicians or bureaucrats, rather than get in the front.”
I would never do such a thing. The biggest weapon of the columnist is his openness to the public. There is nothing secretive or shadowy about his “politics” – unlike the politicians, bureaucrats and other back-room boys of policy-making. His is “politics as the public actions of free people.” Such people are exactly what the back-room types fear and dread.
This columnist is also not very comfortable with the State-Market dichotomy. He says:
“…reforms couched in terms of State versus Market are doomed to fail, especially in these times. Reforms have to be framed in terms of State versus people…”
Actually, The Market is “people.”
And The State are hominids who pretend to be people: Nazis.
It’s a Predatory State, buster.
Get that straight – and the rest, as they say, will follow.
Sunday, May 24, 2009
On Border Guards... And Narco-Tourism
A report in Mint on the “ordeal” of train travel between Calcutta and Dhaka, because of customs and immigration baboos, brought to mind memories of the night train Andy and I took to go to Amsterdam from Frankfurt.
Yes, Amsterdam – where the Ganja Flag flies High!
Where there is a hash café called Goa!
When the train stopped at the Dutch border, no one came to check our passports or our luggage. We were both carrying private stocks of hash, unconcealed, which we were smoking in the train, and we joked later that the Dutch cannot believe that anyone would smuggle hash into Holland.
There followed two days and one great night in the Ganja Capital of the World. More on that another time.
We took the train back to Frankfurt. This time again, neither Dutch police, nor customs, nor immigration boarded the train to check anything. The train passed on to the German side.
And sure enough, the Germans had dozens of uniformed baboos to check anything and everything. We put the skunk in an empty packet of cigarettes, which we crushed and placed in the bin. The German jokers didn’t find it. After they left, we lit up. Nirvana.
The question: Who are the smarter government? The Germans or the Dutch?
Obviously the Dutch. They spend less tax money, and the people are also happier and freer.
There is a lesson for all of us here in India.
The news is that the Border Security Force is raising another 30 battalions, and buying some helicopters too. The total strength of the force now stands at 1,90,000 men. The taxpayer is paying. For what?
Yes, Amsterdam – where the Ganja Flag flies High!
Where there is a hash café called Goa!
When the train stopped at the Dutch border, no one came to check our passports or our luggage. We were both carrying private stocks of hash, unconcealed, which we were smoking in the train, and we joked later that the Dutch cannot believe that anyone would smuggle hash into Holland.
There followed two days and one great night in the Ganja Capital of the World. More on that another time.
We took the train back to Frankfurt. This time again, neither Dutch police, nor customs, nor immigration boarded the train to check anything. The train passed on to the German side.
And sure enough, the Germans had dozens of uniformed baboos to check anything and everything. We put the skunk in an empty packet of cigarettes, which we crushed and placed in the bin. The German jokers didn’t find it. After they left, we lit up. Nirvana.
The question: Who are the smarter government? The Germans or the Dutch?
Obviously the Dutch. They spend less tax money, and the people are also happier and freer.
There is a lesson for all of us here in India.
The news is that the Border Security Force is raising another 30 battalions, and buying some helicopters too. The total strength of the force now stands at 1,90,000 men. The taxpayer is paying. For what?
“All that you protect,
All that you defend,
Is just a borderline,
Another borderline.”
Saturday, May 23, 2009
On Chacha-Bhateeja... And Civilization
The ToI has a piece titled “Inside the mind of Rahul Gandhi”, where it is said that “Rahul has an innate belief in the strength of rural India.”
He tours the villages.
There are lots of “votes” in rural India too.
But I believe in an urban India, and see the strengths of our urban people, who are the real “leaders” of our civilization. They are not made of the same stuff as the peasant.
India’s real challenge lies in making all the cities and towns functional and livable. This is a practical problem of the government. Touring the open fields of rural India will not solve this practical problem.
India also needs a “vision” of the future, a vision in the same sense that the Nehru-Gandhi ideology has a “vision” of self-sufficient village republics, a socialistic pattern of social equality, The State at the commanding heights of the economy, etc.
Bhateeja Rahul seems to be stuck in this rural vision.
How about 500 Hong Kongs – free-trading and self-governing CITIES?
How about thousands and thousands of satellite towns?
I hope you get my drift.
So much for the Bhateeja. Let us return to The Chacha, and the idea we were discussing yesterday – that growth is not a State Subject.
Growth (and decay) are natural phenomena. We see “economic growth” all around us: people are investing in improving their dwellings, small businesses are slowly expanding, bank balances are slowly rising, and so on.
My favourite story is of the peanut vendor who pushed a cart in a Delhi market in the 70s and is now the owner of a small namkeen shop in the same market.
This is economic growth. It happens because of production, saving and investment, because of private prudence.
It therefore follows that the best policy is to leave the management of all economic resources to prudent private management, under the laws of private property. This is Capitalism. The very opposite of Socialism.
Now, Chacha’s idea of “economic growth” goes something like this: he will tax the productive people, thereby reducing their investible capital, and spend it on the consumption needs of the poor – rice at 2 rupees a kilo and NREGA, etc. At the core of Chacha’s ideology lies the Principle of Capital Consumption. Chacha is in serious error. Economic growth can never result from these methods. On the contrary, capital consumption is the pathway to “de-civilization.” After all, the march of civilization has resulted in our ability to “make provision” for longer and longer periods – we even make provision for our grandchildren. Capital consumption is the very opposite. This is the path the USA is on. Ludwig von Mises warned about the effects of “de-civilization.” Hans-Hermann Hoppe still writes about it.
Yet, civilization is cities, not villages.
Both Chacha and Bhateeja are in serious error.
And what is “civilization”?
I just read Plato’s Symposium, about a drinking party in ancient Athens that was attended by Socrates, who is described as a “truth-loving eccentric.” It is the story of a great party, of heavy drinking, and superb conversation. This is civilization. It’s a Great Party. It has nothing to do with the life of peasants.
Cheers!
He tours the villages.
There are lots of “votes” in rural India too.
But I believe in an urban India, and see the strengths of our urban people, who are the real “leaders” of our civilization. They are not made of the same stuff as the peasant.
India’s real challenge lies in making all the cities and towns functional and livable. This is a practical problem of the government. Touring the open fields of rural India will not solve this practical problem.
India also needs a “vision” of the future, a vision in the same sense that the Nehru-Gandhi ideology has a “vision” of self-sufficient village republics, a socialistic pattern of social equality, The State at the commanding heights of the economy, etc.
Bhateeja Rahul seems to be stuck in this rural vision.
How about 500 Hong Kongs – free-trading and self-governing CITIES?
How about thousands and thousands of satellite towns?
I hope you get my drift.
So much for the Bhateeja. Let us return to The Chacha, and the idea we were discussing yesterday – that growth is not a State Subject.
Growth (and decay) are natural phenomena. We see “economic growth” all around us: people are investing in improving their dwellings, small businesses are slowly expanding, bank balances are slowly rising, and so on.
My favourite story is of the peanut vendor who pushed a cart in a Delhi market in the 70s and is now the owner of a small namkeen shop in the same market.
This is economic growth. It happens because of production, saving and investment, because of private prudence.
It therefore follows that the best policy is to leave the management of all economic resources to prudent private management, under the laws of private property. This is Capitalism. The very opposite of Socialism.
Now, Chacha’s idea of “economic growth” goes something like this: he will tax the productive people, thereby reducing their investible capital, and spend it on the consumption needs of the poor – rice at 2 rupees a kilo and NREGA, etc. At the core of Chacha’s ideology lies the Principle of Capital Consumption. Chacha is in serious error. Economic growth can never result from these methods. On the contrary, capital consumption is the pathway to “de-civilization.” After all, the march of civilization has resulted in our ability to “make provision” for longer and longer periods – we even make provision for our grandchildren. Capital consumption is the very opposite. This is the path the USA is on. Ludwig von Mises warned about the effects of “de-civilization.” Hans-Hermann Hoppe still writes about it.
Yet, civilization is cities, not villages.
Both Chacha and Bhateeja are in serious error.
And what is “civilization”?
I just read Plato’s Symposium, about a drinking party in ancient Athens that was attended by Socrates, who is described as a “truth-loving eccentric.” It is the story of a great party, of heavy drinking, and superb conversation. This is civilization. It’s a Great Party. It has nothing to do with the life of peasants.
Cheers!
Friday, May 22, 2009
On Chacha's Grand Delusion
A news report today says that Chacha Manmohan S Gandhi believes that his “first task is to restore growth.” He adds that “we have to protect our growth.”
This makes it seem that there is some magic wand at the PM’s command by which economic growth can be “restored” and “protected.” This is a delusion. Chacha is deluding himself. And he is also deluding the nation.
In reality, the only way by which economic growth can transpire is if The State gets out of the way of enterprise.
Rukawatein Hatao, Gareebi Apnay Aap Hutt Jayegi.
Remove all the obstacles; poverty will vanish on its own.
These are the obstacles of the customs, excise, police etc. These departments of the government are like thorns planted on the path of every entrepreneur. It is these thorns that have to be removed. Pronto. There is nothing else that the PM needs to do to restore and protect economic growth.
Examine the scenario:
If customs barriers are removed, foreign trade would be free, there would be increased commerce, and growth would rise.
If excise and police barriers were removed, restaurants, bars and the nightlife industry would boom. There would be casinos. I would open a hash café.
Similarly, if the government’s barrier to FDI in the retail industry was removed, capital would flow in, supermarkets would erupt, adding to real estate and construction activity.
In other words, economic growth can only occur if the economy is free.
Chacha has a different ideology. According to him, economic growth is a State Subject.
Yet, 100 ministers in New Delhi, supported by planners and assorted baboos, cannot do anything more than spend tax revenues. All this is money other people have earned – the hard way. It is these other people who have to be freed, so that they can continue to generate growth.
Liberty Under Law – that is what we need.
Free trade, free markets, economic freedom – these alone can make the nation grow.
The State is just a massive hindrance. It is also a destroyer of wealth, an agent of “capital consumption.”
Economic growth depends on markets and entrepreneurs. Chacha is batting for the wrong side.
This makes it seem that there is some magic wand at the PM’s command by which economic growth can be “restored” and “protected.” This is a delusion. Chacha is deluding himself. And he is also deluding the nation.
In reality, the only way by which economic growth can transpire is if The State gets out of the way of enterprise.
Rukawatein Hatao, Gareebi Apnay Aap Hutt Jayegi.
Remove all the obstacles; poverty will vanish on its own.
These are the obstacles of the customs, excise, police etc. These departments of the government are like thorns planted on the path of every entrepreneur. It is these thorns that have to be removed. Pronto. There is nothing else that the PM needs to do to restore and protect economic growth.
Examine the scenario:
If customs barriers are removed, foreign trade would be free, there would be increased commerce, and growth would rise.
If excise and police barriers were removed, restaurants, bars and the nightlife industry would boom. There would be casinos. I would open a hash café.
Similarly, if the government’s barrier to FDI in the retail industry was removed, capital would flow in, supermarkets would erupt, adding to real estate and construction activity.
In other words, economic growth can only occur if the economy is free.
Chacha has a different ideology. According to him, economic growth is a State Subject.
Yet, 100 ministers in New Delhi, supported by planners and assorted baboos, cannot do anything more than spend tax revenues. All this is money other people have earned – the hard way. It is these other people who have to be freed, so that they can continue to generate growth.
Liberty Under Law – that is what we need.
Free trade, free markets, economic freedom – these alone can make the nation grow.
The State is just a massive hindrance. It is also a destroyer of wealth, an agent of “capital consumption.”
Economic growth depends on markets and entrepreneurs. Chacha is batting for the wrong side.
Thursday, May 21, 2009
On Working In Vain
We often engage in what Ludwig von Mises called “introversive labour” – instances when work, which should be a “disutility,” gives us pleasure on its own. Like watering the garden every day.
However, there are many people for whom all work is “introversive.” The best example is Ludwig von Mises himself, who only worked for the total mastery of his sphere of knowledge, without any worldly concerns. He told his wife, “I will write a lot about money, but never earn much of it myself.”
But there are many other examples of such “work” – like the guy who pursues a 10 dan black belt in karate, or the mountain climber.
However, for the majority, work is “extroversive labour,” performed to enable exchanges in the market. We work to obtain the means to buy things, to consume. There is a vital catallactic element to all this work.
Thus, it makes no sense to live in a country whose foreign trade policy is dictated by Kamal Nutt and his political masters. For those who live in such a country, unable to freely trade with foreigners, all work is introversive. They are forced to work for the sake of the work itself. Their ability to freely exchange the proceeds of that work is blocked by high tariff walls, enforced with the guns of the customs department.
Indeed, looking back at the 60s, 70s and 80s, all work in India was introversive – by government fiat.
Even the trade union elite waited 10 years to get a Bajaj scooter. The shop shelves were bare. There were “smuggler’s markets” in all the port cities. Smart people migrated to the greener pastures of the capitalist West only in order to enjoy consumption of the very same “consumer goods” we are still being denied. And boy, did people “work.” They still do.
And socialists are supposed to “represent workers”!
See the harm bad philosophies can do.
Essential reading: Ludwig von Mises’ Human Action, Chapter 21, “Work and Wages.” Free pdf download here.
Carefully study the whole book if you can, especially if you are a student or teacher of Economics. The book ends with these words:
However, there are many people for whom all work is “introversive.” The best example is Ludwig von Mises himself, who only worked for the total mastery of his sphere of knowledge, without any worldly concerns. He told his wife, “I will write a lot about money, but never earn much of it myself.”
But there are many other examples of such “work” – like the guy who pursues a 10 dan black belt in karate, or the mountain climber.
However, for the majority, work is “extroversive labour,” performed to enable exchanges in the market. We work to obtain the means to buy things, to consume. There is a vital catallactic element to all this work.
Thus, it makes no sense to live in a country whose foreign trade policy is dictated by Kamal Nutt and his political masters. For those who live in such a country, unable to freely trade with foreigners, all work is introversive. They are forced to work for the sake of the work itself. Their ability to freely exchange the proceeds of that work is blocked by high tariff walls, enforced with the guns of the customs department.
Indeed, looking back at the 60s, 70s and 80s, all work in India was introversive – by government fiat.
Even the trade union elite waited 10 years to get a Bajaj scooter. The shop shelves were bare. There were “smuggler’s markets” in all the port cities. Smart people migrated to the greener pastures of the capitalist West only in order to enjoy consumption of the very same “consumer goods” we are still being denied. And boy, did people “work.” They still do.
And socialists are supposed to “represent workers”!
See the harm bad philosophies can do.
Essential reading: Ludwig von Mises’ Human Action, Chapter 21, “Work and Wages.” Free pdf download here.
Carefully study the whole book if you can, especially if you are a student or teacher of Economics. The book ends with these words:
The body of economic knowledge is an essential element in the structure of human civilization; it is the foundation upon which modern industrialism and all the moral, intellectual, technological, and therapeutical achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race.
Wednesday, May 20, 2009
Against Statolatry
Perhaps the greatest peculiarity of our age is that The State is viewed as a fount of economic benefits. Whether it be the “dole” in the West or the NREGA here at home, the overall perception remains that The State must direct economic benefits to targeted groups.
Things have never been so in the past. Throughout history, The State has been a “cost” on the citizenry, never a “benefit.” The cost was the Tax. If the citizen wanted benefits, the only recourse was to The Market.
Yet, it was under these conditions, when The State was a cost and not a benefit, that the West achieved that great economic transformation by which the standard of living of its labouring masses rose to astonishing heights. The reasons behind this spectacular achievement are not hard to find: people saved and invested, the amount of capital per capita grew by leaps and bounds, output per unit of input grew, labour productivity and wages rose, and increasing quantities of goods were produced for the consumption of the very same labouring masses. Workers gained as consumers.
This progress would have continued indefinitely and spread to other parts of the world had it not been for two evil ideologies.
The first was Socialism, which completely overlooked the interests of workers as consumers. The socialists advocated the taking over of factories by workers. Whereas capitalists were serving consumers, socialism served producers, ignoring their interests as consumers. The sovereignty of the consumer was sacrificed at the altar of the producer. Trade unionism followed. Workers coerced higher wages for themselves. Labour governments raised taxes on capitalists. Saving and investment fell. Capital accumulation plummeted.
The second evil ideology that then took over was Keynesianism. This destroyed the soundness of money. The State was transformed into an institution that could create money and credit out of nothing. So The State was no longer limited in its spending by tax collections. The State became a limitless deficit spender. Millions found themselves receiving generous doles from The State. No costs; only benefits.
Yet, as Hayek wrote, the Keynesians were holding a “tiger by the tail.” Their only lasting legacy is inflation, a hidden tax, a hidden cost. Thus, there were no “real benefits” from loose government spending. What was really happening was capital consumption. Capital invested per capita was going down. Workers were losing. There was “de-civilization.”
The lesson: there are no short-cuts to prosperity. People must save and invest, entrepreneurs must serve consumers, and workers must work. The State must be cut down drastically: its only role must be that of acting against enemies of the market order. Money must be sound – and supplied by The Market.
If things continue the way they are, de-civilization will surely result. When the Roman Empire collapsed it took the West over 1000 years to recover. The cause of this collapse was currency debasement and consequent price controls which destroyed the incentive to produce for exchange. Economic autarky resulted. This is the exact future that lies ahead of the modern world if Socialism and Keynesianism continue.
Behind both is the idea that The State is God, an ideology of “statolatry.” The State can do anything. The State can look after everyone.
This was never the classical liberal view. Their idea of The State was as an ancillary to The Market. To this idea we must return.
Things have never been so in the past. Throughout history, The State has been a “cost” on the citizenry, never a “benefit.” The cost was the Tax. If the citizen wanted benefits, the only recourse was to The Market.
Yet, it was under these conditions, when The State was a cost and not a benefit, that the West achieved that great economic transformation by which the standard of living of its labouring masses rose to astonishing heights. The reasons behind this spectacular achievement are not hard to find: people saved and invested, the amount of capital per capita grew by leaps and bounds, output per unit of input grew, labour productivity and wages rose, and increasing quantities of goods were produced for the consumption of the very same labouring masses. Workers gained as consumers.
This progress would have continued indefinitely and spread to other parts of the world had it not been for two evil ideologies.
The first was Socialism, which completely overlooked the interests of workers as consumers. The socialists advocated the taking over of factories by workers. Whereas capitalists were serving consumers, socialism served producers, ignoring their interests as consumers. The sovereignty of the consumer was sacrificed at the altar of the producer. Trade unionism followed. Workers coerced higher wages for themselves. Labour governments raised taxes on capitalists. Saving and investment fell. Capital accumulation plummeted.
The second evil ideology that then took over was Keynesianism. This destroyed the soundness of money. The State was transformed into an institution that could create money and credit out of nothing. So The State was no longer limited in its spending by tax collections. The State became a limitless deficit spender. Millions found themselves receiving generous doles from The State. No costs; only benefits.
Yet, as Hayek wrote, the Keynesians were holding a “tiger by the tail.” Their only lasting legacy is inflation, a hidden tax, a hidden cost. Thus, there were no “real benefits” from loose government spending. What was really happening was capital consumption. Capital invested per capita was going down. Workers were losing. There was “de-civilization.”
The lesson: there are no short-cuts to prosperity. People must save and invest, entrepreneurs must serve consumers, and workers must work. The State must be cut down drastically: its only role must be that of acting against enemies of the market order. Money must be sound – and supplied by The Market.
If things continue the way they are, de-civilization will surely result. When the Roman Empire collapsed it took the West over 1000 years to recover. The cause of this collapse was currency debasement and consequent price controls which destroyed the incentive to produce for exchange. Economic autarky resulted. This is the exact future that lies ahead of the modern world if Socialism and Keynesianism continue.
Behind both is the idea that The State is God, an ideology of “statolatry.” The State can do anything. The State can look after everyone.
This was never the classical liberal view. Their idea of The State was as an ancillary to The Market. To this idea we must return.
Tuesday, May 19, 2009
What Is "Inclusive Growth"?
The buzzword today is “inclusive growth.”
Chacha Manmohan S Gandhi has said: “The election verdict is a verdict for inclusive growth. It is a verdict for equitable development.”
Bollocks!
No one voted for inclusive growth. They voted for secularism, for a party that was a lighter shade of black.
Anyway, the very idea of inclusive growth has produced some odd responses. The leader article in today’s ToI says that “inclusive growth will remain a pipe dream unless mechanisms are put in place for the successful coupling of technological capabilities with the engine of growth.” The article pleads for a big role for The State in science & technology.
But we had that for 60 years, and could not produce even a decent scooter. Science and technology have been harnessed for the benefit of our people only by entrepreneurs and markets. And, most importantly, by multinational companies.
Bollocks, once again.
The most thoughtful opinion piece on Chacha’s “inclusive growth” comes from an editorial in Mint today. The editors hit the nail on the head when they say:
In other words, the poor have to be “included” in The Market.
This means Economic Freedom must be guaranteed to all.
Secondly, since markets are urban there must be heavy public investment in roads that connect remote and poor villages to urban market centres. The “rural-urban divide” that 60 years of “planning” has created, by not building roads, must be made a thing of the past.
Finally, predation by the minions of our The State must be swiftly ended. There is no city or town market anywhere in India where policemen, municipal functionaries, health inspectors etc. do not collect “huftha”: a bribe paid by poor people in order to be “included” in The Market.
Of course, none of these will happen.
Because Chacha is engaged in hawabaazi. The rhetoric is being used only to prop up senseless schemes like the NREGA, loan waivers and the like. There is no sincerity in Chacha’s idea of “equitable development.” This is just more socialist bull.
How I hate socialists.
Chacha Manmohan S Gandhi has said: “The election verdict is a verdict for inclusive growth. It is a verdict for equitable development.”
Bollocks!
No one voted for inclusive growth. They voted for secularism, for a party that was a lighter shade of black.
Anyway, the very idea of inclusive growth has produced some odd responses. The leader article in today’s ToI says that “inclusive growth will remain a pipe dream unless mechanisms are put in place for the successful coupling of technological capabilities with the engine of growth.” The article pleads for a big role for The State in science & technology.
But we had that for 60 years, and could not produce even a decent scooter. Science and technology have been harnessed for the benefit of our people only by entrepreneurs and markets. And, most importantly, by multinational companies.
Bollocks, once again.
The most thoughtful opinion piece on Chacha’s “inclusive growth” comes from an editorial in Mint today. The editors hit the nail on the head when they say:
The point is: What exactly does inclusive growth entail? Through the tough election campaign, Congress leaders touted inclusive growth to mean last year’s farm loan waiver and the National Rural Employment Guarantee Scheme. These doled out lots of cash—but without delivering clear economic benefits. They are very basic social security schemes at best and lodestones of corruption at worst.
These schemes throw money at the poor and destitute without actually helping them climb the economic ladder. In the long run, they could perversely prevent people from moving out of their low-productivity traps in rural India. In a way, rural Indians now have incentives to keep digging a ditch and refilling it. Neither programme creates wealth.
True inclusive development would mean that even the poorest Indians get a chance to move into the modern, high-productivity sectors.
For that, we will need greater liberalization.
In other words, the poor have to be “included” in The Market.
This means Economic Freedom must be guaranteed to all.
Secondly, since markets are urban there must be heavy public investment in roads that connect remote and poor villages to urban market centres. The “rural-urban divide” that 60 years of “planning” has created, by not building roads, must be made a thing of the past.
Finally, predation by the minions of our The State must be swiftly ended. There is no city or town market anywhere in India where policemen, municipal functionaries, health inspectors etc. do not collect “huftha”: a bribe paid by poor people in order to be “included” in The Market.
Of course, none of these will happen.
Because Chacha is engaged in hawabaazi. The rhetoric is being used only to prop up senseless schemes like the NREGA, loan waivers and the like. There is no sincerity in Chacha’s idea of “equitable development.” This is just more socialist bull.
How I hate socialists.
Monday, May 18, 2009
On Congress Badness... And Madness
Lead editorials today are all about the decimation of the LTTE. But there is also an interesting interview with Kamal Nutt, the anti-commerce minister. Let us look at each in turn.
As I reported in an earlier post, I myself stumbled upon an LTTE camp on the Tamil Nadu coast in 1985, where I met Anton Balasingham, their ideologue. And was taken on a guided tour of their fuel dumps, ammo dumps, etc. The LTTE was part of the criminalized “politics” that Indira Gandhi indulged in; she also created Bhindranwale.
As liberals, we would use different means. We would champion the cause of free-trading and self-governing cities. Jaffna could be one such city, and this would enable the Tamils to not only participate in the global economy, but also retain their culture and identity. There would be peace and prosperity. There would also be Freedom. The political means, most importantly, would be just.
If there is a “one-man roadblock” to the employment of the above means in India’s foreign and trade policies, it is Kamal Nutt. I watched him with horror on tv last night, and am happy that he has said so much in an interview with Mint, so we all have him permanently in black-and-white.
Now, this man, we all know, hates the idea of free trade. He is a protectionist; an economic nationalist. And he is Sonia and Manmohan’s foreign trade minister. Since his mind is in serious error, and these errors cannot and must not continue to be translated into official policy, this interview is opportune. It enables us to look into the inner workings of his brain, to the theories which he uses to perceive the world of the senses.
Kamal Nutt begins by saying that he advocates looking at things from “a very India-specific manner.” This is the fatal idea of a Volkswirtschaft – the National Economy. Kamal Nutt says that this national economy requires a “domestic stimulus encompassing rural India…because demand in rural India can be phenomenal. And that will then drive our manufacturing sector.”
In plain English: The State pumps up the villagers with fiat paper notes. This will spur growth in manufacturing. He adds that “one job in manufacturing creates three in services.” Where did he get that, I wonder.
Actually, India can easily be a global centre for manufacturing, what with its trained manpower and English-knowledge skills. What inhibits it is the entire gamut of what, since the 70s, has been called “infrastructural bottlenecks”: roads and highways, power, water, railways, ports and airports, functional cities and towns… the lot. This fucked-up infrastructure takes away all the locational advantages that India has in its people.
And surely sound money and free international trade are the pathway to prosperity, not more and more fiat money “pumping up” a closed domestic market? Note that the minister is possessed of a distinctly Keynesian mindset.
Kamal Nutt also displays the fatal schizophrenia of those who believe in the Volkswirtschaft – the idea that the only objective of a foreign trade policy is exportation. In reality, just as a peanut-vendor “exports” peanuts in order to “import” all his necessities, from chai and bidis to a new pair of chappals, so too does a nation export in order to import.
Further, the import is more important than the export – for we export what we do not want (as with the peanut-vendor and his peanuts) while we import goods we desperately seek, because we cannot produce them ourselves. These imports then become our prized possessions. Kamal Nutt, trade minister of the Congress, opposes all imports. He wants to export, export and export only.
Ludwig von Mises says that those who do not see themselves as both producer and consumer rolled into one, but see themselves as producer only, suffer from “schizophrenia.” They are divided against themselves. This is the precise mental condition of our trade minister.
It was revealed on television last night that Kamal Nutt has been winning his seat in parliament from the same constituency in poverty-stricken, land-locked and remote Madhya Pradesh for the last 29 years. The UPA government needs a trade minister that hails from the coast.
Further, I would like to see a detailed investigative report on conditions in Kamal Nutt’s constituency. Things must be much worse here than in Amethi or Rai Bareilly.
Kamal Nutt is just a symptom; the real disease is Congressism, with its Volkswirtschaft, its fiat money and its economic isolationism.
The poverty of India lies in this Congress way of thinking.
As I reported in an earlier post, I myself stumbled upon an LTTE camp on the Tamil Nadu coast in 1985, where I met Anton Balasingham, their ideologue. And was taken on a guided tour of their fuel dumps, ammo dumps, etc. The LTTE was part of the criminalized “politics” that Indira Gandhi indulged in; she also created Bhindranwale.
As liberals, we would use different means. We would champion the cause of free-trading and self-governing cities. Jaffna could be one such city, and this would enable the Tamils to not only participate in the global economy, but also retain their culture and identity. There would be peace and prosperity. There would also be Freedom. The political means, most importantly, would be just.
If there is a “one-man roadblock” to the employment of the above means in India’s foreign and trade policies, it is Kamal Nutt. I watched him with horror on tv last night, and am happy that he has said so much in an interview with Mint, so we all have him permanently in black-and-white.
Now, this man, we all know, hates the idea of free trade. He is a protectionist; an economic nationalist. And he is Sonia and Manmohan’s foreign trade minister. Since his mind is in serious error, and these errors cannot and must not continue to be translated into official policy, this interview is opportune. It enables us to look into the inner workings of his brain, to the theories which he uses to perceive the world of the senses.
Kamal Nutt begins by saying that he advocates looking at things from “a very India-specific manner.” This is the fatal idea of a Volkswirtschaft – the National Economy. Kamal Nutt says that this national economy requires a “domestic stimulus encompassing rural India…because demand in rural India can be phenomenal. And that will then drive our manufacturing sector.”
In plain English: The State pumps up the villagers with fiat paper notes. This will spur growth in manufacturing. He adds that “one job in manufacturing creates three in services.” Where did he get that, I wonder.
Actually, India can easily be a global centre for manufacturing, what with its trained manpower and English-knowledge skills. What inhibits it is the entire gamut of what, since the 70s, has been called “infrastructural bottlenecks”: roads and highways, power, water, railways, ports and airports, functional cities and towns… the lot. This fucked-up infrastructure takes away all the locational advantages that India has in its people.
And surely sound money and free international trade are the pathway to prosperity, not more and more fiat money “pumping up” a closed domestic market? Note that the minister is possessed of a distinctly Keynesian mindset.
Kamal Nutt also displays the fatal schizophrenia of those who believe in the Volkswirtschaft – the idea that the only objective of a foreign trade policy is exportation. In reality, just as a peanut-vendor “exports” peanuts in order to “import” all his necessities, from chai and bidis to a new pair of chappals, so too does a nation export in order to import.
Further, the import is more important than the export – for we export what we do not want (as with the peanut-vendor and his peanuts) while we import goods we desperately seek, because we cannot produce them ourselves. These imports then become our prized possessions. Kamal Nutt, trade minister of the Congress, opposes all imports. He wants to export, export and export only.
Ludwig von Mises says that those who do not see themselves as both producer and consumer rolled into one, but see themselves as producer only, suffer from “schizophrenia.” They are divided against themselves. This is the precise mental condition of our trade minister.
It was revealed on television last night that Kamal Nutt has been winning his seat in parliament from the same constituency in poverty-stricken, land-locked and remote Madhya Pradesh for the last 29 years. The UPA government needs a trade minister that hails from the coast.
Further, I would like to see a detailed investigative report on conditions in Kamal Nutt’s constituency. Things must be much worse here than in Amethi or Rai Bareilly.
Kamal Nutt is just a symptom; the real disease is Congressism, with its Volkswirtschaft, its fiat money and its economic isolationism.
The poverty of India lies in this Congress way of thinking.
Sunday, May 17, 2009
Development - Without The State
I was cheered up this morning by a letter from the Liberal Youth Forum telling me of their campus outreach programme. I advised them to give some of my writings to the targeted youth to take home and slowly imbibe.
Yes, we have our work cut out for us. There must emerge a strong secular free market party as an alternative to the socialist Congress. The Congress is targeting the youth with Rahul Gandhi. We must target the youth with sound theories.
Our essential point is this: It is indeed a grievous error to expect “development” from the efforts of The State.
On the contrary, if “development” is taken to mean a standard of living comparable to the developed parts of the world, the only way to raise the living standards of the entire citizenry is through free markets.
Capitalism. Not Socialism.
Note that today we have a strong and stable Congress government. So what? We have had strong and stable Congress governments right through our history as an independent nation. We have had “employment programmes” like the Jawaharlal Nehru Rozgaar Yojana since the days of the 5th Five Year Plan. And the term “infrastructural bottlenecks” was very much in vogue when I studied economics in Delhi university in the mid-70s, while Indira Gandhi lorded over the Empire.
Nothing much happened in India then with employment programmes, 5-year plans, and strong Congress governments. There was no Market. There was only our The State. It was Hell.
Whatever good is happening in India today is because of markets and entrepreneurs.
“Development,” therefore, must never be made a State Subject. It lies in the domain of free enterprise.
The rural poor must move “from subsistence to exchange,” as the late Peter, Lord Bauer elegantly put it, as the title of his last book.
Note that “subsistence” is never a concern in the market economy. We never worry about food running out. We might worry over the beer running out. This is the power of exchange.
Note that the people of the developed West were in a pretty bad condition in the 1700s. It is Capitalism – not State power – that raised the living standards of all. Indeed, their governments may well become their downfall.
We have five years to build support. Let us proceed in full earnest, confident that we have Truth, Morality, Justice and Liberty on our side.
Yes, we have our work cut out for us. There must emerge a strong secular free market party as an alternative to the socialist Congress. The Congress is targeting the youth with Rahul Gandhi. We must target the youth with sound theories.
Our essential point is this: It is indeed a grievous error to expect “development” from the efforts of The State.
On the contrary, if “development” is taken to mean a standard of living comparable to the developed parts of the world, the only way to raise the living standards of the entire citizenry is through free markets.
Capitalism. Not Socialism.
Note that today we have a strong and stable Congress government. So what? We have had strong and stable Congress governments right through our history as an independent nation. We have had “employment programmes” like the Jawaharlal Nehru Rozgaar Yojana since the days of the 5th Five Year Plan. And the term “infrastructural bottlenecks” was very much in vogue when I studied economics in Delhi university in the mid-70s, while Indira Gandhi lorded over the Empire.
Nothing much happened in India then with employment programmes, 5-year plans, and strong Congress governments. There was no Market. There was only our The State. It was Hell.
Whatever good is happening in India today is because of markets and entrepreneurs.
“Development,” therefore, must never be made a State Subject. It lies in the domain of free enterprise.
The rural poor must move “from subsistence to exchange,” as the late Peter, Lord Bauer elegantly put it, as the title of his last book.
Note that “subsistence” is never a concern in the market economy. We never worry about food running out. We might worry over the beer running out. This is the power of exchange.
Note that the people of the developed West were in a pretty bad condition in the 1700s. It is Capitalism – not State power – that raised the living standards of all. Indeed, their governments may well become their downfall.
We have five years to build support. Let us proceed in full earnest, confident that we have Truth, Morality, Justice and Liberty on our side.
Saturday, May 16, 2009
India Votes To Continue Muddling Along
Look at the bright side: At least its not Advani, Modi and Varun Gandhi.
The election was won by the Congress and its allies only because they were a lighter shade of black. The vote was for “secularism” and “stability” – but more for the former.
The lesson: We must build a secular, free market party.
What does the verdict mean for India? Just that this country will muddle along aimlessly for another five years. The treasury will be hugely depleted by more and more anti-poverty schemes: apart from rural employment, which will be extended to cover the entire territory, the poor will now get rice at 2 rupees a kilo, as promised in the Congress manifesto. The fiscal deficit will become huge, all because of government consumption. This includes the recent hike in salaries of the baboo brigade. Inflation will resume.
Note that the science of catallactics prescribes very different policies for making India a prosperous, “developed” country. These are:
To these we must add bijli, sadak and paani because the people are crying out for these. Bijli and paani can be privatized. The public treasury must fund a pan-India toll-free highway network. Local government must be legally obliged to build a road right up to the door of every homestead.
The Chacha Manmohan and Bhateeja Rahul team will ignore all these things. Manmohan has promised to use his second term to focus on “agriculture, education and rural health.” There will undoubtedly be another Five Year Plan. Kamal Nutt will stall free trade for another five years. There will be zero privatization. The cities will continue to implode. The towns will become hell-holes. Chacha and Bhateeja will have all their attention on the “rural poor.”
All that catallactics can tell Chacha-Bhateeja is that our ends are the same. We both desire that the poor benefit. We both desire that growth be “inclusive.” We both desire that India become a “developed” nation.
It is over the means that we differ. Catallactics can only say that the means Chacha-Bhateeja have chosen are wrong. They will not achieve the desired results. Over the next five years, at every turn, the science of catallactics will have to unravel their every error and expose it to the public. That is what this blog promises to do – as a “loyal opposition” to the regime.
It is also good news that the Communists have been routed. As Aristotle the Geek wrote on his blog:
Much to cheer about.
The election was won by the Congress and its allies only because they were a lighter shade of black. The vote was for “secularism” and “stability” – but more for the former.
The lesson: We must build a secular, free market party.
What does the verdict mean for India? Just that this country will muddle along aimlessly for another five years. The treasury will be hugely depleted by more and more anti-poverty schemes: apart from rural employment, which will be extended to cover the entire territory, the poor will now get rice at 2 rupees a kilo, as promised in the Congress manifesto. The fiscal deficit will become huge, all because of government consumption. This includes the recent hike in salaries of the baboo brigade. Inflation will resume.
Note that the science of catallactics prescribes very different policies for making India a prosperous, “developed” country. These are:
Free Trade
Sound Money
Private Property
Economic Freedom
The Rule of Law
To these we must add bijli, sadak and paani because the people are crying out for these. Bijli and paani can be privatized. The public treasury must fund a pan-India toll-free highway network. Local government must be legally obliged to build a road right up to the door of every homestead.
The Chacha Manmohan and Bhateeja Rahul team will ignore all these things. Manmohan has promised to use his second term to focus on “agriculture, education and rural health.” There will undoubtedly be another Five Year Plan. Kamal Nutt will stall free trade for another five years. There will be zero privatization. The cities will continue to implode. The towns will become hell-holes. Chacha and Bhateeja will have all their attention on the “rural poor.”
All that catallactics can tell Chacha-Bhateeja is that our ends are the same. We both desire that the poor benefit. We both desire that growth be “inclusive.” We both desire that India become a “developed” nation.
It is over the means that we differ. Catallactics can only say that the means Chacha-Bhateeja have chosen are wrong. They will not achieve the desired results. Over the next five years, at every turn, the science of catallactics will have to unravel their every error and expose it to the public. That is what this blog promises to do – as a “loyal opposition” to the regime.
It is also good news that the Communists have been routed. As Aristotle the Geek wrote on his blog:
As far as I am concerned, West Bengal is “the” story of the election. As one commentator said on one of the news channels (I paraphrase) – before the elections, communism existed in three places in the world: Kerala, Kolkata and Cuba. Now it exists only in Cuba.
Much to cheer about.
Friday, May 15, 2009
On Rogues... And Morality
Amit Mitra’s conclusion on what will transpire once election results are declared points to a harsh reality that most of us find quite revolting. Mitra has been secretary-general of FICCI, one of our oldest chambers of commerce, for a long time, and he should know. He says:
Another piece of news I found interesting was about a speech made by an NGO-type in Chennai, during which he said that “political parties are rogue institutions.” He talked of the sale of tickets. He talked of the “cash-crime nexus” – whatever that implies.
So let us get back to what Amit Mitra said: “Power now defines and drives Indian politics.” Is this power exercised through “rogue institutions”? That certainly must be the case when there is no “ideology,” no fixed principles upon which to base policies. When everything is all about “power.”
As Lord Acton famously said, “Absolute power corrupts absolutely.”
As we muddle along with our corrupt and debased democracy, let us turn to Pakistan. What can a libertarian say about the state of affairs there?
All that can be said is that civilization lies in peaceful market exchange, while predatory militarism is the path of the barbarian.
We have nothing more to say to the barbarian, except that he is a barbarian, an outlaw. His way of life is immoral. And primitive to boot.
This is the strong moral message India should be giving out in the south Asian region, as the biggest nation with the biggest markets.
But this requires an “ideology.”
For in the end how much difference is there between predatory militarism and corrupt Indian politicians to whom power is everything – when both misuse force?
If the Congress gets 20 more seats than the BJP, there will be an exodus in its direction and the focus will shift to bargain-hunting on ministerial portfolios. If the BJP surpasses the Congress by 20 seats, it will be the same process, by and large. Let us get real. India lost its innocence on 'ideological divides' a long time ago. Power now defines and drives Indian politics. The deeper question is, will this power politics detract from or drive the nation's economic development and reform agenda?
Another piece of news I found interesting was about a speech made by an NGO-type in Chennai, during which he said that “political parties are rogue institutions.” He talked of the sale of tickets. He talked of the “cash-crime nexus” – whatever that implies.
So let us get back to what Amit Mitra said: “Power now defines and drives Indian politics.” Is this power exercised through “rogue institutions”? That certainly must be the case when there is no “ideology,” no fixed principles upon which to base policies. When everything is all about “power.”
As Lord Acton famously said, “Absolute power corrupts absolutely.”
As we muddle along with our corrupt and debased democracy, let us turn to Pakistan. What can a libertarian say about the state of affairs there?
All that can be said is that civilization lies in peaceful market exchange, while predatory militarism is the path of the barbarian.
We have nothing more to say to the barbarian, except that he is a barbarian, an outlaw. His way of life is immoral. And primitive to boot.
This is the strong moral message India should be giving out in the south Asian region, as the biggest nation with the biggest markets.
But this requires an “ideology.”
For in the end how much difference is there between predatory militarism and corrupt Indian politicians to whom power is everything – when both misuse force?
Thursday, May 14, 2009
The Great Socialist Darkness
This really came as a shocker:
This happened in Babrala, deep inside UP. The quote is from Shekhar Gupta’s excellent two part travelogue on his election tours in rural India: part one; part two. [The quote above is from part 2.]
Shekhar Gupta was in Babrala with Mulayam Singh Yadav. He reveals that Mulayam, Nitish and Paswan are “Lohia socialists.”
Actually, UP is a great example of what Aravind Adiga called “The Great Socialist Darkness.” The passage quoted above could well have been a para from The White Tiger. This novel is a must read, a very powerful indictment of Indian socialism.
Yet, UP elects the highest number of MPs among all Indian states. This is why most Indian prime ministers have been elected from UP. Sonia Gandhi and Rahul Gandhi have their constituencies in UP. Hence the Darkness.
We are lucky in Goa: just 2 MPs. Very little “politics.”
The lesson: Democracy has “diminishing returns” – and these have turned negative for UP. Uttar Pradesh has become Chuttar Pradesh. I did not wish to be vulgar, but reality is even more vulgar. This is the truth.
But I wanted to focus on electricity: Why don’t the citizens of Babrala, and thousands and thousands of such towns, have electricity?
The answer: because of “socialism” – which makes this a monopoly of The State. There has been zero “liberalization” of the power sector. This is the problem. And The State seems happy to continue its monopoly indefinitely: the “civilian nuclear deal” with the USA will enable The State to generate nuclear power, and thereby maintain its monopoly. This actually means that The State is not really run by “civilians” – but that is another matter, which should occupy the minds of Americans.
Yes, the people are crying out for bijli, sadak and paani.
All three are State monopolies.
This is why The Great Socialist Darkness persists.
[Incidentally, this post was delayed because of a long power cut.]
As our cars pull out, word has spread that some “important” people from Delhi are here, so a clamour builds up: light de do, light de do (give us power), and soon it becomes a small mob, pleading, even begging, faces behind desperate hands beating at our car windows: light bhijwa do, hum mar jayenge, humaare bachche padhenge kaise (send us power, we will die, how will our children study).
This happened in Babrala, deep inside UP. The quote is from Shekhar Gupta’s excellent two part travelogue on his election tours in rural India: part one; part two. [The quote above is from part 2.]
Shekhar Gupta was in Babrala with Mulayam Singh Yadav. He reveals that Mulayam, Nitish and Paswan are “Lohia socialists.”
Actually, UP is a great example of what Aravind Adiga called “The Great Socialist Darkness.” The passage quoted above could well have been a para from The White Tiger. This novel is a must read, a very powerful indictment of Indian socialism.
Yet, UP elects the highest number of MPs among all Indian states. This is why most Indian prime ministers have been elected from UP. Sonia Gandhi and Rahul Gandhi have their constituencies in UP. Hence the Darkness.
We are lucky in Goa: just 2 MPs. Very little “politics.”
The lesson: Democracy has “diminishing returns” – and these have turned negative for UP. Uttar Pradesh has become Chuttar Pradesh. I did not wish to be vulgar, but reality is even more vulgar. This is the truth.
But I wanted to focus on electricity: Why don’t the citizens of Babrala, and thousands and thousands of such towns, have electricity?
The answer: because of “socialism” – which makes this a monopoly of The State. There has been zero “liberalization” of the power sector. This is the problem. And The State seems happy to continue its monopoly indefinitely: the “civilian nuclear deal” with the USA will enable The State to generate nuclear power, and thereby maintain its monopoly. This actually means that The State is not really run by “civilians” – but that is another matter, which should occupy the minds of Americans.
Yes, the people are crying out for bijli, sadak and paani.
All three are State monopolies.
This is why The Great Socialist Darkness persists.
[Incidentally, this post was delayed because of a long power cut.]
Wednesday, May 13, 2009
On Technology, Capitalism And Dissent
As a reader and writer of books, I was naturally interested in the ToI editorial today on the new phenomenon in book publishing: e-books. Technology seems to have created a book-reader billed as “the I-Pod of books.” I welcome the development. I only hope that the e-book provides a good reading experience. If so, I can only predict that books will get cheaper, and more books will be read. Win-win.
In particular, the greatest benefit will be to the traveler. When I travel, my bags are inevitably heavier because of the many books I always carry. Recently, I took my German brother-in-law, Jurgen, who was visiting from Stuttgart, on a tour of the bookshops in New Delhi’s Khan Market. He had a problem buying all the books he liked because his bags were already full of the books he had carried along to read on the trip. With e-books, the entire picture will change.
The ToI edit predicts the end of paper-and-ink books in a decade. That might be a bit hasty. How exactly the “gales of creative destruction” will hit the publishing industry cannot be accurately predicted. All that can be said is that the ultimate decisions rest on the consumers, those who buy books. As long as there exist consumers for paper-and-ink books, these will continue to be sold. I do believe such consumers will always remain. I myself much prefer paper-and-ink to reading pdf books on the computer. And books grace my shelves in a manner that e-books can never do.
Yet, an I-Pod for books sounds great.
Three cheers for technology.
And four cheers for Capitalism, without which technology cannot serve the consumers; that is, cannot earn profits for the inventors, entrepreneurs and promoters. When we cheer for technology, we must always simultaneously cheer for Capitalism.
Not much else to write about today. We all await the results of the elections, due on Saturday the 16th. The world’s biggest democratic exercise will be over. But let us never forget the heroic dissenters – like the medical doctor Binyak Sen who is languishing in jail. Salil Tripathi’s column on the plight of Sen is timely, and well worth a read.
In particular, the greatest benefit will be to the traveler. When I travel, my bags are inevitably heavier because of the many books I always carry. Recently, I took my German brother-in-law, Jurgen, who was visiting from Stuttgart, on a tour of the bookshops in New Delhi’s Khan Market. He had a problem buying all the books he liked because his bags were already full of the books he had carried along to read on the trip. With e-books, the entire picture will change.
The ToI edit predicts the end of paper-and-ink books in a decade. That might be a bit hasty. How exactly the “gales of creative destruction” will hit the publishing industry cannot be accurately predicted. All that can be said is that the ultimate decisions rest on the consumers, those who buy books. As long as there exist consumers for paper-and-ink books, these will continue to be sold. I do believe such consumers will always remain. I myself much prefer paper-and-ink to reading pdf books on the computer. And books grace my shelves in a manner that e-books can never do.
Yet, an I-Pod for books sounds great.
Three cheers for technology.
And four cheers for Capitalism, without which technology cannot serve the consumers; that is, cannot earn profits for the inventors, entrepreneurs and promoters. When we cheer for technology, we must always simultaneously cheer for Capitalism.
Not much else to write about today. We all await the results of the elections, due on Saturday the 16th. The world’s biggest democratic exercise will be over. But let us never forget the heroic dissenters – like the medical doctor Binyak Sen who is languishing in jail. Salil Tripathi’s column on the plight of Sen is timely, and well worth a read.
Tuesday, May 12, 2009
Population: The Ultimate Resource
More than a decade ago, I began making my name arguing against the notion that population is India's biggest problem.
After all, cities are crowded - and rich!
I argued in favour of aggressive urbanization - as I still do.
I also argued that the Real Problem was The State. The policies of The State were keeping Indians poor.
Population is a resource. Government is the problem. That is what I believe to be true.
Back in those days, Barun Mitra decided to compile a book with essays by eminent people who opposed neo-Malthusianism. My essay, "Population, Urbanization, 'Vision' and Abundance" was included in that list. The book Population: The Ultimate Resource was a huge hit, and won the Anthony Fisher International Memorial Award for best book published by a think-tank that year. The book contains seminal essays by Julian Simon, Peter Bauer, Deepak Lal, Nicholas Eberstadt and others.
Anyway, thanks to Chandra, we now have a pdf file of my essay.
It can be downloaded here.
Enjoy the read.
And know where the real problem lies - not with little brown babies, but with old men and their spurious ideologies.
Indeed, the lead editorial in Mint today argues that "a weak India has always been a Leftist aspiration. A strong middle class and confident India will make the Left redundant."
Poverty is in the interest of The State.
After all, cities are crowded - and rich!
I argued in favour of aggressive urbanization - as I still do.
I also argued that the Real Problem was The State. The policies of The State were keeping Indians poor.
Population is a resource. Government is the problem. That is what I believe to be true.
Back in those days, Barun Mitra decided to compile a book with essays by eminent people who opposed neo-Malthusianism. My essay, "Population, Urbanization, 'Vision' and Abundance" was included in that list. The book Population: The Ultimate Resource was a huge hit, and won the Anthony Fisher International Memorial Award for best book published by a think-tank that year. The book contains seminal essays by Julian Simon, Peter Bauer, Deepak Lal, Nicholas Eberstadt and others.
Anyway, thanks to Chandra, we now have a pdf file of my essay.
It can be downloaded here.
Enjoy the read.
And know where the real problem lies - not with little brown babies, but with old men and their spurious ideologies.
Indeed, the lead editorial in Mint today argues that "a weak India has always been a Leftist aspiration. A strong middle class and confident India will make the Left redundant."
Poverty is in the interest of The State.
Monday, May 11, 2009
On Sardars, Sardars, And More Sardars
Callous.
That is the right word to describe Chacha Manmohan S Gandhi’s statement that the “1984 riots cannot be kept alive forever.”
Does that mean we all forget the Holocaust? Or Hiroshima? Or any other instance of deliberate mass murder?
And do note that the word “riot” is inappropriate. What happens in India are “pogroms.” What happened in 1984 in Delhi was a pogrom against Sikhs. The pogrom was organized by Congressmen. There has been no justice yet. And we know that the Congress is very fond of Jagdish Tytler and Sajjan Kumar.
Yet, Chacha is the PM-candidate of the Congress.
He has spoken as a loyal Congressman, not as a Sardar.
So let us turn to another Sardar, who has spoken like a true “Sardar”: MS Gill.
He is opposing an SMS gambling game. (Read about the game here.)
Amit Verma has already lambasted him in an open letter.
But allow me to lend some muscle to Amit’s arguments.
MS Gill is a former chief election commissioner who has shown us his political affiliation by becoming a minister in the Congress-led government. Yet, elections are the biggest legal gamble in India! Candidates gamble in the electoral sweepstakes.
MS Gill was running the casino – as an interested party.
So much for Sardar-speak.
We should get Montek the Sardar Planner in, shouldn’t we? And his predictions of the growth rate.
Anyway, with so many Sardars running the government, it was bound to mess up real bad. Here is news that the courts in Switzerland have ruled that documents submitted to them in a money-laundering case by the Enforcement Directorate are forged. Pune-based racehorse breeder Hassan Ali is innocent.
I am always happy when a man’s wealth is saved from State usurpation.
That is the right word to describe Chacha Manmohan S Gandhi’s statement that the “1984 riots cannot be kept alive forever.”
Does that mean we all forget the Holocaust? Or Hiroshima? Or any other instance of deliberate mass murder?
And do note that the word “riot” is inappropriate. What happens in India are “pogroms.” What happened in 1984 in Delhi was a pogrom against Sikhs. The pogrom was organized by Congressmen. There has been no justice yet. And we know that the Congress is very fond of Jagdish Tytler and Sajjan Kumar.
Yet, Chacha is the PM-candidate of the Congress.
He has spoken as a loyal Congressman, not as a Sardar.
So let us turn to another Sardar, who has spoken like a true “Sardar”: MS Gill.
He is opposing an SMS gambling game. (Read about the game here.)
Amit Verma has already lambasted him in an open letter.
But allow me to lend some muscle to Amit’s arguments.
MS Gill is a former chief election commissioner who has shown us his political affiliation by becoming a minister in the Congress-led government. Yet, elections are the biggest legal gamble in India! Candidates gamble in the electoral sweepstakes.
MS Gill was running the casino – as an interested party.
So much for Sardar-speak.
We should get Montek the Sardar Planner in, shouldn’t we? And his predictions of the growth rate.
Anyway, with so many Sardars running the government, it was bound to mess up real bad. Here is news that the courts in Switzerland have ruled that documents submitted to them in a money-laundering case by the Enforcement Directorate are forged. Pune-based racehorse breeder Hassan Ali is innocent.
I am always happy when a man’s wealth is saved from State usurpation.
Sunday, May 10, 2009
On Mayawati
The lead editorial in Mint today talks of “political incoherence” and asks readers to answer the question, “Is ideology dead in Indian politics?” We all know the answer. All politics in India is centred around individuals today.
One of these individuals who is being much discussed on tv is Mayawati. I watched one of her supporters argue that the time had come for Dalits to take over The State and rule over the rest of the population.
For Mayawati and her supporters, The State is the prize. Once they are in control of The State they will do what all others have been doing for 60 years – channel the loaves and fishes of office to their own henchmen, dole out favours to them, and more. In short: Get Rich Quick.
Yet, if you search the archives of the Dalit website dedicated to Dr. BR Ambedkar, you will find my old article “Caste and the Market Economy” that argues urbanization and globalization are in the best interests of the lower castes. That is, the bright future Dalits seek lies in The Market. Under Mayawati, they will seek it in The State. Note that Mayawati is “against policies that benefit capitalists.” Under her leadership, it has become the Dalit goal to control The State. When they succeed, all Dalits will feel they have achieved something – but, just as 60 years of socialist governments have been unable to meaningfully help the working classes of India, so too will a Mayawati sarkaar fail at improving the living conditions of the average Dalit. Their only hope lies in The Market: a free market, urbanization, and a severely cut down State. This is not a direction in which Mayawati seeks to go.
Once again, then, we are back to “ideology.”
Statism is an ideology like all the others. Those who believe in it want to control The State and use its Revenues, and its Force and Violence, to suit their own ends. They will benefit some at the expense of others – through the misuse of State force.
This is the ideology of “legal plunder.”
Libertarians stand at the other end of the spectrum: No plunder. Private Property. Free Markets. Rule of Law. Liberty. Peace.
Newsweek has profiled Mayawati here, calling her India’s “Anti-Obama.” Whereas Obama reaches out to all Americans, Mayawati’s agenda is divisive and violent. Read it – and I guarantee you will feel scared about the future of this country.
One of these individuals who is being much discussed on tv is Mayawati. I watched one of her supporters argue that the time had come for Dalits to take over The State and rule over the rest of the population.
For Mayawati and her supporters, The State is the prize. Once they are in control of The State they will do what all others have been doing for 60 years – channel the loaves and fishes of office to their own henchmen, dole out favours to them, and more. In short: Get Rich Quick.
Yet, if you search the archives of the Dalit website dedicated to Dr. BR Ambedkar, you will find my old article “Caste and the Market Economy” that argues urbanization and globalization are in the best interests of the lower castes. That is, the bright future Dalits seek lies in The Market. Under Mayawati, they will seek it in The State. Note that Mayawati is “against policies that benefit capitalists.” Under her leadership, it has become the Dalit goal to control The State. When they succeed, all Dalits will feel they have achieved something – but, just as 60 years of socialist governments have been unable to meaningfully help the working classes of India, so too will a Mayawati sarkaar fail at improving the living conditions of the average Dalit. Their only hope lies in The Market: a free market, urbanization, and a severely cut down State. This is not a direction in which Mayawati seeks to go.
Once again, then, we are back to “ideology.”
Statism is an ideology like all the others. Those who believe in it want to control The State and use its Revenues, and its Force and Violence, to suit their own ends. They will benefit some at the expense of others – through the misuse of State force.
This is the ideology of “legal plunder.”
Libertarians stand at the other end of the spectrum: No plunder. Private Property. Free Markets. Rule of Law. Liberty. Peace.
Newsweek has profiled Mayawati here, calling her India’s “Anti-Obama.” Whereas Obama reaches out to all Americans, Mayawati’s agenda is divisive and violent. Read it – and I guarantee you will feel scared about the future of this country.
Saturday, May 9, 2009
Politics: From Delhi To Athens
The incident of Varun Gandhi supporting forced sterilisation to solve the “population problem” (and then withdrawing his statement) brings into relief something Peter, Lord Bauer wrote long ago:
The only question in the population debate is whether the decision to have children, and how many, should be left to the concerned couples, or should these decisions be taken by The State.
So that takes care of that.
Unfortunately, Liberty Institute is yet to put up a free pdf download of my essay “Population, Urbanization, ‘Vision’ and Abundance,” published alongside essays by Julian Simon, Peter Bauer, Deepak Lal, and others, in an award-winning volume titled Population: The Ultimate Resource.
Anyway, if Varun Gandhi exposes the poverty of BJP politics, read this to discover what a bunch of weirdos the Samajwadi party are. An earlier post had discussed their miserable manifesto. This is the party of Sanjay Dudd. Amar Singh hogs tv. He hob-nobs with them all. Their “political party” supported the Sonia-Manmohan government after the Commies departed. Such political parties will sell their votes in parliament to the winning coalition. This is the “politics” by which the Central Government is going to be formed.
Underneath, all is hollow. The Congress too has hit the dirt. Chacha Manmohan and Bhateeja Rahul fail to inspire.
I therefore found MJ Akbar’s column on how a new government will emerge in Dilli Door Ast bluntly realistic, and therefore a very good read. It is aptly titled “Prepare for a marathon at the 2009 racecourse.” He quotes a great gambler who said that the bookies win when the favourite loses. He is a journalist-politician. He should know.
Yet, the sad fact is that during these elections there was no “race” between competing candidates and no contest on such lines. Parties competed, not candidates. The winning horse who will occupy the PM’s bungalow on Race Course Road will emerge not after votes have been counted, but perhaps a fortnight later, after the votes of those elected are bought. So reality bites harder than Akbar takes cognisance of.
But to see the reality of New Delhi Sarkaar even more clearly, take this news report: It says that the chief minister of Delhi does not control the New Delhi Municipal Corporation, the Delhi Development Authority, the Delhi Police, and the Municipal Corporation of Delhi. All these are under the control of The Great Centralized Socialist State From On High.
Shiela Dixit just runs the booze shops – as a monopoly.
“Warm beer, cold women,” as Tom Waites put it.
Anyway, here I am, far, far away from Delhi, in cold beer country. Looking from afar helps.
My best read today was an article by Peter Jones on rhetoric in ancient Athens, written in the light of Obama’s tremendous oratorical skills. The essential difference between then and now is this:
Peter Jones concludes that the modern rhêtor is dangerous.
So I leave you with that: Think of Athens.
Don’t think too much of Dilli Door Ast.
The only question in the population debate is whether the decision to have children, and how many, should be left to the concerned couples, or should these decisions be taken by The State.
So that takes care of that.
Unfortunately, Liberty Institute is yet to put up a free pdf download of my essay “Population, Urbanization, ‘Vision’ and Abundance,” published alongside essays by Julian Simon, Peter Bauer, Deepak Lal, and others, in an award-winning volume titled Population: The Ultimate Resource.
Anyway, if Varun Gandhi exposes the poverty of BJP politics, read this to discover what a bunch of weirdos the Samajwadi party are. An earlier post had discussed their miserable manifesto. This is the party of Sanjay Dudd. Amar Singh hogs tv. He hob-nobs with them all. Their “political party” supported the Sonia-Manmohan government after the Commies departed. Such political parties will sell their votes in parliament to the winning coalition. This is the “politics” by which the Central Government is going to be formed.
Underneath, all is hollow. The Congress too has hit the dirt. Chacha Manmohan and Bhateeja Rahul fail to inspire.
I therefore found MJ Akbar’s column on how a new government will emerge in Dilli Door Ast bluntly realistic, and therefore a very good read. It is aptly titled “Prepare for a marathon at the 2009 racecourse.” He quotes a great gambler who said that the bookies win when the favourite loses. He is a journalist-politician. He should know.
Yet, the sad fact is that during these elections there was no “race” between competing candidates and no contest on such lines. Parties competed, not candidates. The winning horse who will occupy the PM’s bungalow on Race Course Road will emerge not after votes have been counted, but perhaps a fortnight later, after the votes of those elected are bought. So reality bites harder than Akbar takes cognisance of.
But to see the reality of New Delhi Sarkaar even more clearly, take this news report: It says that the chief minister of Delhi does not control the New Delhi Municipal Corporation, the Delhi Development Authority, the Delhi Police, and the Municipal Corporation of Delhi. All these are under the control of The Great Centralized Socialist State From On High.
Shiela Dixit just runs the booze shops – as a monopoly.
“Warm beer, cold women,” as Tom Waites put it.
Anyway, here I am, far, far away from Delhi, in cold beer country. Looking from afar helps.
My best read today was an article by Peter Jones on rhetoric in ancient Athens, written in the light of Obama’s tremendous oratorical skills. The essential difference between then and now is this:
The main difference between our orators and the ancient Greek rhêtor in democratic Athens is that the ancient rhêtor had no political power whatsoever. He was trying to persuade an Assembly of citizens (males over 18) to do what he wanted, but it was they who made the final decision whether to act on his advice or not. In our system, an Obama or Brown can speak well or badly, intelligibly or incomprehensibly, it will still be (s)he who makes the decisions and not the listeners. Ancient rhetoric, then, unlike the modern, was absolutely central to the democratic process.
It was central in another sense. No radical democracy where citizens made all the decisions could work unless everyone was able to make their contribution in the Assembly. But not everyone was a natural speaker. That was why the rules of rhetoric were developed and taught in democratic Athens. Further, they empowered any citizen not just to participate effectively in the Assembly, but also to learn to distinguish the good arguments from the bad, the false from the true.
And, even more critically, the right from the wrong.
Peter Jones concludes that the modern rhêtor is dangerous.
So I leave you with that: Think of Athens.
Don’t think too much of Dilli Door Ast.
Friday, May 8, 2009
On Business Cycles... On Market Day
It is market day again in this sleepy south Goa village, and we must drive to Chaudi, our nearest town.
It will not be a very pleasant experience, although this is Goa, supposedly a tourist paradise – and tourists love to go shopping.
Chaudi, a tiny market town straddling a “notional highway,” is a tiny little disaster.
Just as the metro cities are big huge disasters.
How do we fix this massive country, when there are urban disasters all over?
I daresay no single man can do it.
Anyway, the thought of market day has reduced my desire to write.
But I will leave you with something worthwhile to read:
First: “Beware of Obamanomics” by Tom Woods, a white paper published by Euro Pacific Capital, the investment firm run by Peter Schiff. The report concludes:
“… the president’s program aggravates every existing problem in the American economy, and will make genuine recovery all the longer in coming. Whether we measure these policies against history or sound economic theory, the verdict is the same: the president has chosen a path that is guaranteed to fail.”
The report looks not only at Obama’s “stimulus,” but also at his “green jobs” programme.
Well worth a read.
Tom Woods is the author of Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse.
This book has been a huge success. I am yet to get hold of a copy, but I read somewhere that it offers a very good explanation of the theory of the business cycle as propounded by economists of the “Austrian” school: Carl Menger, Ludwig von Mises, Friedrich Hayek, Murray Rothbard, Israel Kirzner, Hans-Hermann Hoppe.
Anyway, I also found this short article by Tom Woods, where he explains the Austrian theory of the business cycle in a nutshell. It goes:
The lesson: If you want to end the boom-bust cycle, shut all central banks down.
Sound money.
Only the Austrians thought of that.
The deeper lesson: If prosperity could be created by cheap money and credit, poverty would vanish overnight.
Hope you learnt something new today.
It will not be a very pleasant experience, although this is Goa, supposedly a tourist paradise – and tourists love to go shopping.
Chaudi, a tiny market town straddling a “notional highway,” is a tiny little disaster.
Just as the metro cities are big huge disasters.
How do we fix this massive country, when there are urban disasters all over?
I daresay no single man can do it.
Anyway, the thought of market day has reduced my desire to write.
But I will leave you with something worthwhile to read:
First: “Beware of Obamanomics” by Tom Woods, a white paper published by Euro Pacific Capital, the investment firm run by Peter Schiff. The report concludes:
“… the president’s program aggravates every existing problem in the American economy, and will make genuine recovery all the longer in coming. Whether we measure these policies against history or sound economic theory, the verdict is the same: the president has chosen a path that is guaranteed to fail.”
The report looks not only at Obama’s “stimulus,” but also at his “green jobs” programme.
Well worth a read.
Tom Woods is the author of Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse.
This book has been a huge success. I am yet to get hold of a copy, but I read somewhere that it offers a very good explanation of the theory of the business cycle as propounded by economists of the “Austrian” school: Carl Menger, Ludwig von Mises, Friedrich Hayek, Murray Rothbard, Israel Kirzner, Hans-Hermann Hoppe.
Anyway, I also found this short article by Tom Woods, where he explains the Austrian theory of the business cycle in a nutshell. It goes:
Government-established central banks can artificially lower interest rates by increasing the supply of money (and thus the funds banks have available to lend) through the banking system. This is supposed to stimulate the economy. What it actually does is mislead investors into embarking on an investment boom that the artificially low rates seem to validate but that in fact cannot be sustained under existing economic conditions. Investments that would have correctly been assessed as unprofitable are falsely appraised as profitable, and over time the result is the squandering of countless resources in lines of investment that should never have been begun.
If lower interest rates are the result of increased saving by the public, this increase in saved resources provides the material wherewithal to see the additional investment through to completion. The situation is very different when the lower interest rates result from the Fed’s creation of new money out of thin air. In that case, the lower rates do not reflect an increase in the pool of savings from which investors can draw. Fed tinkering, in other words, does not increase the real stuff in the economy. The additional investment that the lower rates encourage therefore leads the economy down a path that is not sustainable in the long run. Investment decisions are made that quantitatively and qualitatively diverge from what the economy can support. The bust must come, no matter how much new money the central bank creates in a vain attempt to stave off the inevitable day of reckoning.
The recession or depression is the necessary, if unfortunate, correction process by which the malinvestments of the boom period, having at last been brought to light, are finally liquidated. The diversion of resources into unsustainable investments out of conformity with consumer desires and resource availability comes to an end, with businesses failing and investment projects abandoned. Although painful for many people, the recession/depression phase of the cycle is not where the damage is done. The bust is the period in which the economy sloughs off the malinvestments and the capital misallocation, re-establishes the structure of production along sustainable lines, and restores itself to health. The damage is done during the boom phase, the period of false prosperity that precedes the bust. It is then that the artificial lowering of interest rates causes the squandering of capital and the initiation of unsustainable investments. It is then that resources that would genuinely have satisfied consumer demand are diverted into projects that make sense only in light of the temporary and artificial conditions of the boom.
The lesson: If you want to end the boom-bust cycle, shut all central banks down.
Sound money.
Only the Austrians thought of that.
The deeper lesson: If prosperity could be created by cheap money and credit, poverty would vanish overnight.
Hope you learnt something new today.
Thursday, May 7, 2009
On Watching Elections On TV
This morning, let me share some thoughts on the manner in which the elections are being covered on television. After watching a leading news channel for a few weeks between 8 and 10 pm, my conclusion is that Indian democracy does not hold any appeal on screen, unlike the US elections, which glues the world to their televisions.
There, it is candidate versus candidate, debate on policies – basic elements of “politics” – and this makes for good television.
On the other hand, television here presents the same tired picture of “party spokesmen,” one after another, and since they are not candidates, we cannot be too interested in what they say. The overall impression is that each defends to his utmost a “party line,” no matter how foolish he may appear as a result. These party spokesmen, who hog prime time tv, are not “politicians” in any sense of the term. They are best called “loyalists” – and in every case their loyalty is to a “political organization,” headed by their Supreme Leader. This supreme leader is, of course, never featured. The much talked about Manmohan-Advani tv debate never happened.
For this reason, which is a part of India’s political culture, there is little “politics” on tv. There are no great big rallies that are telecast, there are no thrilling debates. There are just “soundbites”; there are some “talking heads.” For the viewer, it is all quite dull. The same tired faces day after day, each trying to score minor debating points over the other. This is not “politics.” It is a theatre of the absurd.
Yet, I have been noticing a little bit of cynicism creeping into the proceedings. This is noticeable especially after it has become quite apparent that it is anyone’s guess where the next government will emerge from. To the “psephologists” and other election pundits, the realization seems to have finally dawned that what will happen after May 16 is a mad, unprincipled scramble for power as a “market” emerges for the 550-odd votes in the Lok Sabha.
I stress the word “unprincipled,” for time and time again the psephologists and their pundits stress the fact that the “coalitions” that people are talking about to rule the country will be formed on the basis of factors other than ideology or philosophy. We can only conclude they will be formed on the basis of spoils.
The word “democracy” is not an Indian word. Nor indeed, is “politics.” These words have their origins in ancient Greece, particularly Athens. These words were then unearthed by the philosophers of Europe during their “enlightenment,” and acquired a huge halo. Yet, something seems amiss when we try and use these words in India nowadays. This is because there must be a moral-intellectual dimension to politics. There must be the profession of a particular political philosophy. It cannot just be loyal spokespersons, venal allies and the lust for power.
Anyway, it was great to read SV Raju today talking of Minoo Masani and his gang fighting the 1957 elections as independents. That was politics based on the philosophy of classical liberalism. The story should inspire us in these otherwise bleak and uninspiring times. I was born in 1957, and it was heartening to note that we have some real old-timers around, on our side. Keep it up, Mr. Raju.
There, it is candidate versus candidate, debate on policies – basic elements of “politics” – and this makes for good television.
On the other hand, television here presents the same tired picture of “party spokesmen,” one after another, and since they are not candidates, we cannot be too interested in what they say. The overall impression is that each defends to his utmost a “party line,” no matter how foolish he may appear as a result. These party spokesmen, who hog prime time tv, are not “politicians” in any sense of the term. They are best called “loyalists” – and in every case their loyalty is to a “political organization,” headed by their Supreme Leader. This supreme leader is, of course, never featured. The much talked about Manmohan-Advani tv debate never happened.
For this reason, which is a part of India’s political culture, there is little “politics” on tv. There are no great big rallies that are telecast, there are no thrilling debates. There are just “soundbites”; there are some “talking heads.” For the viewer, it is all quite dull. The same tired faces day after day, each trying to score minor debating points over the other. This is not “politics.” It is a theatre of the absurd.
Yet, I have been noticing a little bit of cynicism creeping into the proceedings. This is noticeable especially after it has become quite apparent that it is anyone’s guess where the next government will emerge from. To the “psephologists” and other election pundits, the realization seems to have finally dawned that what will happen after May 16 is a mad, unprincipled scramble for power as a “market” emerges for the 550-odd votes in the Lok Sabha.
I stress the word “unprincipled,” for time and time again the psephologists and their pundits stress the fact that the “coalitions” that people are talking about to rule the country will be formed on the basis of factors other than ideology or philosophy. We can only conclude they will be formed on the basis of spoils.
The word “democracy” is not an Indian word. Nor indeed, is “politics.” These words have their origins in ancient Greece, particularly Athens. These words were then unearthed by the philosophers of Europe during their “enlightenment,” and acquired a huge halo. Yet, something seems amiss when we try and use these words in India nowadays. This is because there must be a moral-intellectual dimension to politics. There must be the profession of a particular political philosophy. It cannot just be loyal spokespersons, venal allies and the lust for power.
Anyway, it was great to read SV Raju today talking of Minoo Masani and his gang fighting the 1957 elections as independents. That was politics based on the philosophy of classical liberalism. The story should inspire us in these otherwise bleak and uninspiring times. I was born in 1957, and it was heartening to note that we have some real old-timers around, on our side. Keep it up, Mr. Raju.
Wednesday, May 6, 2009
On Urban Housing, Roads, Dreams And Theories
The announcement of a nano-housing project 100 km from Mumbai allows us to focus more clearly on the issue of roads. As a reader’s comment on the news report laments, it will take 6 hours every day for the poor soul who owns that nano house to commute to and from Mumbai. So even if the Tata’s gift a Nano car with each nano flat, there may be few takers.
Now, if there were excellent highways all around, the picture would be very different. More and more city folk would live further and further away from the city, and commute. Mega shopping malls would erupt in the vacant surrounds. The unreal estate of rural India would become real estate. And, for the city dweller, the ability to buy residential property would no longer be an impossible dream, for the roads would add to the supply of usable urban land, lowering land prices overall. Of course, we need not depend only on government roads. I am a loud advocate of private tramcars. But even if private developers and private road companies do build private roads to service their own properties, I don’t think it is entirely possible to wish away the role of The State in providing a basic network of functional toll-free roads around cities, between cities and towns, around towns, right up to every village, and even up to every homesteader’s property.
Now, this needs to be contrasted with APJ Abdul Kalam’s PURA scheme. My earlier post on this has elicited a few comments. In particular, Salil recommended the PURA journal website. I checked it out and found an article there titled “The President’s Dream”, which begins thus:
With a circular ring road around every 5 village cluster, villages will not connect to cities and towns; villagers will connect only with each other, in an endless circle.
I also find the assertion that “PURA minimises rural urban migration, and will even curb the mindless growth of cities” to be a product of that faulty “Indian Economics” that does not understand cities and urbanization, and pursues “rural development.” Note that the word “curb” implies the use for force on a natural process.
Yet, theory indicates that it is only the spread of urbanization that will “develop” rural India. This includes real estate development, as roads raise the value of their endless fields of mustard. For this, which is also a solution to the urban housing problem, we need a roads vision.
But the roads vision must be based on patterns predicted apodictically by sound praxeological theory. Urbanization is one such pattern, a qualitative prediction. Hubs-and-spokes is another. These pattern predictions are not based on “dreams”: they are all derived from deep thinking based on sound theory. Similarly, the pattern prediction of mushrooming coastal cities and towns in a free trade scenario is not a dream. It too is based on the praxeologically derived linkages between trade, transportation and urbanization. The sea remains the most efficient mode of bulk transportation.
Of course, we must dream. So I dream of “truckways”: roads only meant for trucks. And “busways” dedicated to buses. And “freeways” – toll-free roads for tourists and holidaymakers. I dream of coastal expressways. Highways into Afghanistan and central Asia. Highways into Tibet, into Myanmar, into Bangladesh. Trade and tourism. Peace. A better life for all. We must dream. Dreams matter.
But theories matter more.
Now, if there were excellent highways all around, the picture would be very different. More and more city folk would live further and further away from the city, and commute. Mega shopping malls would erupt in the vacant surrounds. The unreal estate of rural India would become real estate. And, for the city dweller, the ability to buy residential property would no longer be an impossible dream, for the roads would add to the supply of usable urban land, lowering land prices overall. Of course, we need not depend only on government roads. I am a loud advocate of private tramcars. But even if private developers and private road companies do build private roads to service their own properties, I don’t think it is entirely possible to wish away the role of The State in providing a basic network of functional toll-free roads around cities, between cities and towns, around towns, right up to every village, and even up to every homesteader’s property.
Now, this needs to be contrasted with APJ Abdul Kalam’s PURA scheme. My earlier post on this has elicited a few comments. In particular, Salil recommended the PURA journal website. I checked it out and found an article there titled “The President’s Dream”, which begins thus:
“It is President Kalam's dream to make India a developed country rapidly. PURA is one of the tools he has advocated to achieve that goal. PURA is a high-quality Rurban habitat on either side of a ring road linking a loop of villages. With that design, all infrastructure lengths are halved. Workplace and residences can be co-located, minimising thereby daily commuting to work, the costliest part of urban life. Located as it is in rural areas, real estate prices will be a fraction of that in cities; water and waste management become simple. Thus, PURA cuts down both capital costs and running costs of urban services, minimises rural urban migration, and will even curb the mindless growth of cities. It can thus promote both urban and rural development simultaneously and raise the quality of life in both areas.”
With a circular ring road around every 5 village cluster, villages will not connect to cities and towns; villagers will connect only with each other, in an endless circle.
I also find the assertion that “PURA minimises rural urban migration, and will even curb the mindless growth of cities” to be a product of that faulty “Indian Economics” that does not understand cities and urbanization, and pursues “rural development.” Note that the word “curb” implies the use for force on a natural process.
Yet, theory indicates that it is only the spread of urbanization that will “develop” rural India. This includes real estate development, as roads raise the value of their endless fields of mustard. For this, which is also a solution to the urban housing problem, we need a roads vision.
But the roads vision must be based on patterns predicted apodictically by sound praxeological theory. Urbanization is one such pattern, a qualitative prediction. Hubs-and-spokes is another. These pattern predictions are not based on “dreams”: they are all derived from deep thinking based on sound theory. Similarly, the pattern prediction of mushrooming coastal cities and towns in a free trade scenario is not a dream. It too is based on the praxeologically derived linkages between trade, transportation and urbanization. The sea remains the most efficient mode of bulk transportation.
Of course, we must dream. So I dream of “truckways”: roads only meant for trucks. And “busways” dedicated to buses. And “freeways” – toll-free roads for tourists and holidaymakers. I dream of coastal expressways. Highways into Afghanistan and central Asia. Highways into Tibet, into Myanmar, into Bangladesh. Trade and tourism. Peace. A better life for all. We must dream. Dreams matter.
But theories matter more.
Tuesday, May 5, 2009
For A Life Without Our The State
I began my morning reading an interview with George Selgin, the great scholar of money and banking, published in the official magazine of the Richmond Federal Reserve. This is just about as “mainstream” as you can get. So he does scoff at Rothbardian libertarians.
Despite this, the central point he emphasises (in agreement with the libertarian view) is this:
He also emphasises that deposit insurance must end. No more government guarantees to banks. No more moral hazard. No more monopoly note issue by central banks. And much more. And if coins are privatized, everything else will work out fine.
I have also written recently on why “The State should have nothing to do with money, except punish fraud.” This pious statement should also be taken to imply that things are seriously wrong when it is The State that is committing monetary fraud and actually operating in the manner of a “counterfeiter.”
What is the role of The State in a free society?
Recall that I have only just upheld the idea of “private production of security.”
If The State is not required to provide money, nor to provide security, what is it required for?
And what if The State is not some “ideal type” like the Platonic republic, but a fraudster; a Predatory State? What should the people do then?
They should increasingly turn to The Market – and the most vocal among them should publicly voice strong arguments in favour of freeing all markets. This should include the creative elite in film, theatre, music, literature and the performing arts.
I was therefore extremely happy to read an interview with such a “political” theatre personality published in the ToI today. The introduction says:
She says they were the official theater group of the Communist Party in West Bengal. They welcomed the arrival of the Communist government and stopped staging anti-establishment stuff. All this has changed now. They now consider the Communist administration to be “demonic.”
Looks like some sheeple are waking up. Good news.
But what does Shaoli Mitra dream of today?
She says:
This is surely asking for the impossible. Why not just ask for Free Markets? And let The “demonic” State recede, and go on receding, until it finally withers away?
Of course, there are many among us who argue for a greater role of The State. Arjun Sengupta of the planning commission is top-most among them. Here he is today arguing that “job creation cannot be left to market forces.” He says that The State must play a role in creating jobs! Join the army, what?
He said this in his capacity as chairman of the National Commission for Enterprises in the Unorganised Sector.
I recall my many meetings with small businessmen from the unorganized sector, who operate on the streets. Their only cry was to be Free From Predation (by you know who). Just leave us alone to trade, they all said. They even refused bank credit, saying that they had their own unorganized money lenders to depend on.
Arjun Sengupta is “on the other side.”
So is the Economic Times. An editorial today calls for the “elimination of black money.”
If there is no role for The State, why should anyone pay taxes? Is there any moral claim The State possesses to command the loyalty of the citizens, a loyalty without which paying taxes cannot be our “moral duty”?
We need to think along these lines.
Despite this, the central point he emphasises (in agreement with the libertarian view) is this:
Question: How is your book relevant today to monetary policy?
Selgin: The real lesson I want to get across with the book is that we should take private production and issuance of circulating money more seriously than we do. There is a great deal of misunderstanding about the historical record and particularly a great deal of myth that has grown out of the ancient and medieval dogma that kings and princes alone should be trusted to coin money. That dogma, which somehow managed to survive episode after episode of royal debasement, lies at the foundation of the entire modern superstructure of state control of money. Through their unthinking failure to question governments’ coinage “prerogative,” economists set a precedent that made it all too easy for them to excuse governments’ subsequent monopolisation of paper currency, which in turn paved the way to fiat money, unlimited government guarantees, and the prevailing international monetary chaos.
I wrote Good Money to challenge the oldest and most fundamental belief behind modern governments’ control of money, by looking at a rare case where government didn’t issue coins, but the private sector did. Contrary to what people assume, the episode suggests that the private sector alone is fit to coin money.
He also emphasises that deposit insurance must end. No more government guarantees to banks. No more moral hazard. No more monopoly note issue by central banks. And much more. And if coins are privatized, everything else will work out fine.
I have also written recently on why “The State should have nothing to do with money, except punish fraud.” This pious statement should also be taken to imply that things are seriously wrong when it is The State that is committing monetary fraud and actually operating in the manner of a “counterfeiter.”
What is the role of The State in a free society?
Recall that I have only just upheld the idea of “private production of security.”
If The State is not required to provide money, nor to provide security, what is it required for?
And what if The State is not some “ideal type” like the Platonic republic, but a fraudster; a Predatory State? What should the people do then?
They should increasingly turn to The Market – and the most vocal among them should publicly voice strong arguments in favour of freeing all markets. This should include the creative elite in film, theatre, music, literature and the performing arts.
I was therefore extremely happy to read an interview with such a “political” theatre personality published in the ToI today. The introduction says:
Theatre personality and writer Shaoli Mitra was among the galaxy of intellectuals who have backed the Left Front government in West Bengal for three decades. All that changed a couple of years ago.
She says they were the official theater group of the Communist Party in West Bengal. They welcomed the arrival of the Communist government and stopped staging anti-establishment stuff. All this has changed now. They now consider the Communist administration to be “demonic.”
Looks like some sheeple are waking up. Good news.
But what does Shaoli Mitra dream of today?
She says:
We are seeking a non-partisan government that is humane in its approach and respects its citizens, the Constitution and the judiciary. The government should allow space for protest and dissent. What's also important is that it should ensure that the police force is neutral and not an extension of its political machinery.
This is surely asking for the impossible. Why not just ask for Free Markets? And let The “demonic” State recede, and go on receding, until it finally withers away?
Of course, there are many among us who argue for a greater role of The State. Arjun Sengupta of the planning commission is top-most among them. Here he is today arguing that “job creation cannot be left to market forces.” He says that The State must play a role in creating jobs! Join the army, what?
He said this in his capacity as chairman of the National Commission for Enterprises in the Unorganised Sector.
I recall my many meetings with small businessmen from the unorganized sector, who operate on the streets. Their only cry was to be Free From Predation (by you know who). Just leave us alone to trade, they all said. They even refused bank credit, saying that they had their own unorganized money lenders to depend on.
Arjun Sengupta is “on the other side.”
So is the Economic Times. An editorial today calls for the “elimination of black money.”
If there is no role for The State, why should anyone pay taxes? Is there any moral claim The State possesses to command the loyalty of the citizens, a loyalty without which paying taxes cannot be our “moral duty”?
We need to think along these lines.
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