Freakonomics is Craponomics

When the book Freakonomics first appeared some years ago, I did glance through it - only to be bitterly disappointed. To me, it seemed like statistical number-crunching devoid of any theory. The authors, to me, seemed to be reaching fanciful conclusions that were indeed "freaky" - but lacked sense. To me, it was definitely NOT economics. Over the years I have only wondered how the book became such a hit.

The other day, a friend bought the book and when I inquired as to what she thought of it, she said the authors were just "trying to be clever" and further added that reading the book had "not added a jot to her understanding of humanity." I then thought that a detailed review of the book was in order. 

Luckily, I accidentally found such a review - by Robert Wenzel of EconomicPolicyJournal.com. The review ends with these words; words that I myself might have penned:

In a sense though, this book is a great mystery book. The great mystery being just what marketing plan was implemented to drive this disaster onto the best seller list?

I am therefore pasting the entire review below, as a warning to would-be-economists:

Inside The Mind Of Steven D. Levitt : A Review of Freakonomics 

by Robert Wenzel

Steven D. Levitt (with Stephen J. Dubner) has a hot new  bestseller Freakonomics: A rogue economist explores the hidden side of everything.

In the introduction, Levitt makes abundantly clear that his book has no central theme. I can almost agree with this assessment. The book is indeed much more a blog type compendium of different topics, rather than an exposition on one theme. But I did find one theme that runs through out the book. Levitt poses interesting questions, reports interesting facts and occasionally makes clever arguments, but these questions, facts and arguments are surrounded by misleading statements, hazy statements, inaccuracies, poor logic, sloppiness and outright errors.

These flaws run from the minor to the grand scale. Indeed,one must begin by considering that Levitt clearly believes that through out the book he is "doing economics." In fact, although he does tend to include some type of cost benefit analysis in most chapters, his analysis tends to be much more that of a sociologist than that of an economist. Consider the titles of some of his chapters: "What Makes a Perfect Parent?", "Where Have All the Criminals Gone?" and "What Do School Teachers and Sumo Wrestlers have in Common?"

Further although there is an implication by Levitt that he is writing theory, he is in fact more of a historian reporting on past data.(For the important distinctions between theory and history, see Ludwig von Mises' Theory and History.)So instead of a book of economic theory, we have a flawed book on sociological history.

On a minor scale, Levitt tends to use misleading chapter titles. His chapter "What do School Teachers and Sumo Wrestlers have in Common?" comes up with the answer: some in both groups cheat to get ahead. Since there are some in almost any group that will cheat to get ahead, there is nothing distinctive about this supposed "link."

It is the same as saying "What does Steven Levitt and the members of the offensive front line of the New York Giants football team have in common?" Answer: They all use cell phones. The facts in both cases are true but they result in no new insight, but the questions themselves tend to mislead one into thinking that there is some type of distinctive link in the answers when there is not. At most the chapter title is a sloppy effort at being cute.

Levitt goes from bad to worse in the title of his next chapter: "How is the Ku Klux Klan like a Group of Real Estate Agents?" His answer: they both use privileged information to their advantage. Again, nothing remarkable about this chapter, since everyone uses privileged information to their advantage (Indeed that is pretty close to the definition of an entrepreneur!)

Levitt's presentation is so sloppy that it almost fails to get across the point that privileged information is used by the Ku Klux Klan and real estate agents. In short, it is a pretty bad example used to get in a little, quite interesting, history about the Ku Klux Klan.

As for sloppy and hazy arguments, in one chapter, Levitt relates the story of how a pre-school attempted to solve a problem of children being left late after school. The pre-school instituted a fine for parents who left their children late. With the new stated policy (It was only a $3.00 fine), more parents left their children late.

Levitt in the next chapter on page 45 calls this cheating: "So if...day-care parents...cheat are we to assume that mankind is innately and universally corrupt?"

Given all the cheating going on in the world, it is quite odd that Levitt uses this as one of the examples, which only by the wildest stretch could be called "cheating." In fact, it really is a story about the limits of knowledge, and how people will change their actions when more knowledge becomes available.

In Levitt's next chapter sloppiness is coupled with an implied wrong conclusion. Levitt does the math and shows that on a per hour basis "The per hour death rate of driving versus flying...is about equal." He then concludes "The two contraptions are equally likely... to lead to death." He ends his analysis of flying versus driving with this conclusion, which tends to imply that it doesn't matter whether you fly or drive. But, in fact, using Levitt's own data the clear conclusion is the exact opposite of what Levitt implies. The clear conclusion is to fly whenever possible. Why? Because you get there faster, which means you are traveling a shorter amount of time at the per hour death rate. If it takes five hours to fly from New York to Los Angeles and three days or 72 hours to drive, then if the death rate per hour is the same, the risk by driving is close to 15 times greater. If you do nothing else after reading his book other than take Levitt's implied conclusion on driving versus flying and drive instead of fly, Levitt has increased your chances of dying when traveling by nearly 15 times!

Levitt's chapter on names continues the trend of sloppiness, haziness, illogic and poor conclusions.

He tells us that "...it isn't famous people who drive the name game." He uses the fact that no parents are naming their daughters Madonna as part of his argument that this is proof that parents don't name their children after famous people, but this is just sloppy logic. Just because parents don't name their children after Madonna doesn't mean many parents aren't naming their children after famous people. In fact only a page away from where Levitt tells us that famous people don't drive the name game, Levitt lists the most popular black names in California in the year 2000. Number 4 was Michael and Number 2 was Jordan. Hmmm, it seems to coincide with a period when there was a pretty famous basketball player on the court, named Michael Jordan.

In short, I could literally write a book (maybe many books) detailing the errors, sloppiness, inaccuracies, haziness and poor theory going on in this book. And I haven't even touched on the errors in his chapter on Roe v.Wade. (Levitt is probably most well known for his theory that abortions reduce crime, see Steve Sailer for a critique of this theory.) Nor have I discussed his love affair with regression analysis, which is a questionable method to prove theory in the social sciences (See Leoni and Frola)

In a sense though, this book is a great mystery book. The great mystery being just what marketing plan was implemented to drive this disaster onto the best seller list?

To read the original review, click here.

In Defence of "Insider Trading"

News has it that Raj Rajaratnam, a Sri Lankan hedge-fund manager in New York, has been found guilty of "insider trading" - which means that he made money because he knew what others did not know. Twenty years in prison seems to be the fate that awaits him. 


Note that many, many market trades require special knowledge and information - as Hayek discusses in this old paper of his, "On the Use of Knowledge in Society." 


Indeed, journalists' "scoops" are precisely of this sort - and no one complains that maintaining secret sources of information is unethical for a journalist.


What then is so wrong about insider trading? Tibor Machan, professor of philosophy and business ethics, has written a journal article on the subject that begins by defining the activity as follows:

Insider trading  per se is obtaining information from non-public sources— private acquaintances, friends, colleagues—and using it for purposes of enhancing one's financial advantage. As Vincent Barry explains, “Insider dealings refers to the ability of key employees to profit from knowledge or information that has not yet become public.” Sometimes such a practice can be conducted fraudulently, as when one who has obtained the information has a fiduciary duty to share it with clients but fails to exercise it, or in some other criminal fashion, as when the information is itself stolen.

Machan goes on to argue:

It is against the common view of insider trading presented in business ethics discussion that I want to argue that it may be one's achievement or good fortune to learn of opportunities ahead of others and there is nothing morally wrong with this.  In fact, acting on such information can be prudent, exhibiting good business acumen, whenever it does not involve the violation of other’s rights.  The conventional view rests on the belief that others have a right to one's revealing to them information one has honestly obtained ahead of them.   But there is no sound general moral principle that requires this.

Machan gives this example of insider trading:

A knows the president of a firm who tells me that they are thinking of expanding one of their divisions or have struck oil in a new field, so  A buys a block of stock in anticipation of the increase of value once the deal is done or the knowledge becomes public.  A is not deceiving anyone, nor is  A defrauding anyone.  A is not taking anything from others that  A wasn’t freely given.  A is acting on special, “insider,” information, that is all.

He then shows us how this financial gain on A's part is not immoral nor unethical:

It is conventional wisdom to treat this version of insider trading as morally wrong because it supposed to adversely affect others by being unfair.  As one critic has put it, “What causes injury or loss to outsiders is not what the insider knew or did, rather it is what they themselves [the outsiders] did not know.  It is their own lack of knowledge which exposes them to risk  of loss or denies them an opportunity to make a profit.”

Machan derides those who think the above act on A's part is immoral. He says they confuse the market with a game in which all must be given an equal footing from which to start - as in the golf "handicap." Or what others call a "level playing field." Such ideas are nonsensical. 


Those who demand Legislation against what they call insider trading are, according to Machan:

Those who claim otherwise as regard insider trading confuse the market place with a game in which rules are devised or set down with the special purpose of giving everyone an even chance—e.g., when in golf or steeple chasing handicaps are assigned...

Note that in a "private law society" - a world without Legislation - one would be bound by contract to either reveal information to some, or to conceal certain information from others; that is, these "duties" would be covered by Contract. In Rajaratnam's case the news report mentions that his "defense lawyers had stuck consistently to their main theme that Rajaratnam's trades were guided by a trove of research and public information, not secrets leaked by highly-placed corporate insiders." There is no mention of any contract violations Rajaratnam may have committed while trading the way he did. Twenty years in jail for this seems a miscarriage of justice to me. Injustice!


Anyway, do read Tibor Machan's excellent article from which all the above quotes have been extracted, which was published in the Public Affairs Quarterly of April, 1996, and is provocatively titled "What Is Morally Right With Insider Trading," by clicking here. 


Beware this bogey of "insider trading." This is just another of those "crimes" without any "victim." Instead, what we now have is "victimisation." Throw out all such Legislation. Let the stock markets be free!

PS: Here is an article by Robert P. Murphy of the Mises Institute on insider trading and the Rajaratnam case that is well worth reading.

Why Osama's Ghost Is Smiling

Writes Eric Margolis, author of American Raj: Liberation or Domination?: Resolving the Conflict Between the West and the Muslim World, in a column published by LewRockwell.com:

Bin Laden is dead, but bin-Ladenism lives on. Osama’s primary goal was to end Western domination of the Muslim world, and exploitation of its resources, which he claimed were being plundered. The Western-backed dictators, generals and kings that ruled the Muslim world as overseers for foreign interests had to be overthrown proclaimed bin Laden. 

The Muslim world rejected bin Laden’s bloody-mindedness and his utopian calls for a reborn Islamic caliphate, but many of its people, particularly so younger ones, embraced his calls for revolutions to liberate the region from brutal dictatorships that licked the West’s boots, spread corruption, and betrayed the cause of Palestine. Husni Mubarak’s Egypt amply fit this description. 

Osama bin Laden lived long enough to see the revolutions that he had helped ignite among young people burst into towering flames. In this sense, bin Ladenism will prosper and spread, enhanced by the image of Osama the martyr. 

The Saudi revolutionary leaves another legacy. He repeatedly stated that the only way to drive the US from the Muslim world and defeat its satraps was by drawing the United States into a series of small but expensive wars that would ultimately bankrupt it. The United States under President George W. Bush and then Barack Obama rushed right into bin Laden’s carefully laid trap. 

Today, the nearly bankrupt United States is spending hundreds of billions annually waging small wars in Afghanistan, Iraq, Somalia, Yemen, and the Sahara. Grotesquely overblown military spending and debt addiction are crippling United States. That is why the ghost of bin Laden may be smiling.

Read the full article here.

Against Soft Drinks - and For Soft Drugs

Cricket heroes and Bollywood heroes are always to be seen advertising soft drinks like Coke and Pepsi. And no "hero" ever advertises beer! At least Peter Tosh was possessed of the courage to sing, as regards ganja:

 

Legalise it,

I'll advertise it.

As compared to "soft drugs" like ganja and beer, soft drinks are extremely harmful to your health - and if you want proof, do read this article by Dr. Joseph Mercola: a very good doctor indeed, whose columns I regularly read on LewRockwell.com, where they despise "Obamacare" and encourage doctors like Mercola who talk of ways to maintain "natural health" while warning about "conventional lifestyles," like soft drinks. He begins by saying that, along with french fries, doughnuts and chips, soft drinks rank high among the "5 worst food and drinks."

Soft drinks contain sugar - too much sugar. So does tea and coffee - of which too much is consumed in India these days. What happens to your body after you drink a Coke or Pepsi, with all that sugar (and no cocaine!)? Dr. Mercola tells us what:

Once [the soft drink has been] ingested, your pancreas rapidly begin to create insulin in response to the sugar. The rise in blood sugar is quite rapid. Here’s a play-by-play of what happens in your body upon drinking a can of soda [American word for soft drink]:

• Within 20 minutes, your blood sugar spikes, and your liver responds to the resulting insulin burst by turning massive amounts of sugar into fat.
• Within 40 minutes, caffeine absorption is complete; your pupils dilate, your blood pressure rises, and your liver dumps more sugar into your bloodstream. As you could see in the report above, DeNies’ blood glucose level was 79 at the outset of the experiment, and after 40 minutes it had risen to 111!
• Around 45 minutes, your body increases dopamine production, which stimulates the pleasure centers of your brain – a physically identical response to that of heroin, by the way.
• After 60 minutes, you’ll start to have a blood sugar crash, and you may be tempted to reach for another sweet snack or beverage.

As I’ve discussed on numerous occasions, chronically elevated insulin levels (which you would definitely have if you regularly drink soda) and the subsequent insulin resistance is a foundational factor of most chronic disease, from diabetes to cancer. 

Dr. Mercola concludes thus:

[Ingesting a soft drink] clearly elevates your insulin levels, and elevated insulin levels are the foundation of most chronic disease. Not only does drinking just one soda [American word for soft drink] per day increase your risk of diabetes by 85 percent, it also increases your risk of:

• Heart disease
• Cancer
• Arthritis
• Osteoporosis
• Gout
• Non-alcoholic fatty liver disease (NAFLD) 

Another reason why soft drinks are bad is, as Dr. Mercola points out, they contain "tap water."

Let us now turn our attention to beer - which contains neither sugar nor salt, and is boiled prior to fermentation. This boiled and fermented barley-water is GOOD for you and your health. It is "nutritious." Germans call it "liquid bread." It is especially good where the natural drinking water is contaminated - as in much of India. And beer is not "hard liquor."

And look at ganja-charas, which are not physically addictive - unlike the sugar in the soft drink. Indeed, ganja cures many diseases, from glaucoma to asthma. I have an asthmatic friend who has been cured by ganja-charas - and no longer requires an inhaler.

And look at tobacco, tea and coffee - all of which came from abroad; that too, in fairly recent times.

So let's hear it for beer and ganja:

Legalise it,

I'll advertise it.

The Antidote Blog Needs Your Support

This blog has been surviving for three years or so on nothing more than love and fresh air - and my passion for the Philosophy of Liberty. In these three years, readership has grown considerably, and many a reader has written in to encourage this effort. That too has kept me going. The break in blogging over the past 10 days resulted in quite a few letters inquiring as to whether all was well with me, for such long breaks have never ever occurred in the past. When I finally resumed yesterday, a comment came in from a reader who calls himself Greenleaf, which has been published, that began thus:

welcome back.. was afraid you had discontinued this blog permanently. you are the only libertarian voice here and Indians need to understand the concept of liberty. 

Comments such as this sure gladden my heart.


However, the sad truth is that for financial reasons I am unable to continue. Royalties from my published works have not been coming in for many years now. One newspaper has even refused to pay for a published column! My attempts to publish newer works have not succeeded. Perhaps sinister forces are at work - forces from within The State. 


There are others who provide public services of this kind - like Wikipedia or LewRockwell.com - who depend on donations. The Antidote Blog must do so too.


So, if you think this little lamp of Liberty is worth supporting, do write in. I need some big donors - for building an office-cum-residence, equipment, transportation and communication, books, etc.


The battle that lies ahead will be a long one. There are simply too many errors to be demolished. This will take time. This is particularly true of India - where widespread poverty has had the tendency to make "educated" people support strong State action. Of course, as I witness every passing day, this has only made the poor poorer.


Liberty!


I hope some of you will actively support this blog in its efforts to spread this beautiful idea.

The Corruption Of Economic Science

The Nobel Prize in Economic Science has finally got my goat - and a "tipping point" has been reached. This year's prize takes the entire cake shop and represents what I believe to be something extremely dangerous - the deliberate corruption of a vital science. I have been watching this prize for many years now, and seeing it go to complete clowns and dangerous demagogues - Paul Krugman being the best example. But this year...

Let's begin with the opening statement of the "information for the public" issued by the Academy. It begins:

According to a classical view of the market, buyers and sellers find one another immediately, without cost, and have perfect information about the prices of all goods and services. Prices are determined so that supply equals demand; there are no supply or demand surpluses and all resources are fully utilized.

The document then goes on to say that the awardees have shown that this so-called "classical" view is false, that there are "search costs and frictions," and that their research has important practical applications in the labour and housing markets.

Anyone who has looked for a job or tried to rent a house knows that there is a long search process, and it has costs. This happens precisely because market participants do NOT possess "perfect information." They never can. There are therefore market solutions - like real estate agents for housing and newspapers that advertise job vacancies.

This is something everyone knows - and it is most evident in the area of advertising, which is such a huge industry simply because "perfect information" is a great big fiction. Advertisements tell the consumer "what he did not know that he did not know" - and this is a market solution to imperfect knowledge and information.

But what does the research of our awardees suggest? The Academy states:

In the classical model of competition, the unregulated market outcome is both unique and efficient. But in a world with search costs, there can sometimes be several possible market outcomes. This was shown by Peter Diamond, who also pointed out that only one of these outcomes can be the best. This, in turn, implies that there is reason for governments to try and find ways of inducing the economy to move towards the best outcome.

Thus, at a time when all the real economists on this planet are trying to roll back the State, these three blokes have discovered yet another reason to expand State interference in the market economy; another wretched form of interventionism. What is their research based on?

The answer: MATHEMATICS!

These blokes have developed a mathematical "model" to explain unemployment: the Diamond-Mortensen-Pissarides (DMP) model. The Nobel Academy tells the public that "today, the DMP model is the most frequently used tool for analyzing unemployment, wage formation and job vacancies." I find this portion of the text most significant:

It has been known for a long time that the labor market fluctuates between situations of either high unemployment and few vacancies or low unemployment and many vacancies. This empirical pattern, known as the Beveridge curve due to the British economist William Beveridge, is illustrated in figure 1, based on data on the U.S. economy in the 2000s. The DMP model provides a theoretical explanation for the Beveridge curve.

The DMP model can be used to explain the position of the Beveridge curve and the location of the economy on the curve. If unemployment and vacancies move in opposite directions, then changes can be regarded as reflecting variations in the demand for labor which occur over a business cycle.

Lord William Beveridge once headed the London School of Economics, the birthplace of "Fabian Socialism," and it is he who pushed that nation onto the disastrous path of the "welfare state."

But what of the business cycle itself? What causes all these booms and busts? No answer. No logical economics. Just loads of maths, and a frightful diagram. Is this "economic science"?

I found an independent assessment of this year's prize thanks to LewRockwell.com here. It is by Robertt Wenzel of EconomicPolicyJournal.com, and it is bitterly critical and extremely sarcastic - deservedly. On Peter Diamond, this report says:

Diamond, 70, is an economist at the Massachusetts Institute of Technology, and a specialist in Social Security. Bernie Madoff would have loved to have Diamond on his team, since Diamond completely ignores the Ponzi like aspects of Social Security and tinkers with "fixing" the scam. Going beyond Madoff, Diamond then ignores the coercion involved in Social Security. He focuses with tunnel-like narrow vision beyond the coercive aspects, and Ponzi like aspects, to pontificate in numerous journal articles and books about how to "save" Social Security, including recommendations to cut "benefits" and aggressively increase Social Security taxes.

He adds that Diamond was "elected a fellow and has served as President of the Econometric Society." In my opinion, econometrics is a proven failure. The Nobel prize also went to the founders of Long Term Capital Management, which crashed. Forgotten already? Econometrics has nothing to do with the true science of Economics. It is a corruption of science.

The author of this report adds, on the other awardees:

Mortensen, 71, is an economics professor at Northwestern University in Evanston, Illinois. He studies frictional unemployment. This is like studying half time in a basketball game. Yeah, it exists, but it is a pretty simple concept that doesn't tell you much about the game. Frictional unemployment simply means that if someone loses a job, it takes them time to find another job.

Mortensen along with Pissarides (who is 62, and a professor at the London School of Economics) and, to some degree, Diamond have taken the simple concept of frictional unemployment and put it in mathematical form to create search and matching theory. There appear to be no successful practical applications for the Alice in Wonderland equations created. Their only valuable input is one we have been pointing out here regularly: "that more generous unemployment benefits give rise to higher unemployment and longer search times."

Read the full report.

Let us now turn to the true interests of the working classes, especially those who are unemployed. Booms and busts - the "business cycle" - are caused by central banks, that is, by governments, and the only way to ensure steady economic growth is sound money, the gold standard, and free banking under Law.

Further, ALL State interventions in the labour market - beginning with "minimum wage legislation" - cause unemployment. Labour unionism causes unemployment. And it is in the completely unhampered market that all workers can find work and survive.

What I have written above is according to the established science of Economics of the Austrian School. You can find these views scientifically explained and established logically in the works of Ludwig von Mises and Friedrich Hayek. There are innumerable scholars belonging to this school whose work needs public recognition - simply because the public must be made aware of where their true interests lie. The Nobel prize has gone, once again, to peddlers of nonsense, and propagandists for misgovernment. This is against the general public interest. It is also a corruption of science. This should be widely condemned.

[This post is continued in Part 2, available here.]

I Disown This Publication

India's premier online bookstore, Flipkart.com, as I just discovered, is selling a book purportedly written by me called Busy Bee 4 Teacher's Resource, published by Macmillan Education of the UK in 2003. The book is priced at Rs. 581.

Funny thing is this: I have never written any such book, nor do I have any written contract with Macmillan Education of the UK.

I have had two books published by Macmillan India, and both are available from Flipkart.com:

First: Antidote: Essays Against the Socialist Indian State, available here, for Rs. 189 in paperback, published by Macmillan India in 2000.

Second: Antidote 2: For Liberal Governance, published by Macmillan India in 2003, available here in paperback for Rs. 280. The title given by Flipkart.com is Antidote 2: Columns for Freedom. I wonder how they got this title, for this was rejected by the Macmillan editor, in favour of the tame one - For Liberal Governance.

I have written to Macmillan India and they have promised to look into the matter.

However, what I want to publicly state on this blog is that I disown the book published by Macmillan Education of the UK in 2003, under the title Busy Bee 4 Teacher's Resource.

Don't ever buy that book.

As a true teacher's resource I recommend my Free Your Mind: A Citizen's Guide to Political Economy, available free online in its second edition here. If anyone wants to publish this as a book, I would be happy to write a third edition. This second edition is now available in many languages, including Chinese, Arabic, Turkish, Russian, Kyrgyz and Portuguese.

This post is for the record.

Chacha Speaks - A Whole Lotta Bull!

Chacha Manmohan S Gandhi's address to the nation on the occasion of the 64th anniversary of Independence Day, the day on which our ancestors threw out the British Raj and installed the CONgress, is available here.

At the outset, let us note that Chacha does not speak to the public much. Just the other day, he held a press conference at which not much was said, except that it was his first press conference in four years. Quiet, backdoor man, our Chacha.

Predictably, Chacha began by invoking the spirit of Jawaharlal Nehru, the Great Socialist, whose grandson's widow now commands the CONgress - and Chacha as well. He said:

When Pandit Jawaharlal Nehru unfurled the Tricolour on this historic Red Fort, on 15th August, 1947, he called himself the first servant of India. I address you today in the same spirit of service.

Yes, it is true that our Chacha has spent his entire life in "public service": he has been Chairman of the University Grants Commission, Governor of the Reserve Bank, Deputy Chairman of the Planning Commission, Finance Minister, and now he has reached the very top of the greasy pole and become PM. A lifetime of selfless "service," he assures us.

Let us now jump to the penultimate para of his speech, where this "first servant of India" talks about the forthcoming Commonwealth Games. An obscene amount of public money has been spent on hosting these games, and we all know that much of this money has been stolen by the "servants of India" Chacha employed for the purpose. Chacha says:

The Commonwealth Games will start in Delhi after about one and a half months. This will be a proud moment for the whole country and especially for Delhi. I am convinced that all our countrymen will treat the Games as a national festival and will leave no stone unturned to make them a success. The successful organization of Commonwealth Games would be another signal to the world that India is rapidly marching ahead with confidence.

Actually, to most observers, these games are our "common loss." It is clear that Chacha is talking rubbish. He expects us to believe this rubbish - simply because HE said it. He thinks we are all schoolchildren, or illiterates, or JNU grads. He thinks we are a nation of fools - because he knows that the CONgress has been fooling us all these past 64 years with this "first servant of India" bullshit. He wants to continue on this path.

It is poor form to end a political speech on such an important occasion with a bald lie. The politician who does this loses his audience entirely. But Chacha is no politician - and we all know that. He calls himself an "economist" - so let us now examine what he said on an economic issue of great importance: inflation. He said:

I know that in the last few months high inflation has caused you difficulties. It is the poor who are the worst affected by rising prices, especially when the prices of commodities of every day use like foodgrains, pulses, vegetables increase. It is for this reason that we have endeavored to minimize the burden of increased prices on the poor. Today, I do not want to go into the detailed reasons for high inflation. But, I would certainly like to say that we are making every possible effort to tackle this problem. I am also confident that we will succeed in these efforts.

More bull.

Inflation is a "policy" used by government to fund itself. Chacha is an "inflationist." All Keynesians are. But he doesn't want to "go into the detailed reasons for high inflation." He wants to keep the people in the dark - to go on fooling them forever. First servant of India, indeed.

If you want to know the real causes of inflation, I recommend an article I once wrote called "Funny Money." You can obtain it here.

The rest of the speech babbles on and on about a host of issues - and it all sounds like the same old bull we have been hearing for so long. What I found particularly odd is that, just after boasting that ours is one of the fastest growing economies of the world today, Chacha thanks those who made this possible - but misses out on our businessmen and entrepreneurs. He says:

All of you have contributed to India's success. The hard work of our workers, our artisans, our farmers has brought our country to where it stands today. I specially salute our soldiers whose bravery ensures the safety of our borders. I pay tribute to all those martyrs who have sacrificed their lives for our country.

This is the Jai Jawan, Jai Kisan nonsense. Of course, this servant of the Nehru dynasty cannot bring himself to say "Jai Vyapari."


To conclude: Lewis Carrol's story of Humpty Dumpty is a satire on a British prime minister of that era - or so I believe. Chacha is our Humpty Dumpty. He "sat on the wall" between Liberalism and Socialism for a long, long time - but finally fell on the wrong side. When he ascended to the top post, everyone welcomed him as a "liberalizer." But he turned out to be nothing of the sort. He remained a Statist - only, in his case, a Welfare Statist. And an inflationist to boot. He has only championed increases in the Role of the State - (mis)education, right to work, right to food etc. For these, he has levied new taxes. He has also borrowed excessively. And inflated the currency too. All these measures cause "capital consumption." Thus, they retard progress. They reduce prosperity. They cause de-civilization. They harm us all - especially the poor, in whose name all these first servants of India profess to work. Never has Chacha spoken in favour of The Market. His trade minister, Kamal D Nutt, single-handedly wrecked the WTO. Chacha hates the idea of free international trade. Even today, foreign capital is debarred entry into many areas where it could do great good - like retailing, on which I have a recent post, here.

So there you have it. The "world's largest democracy" - and a prime minister who has never won a Lok Sabha election, deliberately trying to fool the people, pulling the wool over their eyes.

But I do believe that our own Humpty Dumpty has suffered a fatal fall. This bogus speech proves it.

Auto-Rickshaw Economics

Yesterday's post against three-wheeled auto-rickshaws, arguing for four wheels instead, elicited a host of comments, some of which inquired about the "economic argument" backing my case. After all, said one reader, an auto-rickshaw represents lower Capital costs to start a small business. Further, the rides are cheaper than taxis. Allow me to elaborate on these economic arguments in this post.

First and foremost, the auto-rickshaw does NOT represent lower Capital costs for the poor entrepreneur. Since they are licensed, and permits are hard to come by, a second-hand auto-rickshaw in New Delhi can cost around 2,50,000 rupees. This, when a second-hand modern car in reasonably good condition comes for about 80,000 rupees. In other words, if there was no licensing, the poor entrepreneur now driving an auto-rickshaw would be the owner of three taxis. If licensing was abolished, entrepreneurs would fare much better, and passengers too would get a much more comfortable ride. The RTOs are therefore destroying Capital that belongs to poor entrepreneurs. They are also guilty of depriving the consumer of quality transport services.

Second: The real "cost" of the auto-rickshaw business is the inefficient use of scarce road space. In urban areas, roads are precious Capital, and they are scarce. Therefore, they must be used efficiently. If roads had private owners, they would surely restrict the entry of vehicles that slow traffic down and disrupt road safety. In all our cities and towns, because of the profusion of auto-rickshaws, traffic has become a nightmare, impossible to regulate in any scientific manner. The costs of the auto-rickshaw's inefficiency are being transferred to other vehicle owners. Thus, there are huge "negative externalities" - as, for example, when a bus swerves into the middle lane to overtake an auto-rickshaw and every car driver has to slow down, change gears, and waste fuel as well as time.

Thus, auto-rickshaws are neither cheap, nor efficient, nor comfortable. They proliferate because of our socialist system. They are a part of the grand socialist "design" to keep the country poor. They are cheating the consumer. They are a cause of harassment to all other road users. And they are not the best option for transportation entrepreneurs either. If a poor man was allowed to use a second-hand car as a taxi, his productivity would rise, the efficiency of road use would rise, the consumer would be better off - in other words, there would be huge gains all around.

So spread the word: The socialist three-wheeled auto-rickshaw must go.

Real CARS, with four wheels, must replace them.

Our RTOs are a huge "knowledge failure" as well. All over the world, scarce urban roads are being priced for efficient usage. Our officials are causing "capital consumption" of these scarce roads. As always, our bureaucRATS display rank ignorance. Our nation is in the hands of fools.

How Many Wheels?

Dunno about you, but I hate auto-rickshaws. I hate their looks; I hate the ride, especially when it is raining or cold; and I feel extremely sorry for the poor fellows who survive by driving these around all day. My investigations have revealed that auto-rickshaw drivers suffer chronic aches and pains. To me, the auto-rickshaw should be seen as a symbol of Indian socialism - something even more ridiculous than the East German Trabant. I have travelled to many great cities, and nowhere have I seen such a silly beast let loose on public roads. In London, an old city with many narrow streets, the size of the taxicab is extra large, as seen in the photo above.

Even in our own cities, I am old enough to recall a time when there were no auto-rickshaws at all - as in the case of Calcutta in the 60s and 70s. Parts of Bombay are still like that. But Calcutta had its excellent tramway. Somehow, in socialist India, we are not thinking about tramways. All our small cities and towns could benefit from such services.

I first encountered the auto-rickshaw when I moved to Delhi in the late 60s. Those were the really horrible days of socialism in India, when getting a scooter from Bajaj Auto took 10 years; and getting a Premier Padmini took even longer. There were scarcely any cars on Delhi's roads those days. Everyone envied the diplomats who alone owned great cars. Thankfully, all this has changed. Nowhere is this more apparent than in Delhi, where The State rides the absurd Ambassador while The People drive real cars. Like the King riding a donkey while the people ride Arabian stallions.

Dunno about you, but I believe in Four Wheels. Not two. And certainly not three. Four wheels are stable. And they constitute what is universally defined as a "car." I believe that public transportation in the modern age should be provided by cars, buses, trams, underground railways and the like - but not auto-rickshaws. Note the title of my recent monograph: Four Wheels For All. You can read and download it here.

Dunno about you, but I had some serious thoughts about what can be done about the stupid auto-rickshaw. Quite naturally, I thought of a political movement against it. It must be noted that the nationwide takeover of city streets by this ugly beastie is indeed "political" - because it is "licensed" by the RTOs. The profusion of auto-rickshaws is part of a grand socialist "design." If it is to be opposed, politics must come into play.

My thoughts therefore turned to those who are economically seriously injured by an official policy that encourages three-wheeled beasties to rule the roads. My thoughts turned immediately to the workers in our rubber plantations. Poor chaps. Tap, tap all day, collecting sap. These very poor people would benefit hugely if four wheels became the norm, for that would mean one more tyre on every vehicle. So spread the word in the plantations - it's either four wheels, or bust.

I guess, in this instance, what we need is a kind of "Candlemakers' Petition."

Ha ha.

But seriously, we in India must think hard of the future. Of being a rich nation. Of being a people equipped with the best Capital goods the world has to offer. The auto-rickshaw is a symbol of the dead past, those horrible decades of socialism. It has NO PLACE in our nation's future, which must be bright. Think about it.

The Very Long Term

Back in Goa again. Took the dawn train from Mangalore and am happy to report that ours is a truly beautiful country with immense potential. And nowhere is the potential higher than here on the beautiful Konkan coast. My train, which started off from an ancient port city, passed many other ancient ports, like Honavar - but these are no longer cities today. While in Hassan, I read that the Karnataka government has banned iron ore exports from these ports - and there was a long list. I have been travelling up and down these parts by road, too, for many years, and it is true that all the ports here seem to be engaged in nothing but the export of iron ore. This is true of Mangalore, Karwar and even the ports of Goa.

Exporting red mud. Importing nothing.

This is the Kamal D Nutt theory of international trade.

I wonder what would happen to great ancient port cities like Hamburg if the Kamal D Nutt theory was applied. Singapore and Hong Kong are port cities - and both are brand new. We have a long way to go in India, but the first step must be to think things straight.

And that is the thought uppermost in my mind this morning as I reflect on the realities of today, which I saw clearly in Hassan - a city with immense potential reduced to a hell-hole by bad ideas - and on the glorious Konkan coast, now exporting red mud. And my thought for the day is this: We must think of the very long term. There is much to do if we want to build a great country out of this rubble. And it will take a long, long time. But the first step must be taken in the field of ideas. Bad ideas like socialism and Gandhianism must be jettisoned. Sound ideas of cities, markets and civilization must replace them.

Lord Keynes famously said, "In the long run we are all dead." I frankly believe I have never ever heard anything more stupid. Even ordinary people without much education think of the future of their children and grandchildren. Serious businessmen, of course, know well the meaning of "long term." And great men like Adam Smith and Ludwig von Mises will never die, for their legacy lives on. Keynes never thought of these things. His attitude to life was that of a loot-and-scoot politician.

Here in Goa, I no longer contemplate a busy street. Here, there is peace and serenity, and a small garden. This garden is now 6 years old. When we started off there was nothing. It takes time to grow a garden. It will take lots of time to re-build India.

There is a story told of a 90-year old retired Prussian general who called in his chief gardener and instructed the man to plant an avenue of oak from one side of his huge estate to the other. The gardener told the general that the oak takes 20 years to mature and the master was already 90 years old. To which the general replied: "So there is no time to waste."

For A New National Anthem - And FUN!

Kashmir is burning; the army has taken over Srinagar; indefinite curfew has been imposed; and the ToI has a lead editorial titled "Absentee Leadership." Good title; poor edit.

In the socialist, democratic India of today, political leadership is glaringly absent. Chacha Manmohan, Boss Sonia and Baby Rahul are all zeroes. And the Opposition is entirely without heroes. Made me think of our National Anthem.

"Jana Gana Mana" is a song in praise of The Leader. The first line says, "nayaka jaya he," and nayaka means Leader. The song was written and composed by Rabindranath Tagore as a paean to George V when the Emperor came visiting. It was adopted by Nehru as the National Anthem because the Great Socialist is always The Leader. The history of socialism worldwide shows that all these great leaders failed; their stories are all about "fatal conceit."

So we need a new National Anthem. This should be a Song for the People. I suggest BB King's "Let the Good Times Roll." The opening lines are as follows:

Hey everybody,
Let's have some fun,
You only live once,
And when you're dead, you're done,
So let the good times roll,
Let the good times roll,
I don't care if you're young or old,
Let the good times roll.

Yes, in India, we the people must get down to the serious business of having FUN. Our political leaders are all totally devoid of any idea of having a good time. Indeed, through their misgovernance, they are giving all of us a real bad time. Let us resolve to get rid of all these rascals and institute Liberty.

And then, let the good times roll.

Happy Overthrow-The-Government Day!

Lew Rockwell calls the 4th of July Happy Overthrow-the-Government Day on his blog, because that is precisely what the American founding fathers did.

On the same blog, Laurence Vance has some excellent quotes from Abe Lincoln in this post:

This country, with its institutions, belongs to the people who inhabit it. Whenever they shall grow weary of the existing Government, they can exercise their constitutional right of amending it or their revolutionary right to dismember or overthrow it.

Any people anywhere, being inclined and having the power, have the right to rise up, and shake off the existing government, and form a new one that suits them better. This is a most sacred right—a right, which we hope and believe, is to liberate the world. Nor is this right confined to cases in which the whole people of an existing government may choose to exercise it. Any portion of such people that can, may revolutionize, and make their own, of so much territory as they inhabit.

Don't you know, we're talkin' 'bout a Revolution - in a SHOUT!