Say's Law: A Summing Up

Say's Law of Markets, by making a distinction between those who compete with us and those who do not, tells us that the bulk of the market is made up of those who co-operate with us; that too, in two ways: first, by providing us with our needs, the goods and services we do not and cannot produce ourselves; and second, by providing the vital demand for the goods and services we come to the market to sell. 

The market is NOT "pitiless competition." There is more co-operation than competition - and, anyway, "competition is liberty, while the absence of competition is tyranny." There is no "Social Darwinism" in the market.

This is SOCIETY. 

This is the market society built on the principle of the DIVISION OF LABOUR, which is specialisation. This is the polar opposite of Gandhian "self-sufficiency.


Say's Law of Markets thus proves what Thomas Paine wrote in the very first paragraph of Common Sense - that "society is a patron, while government is a punisher." Society is the vast majority, and they are in the market; government is a small minority, set up to apprehend, try, and punish enemies of this market order, who are an even smaller minority. 

This is the "natural order."

To socialists, Society, State and Party are all ONE: "India is Indira." Say's Law proves this vision dead wrong.


Say's Law also tells us much about taxation - that any tax reduces demand. It suggests a minimalist State; it suggests "political economy." Giving taxes to the State hurts market demand for all. Say's Law proves many genuine experts in public finance right when they write that modern taxation is more expropriation - and that indirect taxation, including customs duties, as well as the income tax, should be outlawed by constitution. Say's Law suggests "user fees" ought to replace taxes, wherever possible.


Say's Law can also be used to analyse the effects of interventionism - the key question being how interventionism in one area will hurt non-competing industries, which is the rest of society, the rest of the market order.


Finally, Say's Law "pours lead into the Keynesian's ear" - as one of my readers put it. It shows that government is a cost, not a source of benefits, not a "stimulus to demand." It points to the real source of market demand - which is the production and sale of goods and services, backed by savings and investment. This is the pathway to civilisation. The Keynesians, with their funny money welfarism, heavy taxation and even heavier borrowing, have unleashed the forces of "de-civilisation" - which is rampant capital consumption. All welfare, it may be pointed out, is consumption; nothing is saved; nothing is invested.


As a wise man put it: "It is good if the people support the government - but all hell breaks loose if the government attempts to support the people."


To conclude: In these five posts on this vital Law of Markets  which is currently mistaught universally (the first post is here), I hope I have shown my reader the correct way to look at markets, at society, and at the State. I hope my reader will realise that Keynesian "macroeconomics" must be jettisoned in toto, and replaced by methodological individualism as the epistemology of the Science of Economics.


Thus, as Sudha Shenoy once put it in an interview with Austrian Economics Newsletter in 2003:

Almost every economics department in the world can be immediately shut down without having any ill-effect on the world of ideas. 

This is the power of Jean Baptiste Say's Law of Markets.

Say's Law versus The Marxists

The critical question before a poor nation like India is whether the market and laissez faire capitalism will raise our masses out of poverty - or should we stick to étatism? That is, how will the poor get "according to their needs"? Who will think of their needs, and invest in producing them - entrepreneurs or planners? Is Keynesian funny money financed welfare the way out? Say's Law holds the answer.


Say's Law of Markets says that if any poor person manages to sell his produce or services, he will be possessed of the means to demand non-competing goods on the market. This, as we have already discussed, implies the need for economic freedom.


Further, as also discussed yesterday in Part 2 of this 4-part series on Say's Law, modern capitalism is about mass production by Big Companies for mass consumption - by the poor, as in the case of shampoo in sachets or simple mobile phones. 


Thus, the poor, if possessed of economic freedom, will have the proverbial horn of plenty poured upon them by all the Big Companies. And many of them will be small investors in shares, too. In time, they will have TV sets, motorised personal transport, and what not. They will eat better, drink better, smoke better and live better. This is GUARANTEED if markets are free.


Now, this knocks the bottom out of the "iron law of wages" that Marxists believe in, as do Ricardian-Marxists like Piero Sraffa, whose blind follower teaches Economics at the IAS Academy. According to this law, the wages of workers must remain at subsistence. This is untrue - as proved above, looking at consumption. It is also proved by history - looking at the British working class during the 19th century, the heyday of classical liberalism, free trade and laissez faire. 


Further, if capital accumulation proceeds apace, and per-capita capital invested rises, the wages of all workers will also rise, because each one's productivity will rise. Ricardo erred on this score because he and the classical economists did not look at the consumer; nor did they know anything about "marginal productivity." Once we factor these concepts in, thanks to the advances made in economic theory by Menger and later Austrians, we can be sure that, if the Keynesians and the welfarists are prevented by public opinion from consuming capital, wages will rise along with consumption. Demand will continuously rise.


It must also be noted that if money is gold, inflation will end, and all prices will steadily fall - increasing consumption. The poor will inherit the earth.


So there are the following prescriptions:


1. Economic freedom.
2. Capital accumulation.
3. No funny money.
4. No welfarism.
5. No interventionism.
6. Laissez faire, laissez passer, laissez aller.


On the other side we have centralised economic planning - and Montek!


Now, the real Marxist question is: How will "each have according to his needs"? Montek is busy "measuring poverty" - for which purpose he has sanctioned State funds to hundreds of economists and statisticians, and confusion still prevails. When this confusion is finally settled, some poor people will get rice cheap. The planner will provide the poor with rice.


What is the market and the entrepreneur?


As Mises defined it, "the social function of the entrepreneur is to make provision for the uncertain future." It might rain - and so entrepreneurs invest - "make provision" - in making umbrellas. And shopkeepers stock them. If it rains, you can always get umbrellas. 


Now, smart entrepreneurs are ALWAYS surprising you with goods you never knew you needed. Smart entrepreneurs invest - "make provision" - to research consumer wants, they invest in R&D, and they come out with all kinds of surprises for satisfying unspoken needs. Skype is a great example. Poor people in India go to internet cafes and speak to loved ones abroad using Skype. It is cheap. And there is video. 


Meanwhile, the planner is thinking of rice. He has "made provision" for NOTHING. He is in perpetual DEFICIT. 


Anything to do with the market works - cars, mobile phones, civil aviation... anything. 


On the other hand, anything to do with the State fails - highways, railways, Air India, BSNL, electricity, water, drainage.


I think the choice should be clear.

Away with the Marxists!

Away with the planners!

Away with the socialists!

Away with the Keynesians!

Away with the welfarists!


Away with the protectionists!


Away with the trade unionists!


Away with the interventionists!


Away with immigration controls!

Laissez faire capitalism - for the poor!

PS: The final summing up post can be read here.

Further Implications Of Say's Law Of Markets: Part 2

So far, I have shown how Say's Law disproves the Keynesians, the protectionists and those who oppose free immigration, like the trade unionists. Today, let us take the arguments a few steps further, and also counter the points raised by Murali yesterday - "legal and cultural objections" to free immigration.


Let us begin with the example I gave yesterday - of the bhel-puri wallah. As Say's Law reveals, once he sells his stock, he is possessed of the means to demand other stuff on the market, except for bhel-puri, of course, which he will not buy. Thus, the sale of bhel-puri creates the demand for all non-competing goods. Our bhel-puri wallah might buy a mobile phone!


There are two important aspects worth noting at this stage: first, who are his customers; and second, the fact that the bhel-puri wallah is really a "poor" man, a very small businessman, often hounded by the cops. I will examine each aspect in turn. 


First: the customers of the bhel-puri wallah are a diverse bunch of people who produce a diverse bunch of goods and services, which they have successfully sold, and which has given them the means to enjoy some bhel-puri. This shows that widespread diversity - a hugely diverse division of labour - is good for all businessmen, because there are then more and more "non-competing" goods and services on sale. In other words, the more non-competing goods on sale, the better it is for all businessmen, the greater the demand for his own produce. 


Thus, Say's Law of Markets allows us the possibility of restating Adam Smith's dictum: "The division of labour is limited by the size of the market." This could be also put in the following form: "The greater the division of labour, the greater the demand for all goods on the market." Thus, free international trade is good - because then we have the "international division of labour."


Second: We noted that the bhel-puri wallah is a very small businessman. Now, especially in a poor country like India, the bulk of the businessmen are of this variety in our cities and towns - very small businessmen. And they are victims of the police. They are hounded, robbed, and their surpluses go in paying bribes. 


Yet, capitalism is all about Big Companies. And these Big Companies are ALL producing for the "mass market." Modern capitalism is nothing but "mass production for mass consumption." Our bhel-puri wallah bought a mobile phone - and he will spend the rest of his life re-charging it. Another example: 70 percent of all shampoo sold in India comes in little 1 rupee sachets - for the poor. This has enormous implications for policy.


This shows that the bulk of demand comes from lesser off people - and, if we want prosperity, every effort must be made to ensure that these people are able to sell whatever goods and services they wish to sell.

There must be economic freedom!

And State Predation on these people must end. This is a very different approach from Keynesian "funny money" welfarism of the kind chacha manmohan s gandhi has instituted, copying the West (where it has failed most spectacularly). 


Thus, either we institute Liberty - by which we will become the world's fastest growing market for mobile phones and other gizmos; or we continue with the charade of a Predatory State pretending to be a Welfare State: free rice for all bullshit.


Murali pointed out that westerners are opposed to "illegal immigration." But what does True Law state on Private Property. Does the US Immigration Department own the United States of America? Or is there, indeed, a "patchwork" of private property? In which case, each private property owner has the full right to decide who should enter his area. If I rent a room in a US hotel, US Immigration should not be able to disallow me entry.


As far as "cultural" objections to free immigration are concerned, these are "tribal mindsets" at work - not the sort of "rugged individualism" capitalism is all about. In any case, they make zero economic sense. Immigrants from different cultures are good for a country precisely because they make the division of labour more and more diverse. In Pondicherry, for example, I met a Frenchman who has been living there for 40 years, running three French restaurants. Such immigration is for bidden in Goa. And in Pondicherry of the old days, there were lots of Vietnamese running their own restaurants - and the city is poorer because they have upped and left. Mexicans in the US have popularised their cuisine. 


There is much people of diverse cultures can successfully sell that is "non-competitive" - like handicrafts and jewellery. Would the USA be a better place with just European food, burger joints and the like? And have you ever tried Vietnamese nouc mam sauce? Isn't Britain better off with all the Indian restaurants? And I did find a Vietnamese restaurant in London! Give me a "cosmopolitan" city any day. And do note that all these diverse restaurants ADD to overall demand - unlike Keynesian funny money.


We in India should therefore consider ourselves fortunate that none of our cities are homogeneous. They are all true "catallaxies." Catallaxies, which are "open trading arenas" - open to strangers, that is - are the "key to an Open Society," something I discussed in a column once. We can either have catallaxies and open societies - based on rugged individualism - or we can have "closed communities." 


Say's Law, as I discussed yesterday, makes a strong case for rugged individualism. Our heterogeneous society is best placed to make such a world, and such an Open Society, happen.


(This series on Say's Law is continued here.)

Further Implications Of Say's Law Of Markets: Take #2

Today is the 130th birth anniversary of Ludwig von Mises. This post is written in his honour. He hated the Keynesians and he upheld Say's Law against their vicious attacks. It is Say's Law that proves the truth of Mises' words below, written for the benefit of the working classes who mistakenly support socialism, unionism and Keynesianism:

In the capitalist society there is a place and bread for all. Its ability to expand provides sustenance for every worker. Permanent unemployment is not a feature of free capitalism.

Murali's comment to my previous post - on Jean Baptiste Say's Law of Markets, and its implications on the current economic crisis, has prompted me to write another post on this vital law, this time explaining some of its other practical implications. In the world of classical liberal political economy, if you were not an adept at Say's Law, you were not considered a political economist worth your salt. It is therefore important to know all about this law of markets - a law that John Maynard Keynes thought he had disproved.


First, let me restate the law:

The sale of X gives rise to the demand for all non-X.

If X sells, it creates the demand for all non-competing goods.

Thus, if a bhel-puri wallah sells his stock, he will be possessed of the means to purchase all other, non-competing goods on the market, except bhel-puri, which of course he will not buy. This disproves the deliberately misleading Keynesian formulation of Say's Law as "supply creates its own demand." The supply of bhel-puri does not create the demand for bhel-puri. The supply and sale of all other, non-competing goods and services do.  


Now, the first objection the Keynesian will have to this formulation is that the market tends towards over-production, so without Keynesian monetary boosts, recessions are inevitable. But Say's Law says:

Markets Clear - If Prices Are Not Rigid Downwards 
(due to interventionism).

Thus, ANYTHING PRODUCED will finally be sold - even as junk, if prices are allowed to fall. There is NO OVERPRODUCTION. And there is NO CASE for any monetary boost to "stimulate consumption." 

Indeed, as the Austrian School of economists have proved with theory, and as history has proved today as well, it is this sort of monetary tinkering based on Keynesian "macroeconomics" that is the root cause of all boom-and-bust "business cycles."

Say's Law asserts the obvious: That SAVING and INVESTMENT and INCREASED PRODUCTION lead to INCREASED DEMAND for ALL GOODS AND SERVICES. This is the ONLY WAY to boost demand permanently. 


Keynesian inflationism destroys savings; erodes capital; and thereby reduces production. If at all it boosts consumption, this is during the temporary, heady and short period of the artificial boom, for inevitably the bust must follow, and this is invariably of longer duration than the boom. Further, there have been historical periods of "stagflation," when inflationism failed to boost consumption at all, and economic stagnation combined with high inflation.  

Second: Say's Law proves that all businessmen are best off if they DO NOT COMBINE in protectionist groups. Such groups, if successful, reduce the supply and sales of all non-competing goods - and this reduces demand for all businessmen who do NOT compete with these goods. Thus, whereas Amul Cheese may want protection, it makes no sense for Kingfisher Beer to support this claim, and vice versa. 


Recall that, in our protectionist heydays, there was precious little available in Indian shops - and all businesses suffered. Our markets had zero catallactic energy. 


Thus, Say's Law proves that the business interests of a particular class of traders called "importers" must be supported by all. 


Further, it makes a rock-solid case for "rugged individualism" on the part of all businessmen. It opposes mixing politics - particularly protectionist politics - with business.

The same is true with regard to immigration restrictions. These exist in the West because of a few very powerful trade unions, like the US Automobile Workers' Union. These unions demand visa restrictions because they fear that immigrants will "take away their jobs." 


But the fact remains that all immigrants are NOT competing with autoworkers. Some may come as doctors and nurses. Some may come as dishwashers and construction labourers, restaurant waiters and cooks. And some as software engineers. After all, labour is NOT a homogeneous entity. And there is therefore nothing called "unskilled labour." Further, the demand for labour is always the demand for a particular skill.

If immigration was free, Say's Law proves that overall demand would rise, because as the workers in the non-competing areas managed to sell their services, they would buy whatever they needed from that very same market. I daresay if the USSA had opened up to immigration two years ago, their crisis in the housing market would well nigh be over.

There is more: Because automobile workers' unions are so influential and powerful, the US automobile industry has collapsed. General Motors has been nationalised! Obviously, an important cause of this collapse is the high cost of domestic labour. 

So here is a third and final implication of Say's Law: That all non-competing businessmen gain the most if ALL goods and services are sold at their most competitive price, which is, of course, the LOWEST PRICE.

THIS INCLUDES LABOUR.

Thus, cheap and abundant labour is good for an economy, just as cheap and abundant coal or oil or natural gas or timber is. If labour is cheap, all businesses benefit. All costs are lowered. More goods and services are produced and there is more competition. Thus, workers in all industries gain as consumers - even though their individual wages may be lower. For example: If waiters and cooks can be hired cheap, restaurants will be cheap, there will be more of them - and more workers will be able to eat out.


Cheap labour is beneficial to other, non-competing businesses in another, vital way: consumers have more to spend on the other offerings of the market. Thus, if cars are cheap in the US, the US consumer has money left over to buy beer, jeans, CDs and books. 


This implies that free immigration and cheap labour are GOOD for all American businessmen. Further, there is NO REASON for all workers to join socialist trade unions. Karl Marx's slogan, "Workers of the world - Unite!" makes as little sense as "Businessmen of the World - Unite for Protectionism!"

So, just as Say's Law of Markets suggests RUGGED INDIVIDUALISM as the best policy for businessmen, so also does it suggest the same for workers. Trade unionism and labour market restrictions hurt all workers outside the combination - and thereby hurt all other businesses, and the workers employed in them, too. Workers must compete with each other - just as businessmen must, too. After all, workers in the same factory compete for the next promotion, don't they? As Mises put it: 

Under capitalism everybody is the architect of his own fortune.

Say's "Law of Markets" thus makes a water-tight case for free trade, for free immigration, and for laissez faire. It supports the logic of open borders and the free mobility of capital, goods and labour. It tells us what really boosts demand permanently - which is, increased production of goods and services, based on higher savings and investment. It totally explodes the Keynesian myth that monetary stimulation to boost consumption is good for an economy.

Jean Baptiste Say was known as the "Adam Smith of France." His Law of Markets is as unshakable as the Law of Gravity - despite all the efforts of the evil, lying Keynesians. Truth keeps on working, as Mises said, even if the textbooks contain lies. This law makes a logically indestructible case for free markets and free competition. It makes a solid case for rugged individualism. It opposes politics - which is what the Keynesians, Marxists, protectionists and union bosses have injected overdoses of into our lives, thereby damaging civilisation, even to the point of destroying it.

If you want to learn more about Say's Law, I suggest the late Professor WH Hutt's A Rehabilitation of Say's Law, available from the Mises Institute in PDF, as an e-book, and also as a proper book. Follow this link.


WH Hutt was an outstanding classical liberal; that too, despite being educated at the London School of Economics during the heydays of Fabian Socialism. Hulsmann reports that Hutt, while a student at the LSE, attended a guest lecture by Mises - and then he "broke on through to the other side."


Hutt was born into the British working class - which is why his works against trade unionism are all the more worth studying.


Part 2 of this post can be read here.

We Don't Get Fooled Again!

A Deutsche Bank report just reached me, warning of recession in the USSA. But their analysis is based on "consumer spending" - and this might suggest to many that another "stimulus" is required from the Fed.

This displays ignorance of Say's Law of Markets.

Last night, I watched a BBC programme called "The World Debate" on the current economic crisis, hosted by Nick Gowing. Of the four debaters, three were government people - Christine Lagarde, who heads the IMF; a guy from Obama's economic team; and a dude from the EU in Brussels.


Lagarde spoke of the need for the G-20 to get together and do what they did last time - and I could have cried out loud. That time the G-20 nations inflated their currencies along with the US Fed, which is what "central bank co-ordination" is all about, and which is why the crisis is so widespread today. Nick Gowing, on his part, asked for "more decisive political leadership."

This, too, displays ignorance of Say's Law of Markets.

Today, the Keynesians teach this law as follows:

Supply creates its own demand.

This incorrect formulation of this vital law makes their students believe that "monetary stimuli" create demand.


So, let us think things through: 


The supply of plasma TVs does not create the demand for plasma TVs. Yet, if cars sell, if jeans sell, if shoes sell, and if beer sells - then, and only then, will some people from these latter industries be tempted to buy a plasma TV. Thus, what Say's Law actually means is:

The sale of X gives rise to the demand for all non-X.

If X sells, it creates the demand for all non-competing goods.

So, if you want increased demand for your plasma TVs, don't go to The State asking for a monetary stimulus. Instead, make sure all those who do not compete with you are selling their stuff.


There is another reason for this: If you ask The State to inject a monetary stimulus, all that will happen is another boom-bust cycle - and inflation. The entire economy will be hurt, including yourself, and including all those who do not compete with you.


On the other hand, if you want those industries that do not compete with you to do well, you will NOT favour loose monetary policies based on the false idea of boosting consumption. Rather, you will realise the importance of SAVING and INVESTMENT. You will realise that these businessmen who do not compete with you will need to save and invest - in order to produce. You will favour "capital accumulation" and despise "capital consumption" - which is Keynesian-welfarism-inflationism. You will champion "sound money."  


That is, you will realise that production of goods and services boosts demand - not the production of money. Indeed, not even the production of gold boosts demand. All that happens then is that the price of gold falls - look at the history of Spain and Portugal when they brought gold and silver back to Europe from South America. Spain and Portugal never got rich. And there was inflation throughout Europe. Britain got rich not by digging for gold and silver - but by trading in nutmeg and pepper, and tea, and opium, and tobacco, and sugar, etc.

Increased production of "funny money" is a VERY BAD IDEA.

Thus, Nick Gowing is WRONG when he asks for "more decisive political leadership." The solution does NOT lie in politics. On the contrary. The solution lies in "private money" - and "free banking under law." 


That is: the size, scope, powers and resources of The State and the politicians must be drastically cut down. Money must be given back to the people - to save and invest, to produce. That is how demand can be permanently boosted and boom-bust cycles avoided forever.


Indeed, the current crisis is BECAUSE OF POLITICS. Central banks and their member banks are collapsing. Politics lies at the root of this crisis.


So, let us NOT GET FOOLED. 


Paper notes are just a "money substitute." This is what the "promise to pay the bearer" indicates. Something "hard" is (and always was) real money - GOLD.


So, as the song goes:

I tip my hat to the New Constitution,

Take a bow for the New Revolution,

Smile and grin at the change all around me,

Pick up my guitar and play,

Just like yesterday,

Then I get on my knees and pray:

WE DON'T GET FOOLED AGAIN!

While that covers widespread miseducation in the USSA, Britain and Germany, let us now turn to our own country.


Did you know that both Amartya Sen and chacha manmohan s gandhi were students of Professor Joan Robinson in Cambridge - who was Keynes' right-hand man, and who made it her "mission to destroy Say's Law"? It was Joan Robinson who cleverly coined the "supply creates its own demand" nonsense.


And, as I wrote the other day:

Without Sound Money - what is the State 

but a band of robbers?

That should take care of Kapil Sibal's "(mis)education."


Let us now turn to Palaniappan Chidambaram, the Central State Police Minister, whose name has cropped up in the 2G scam. There is a report written by the Political Editor of The Sunday Guardian that says that in the Nira Radia tapes, A Raja told Radia that "PC got a lot of money."


The Central State's Police Minister is corrupt?


And he has been police minister since the 1980s - and there have been no police reforms. Policing has just got worse. Now, road deaths total over 2,00,000 per annum - and the police don't even possess the "knowledge" to fix things.


We must ABOLISH THIS STATE. And replace it with honest civic corporations - one in each city and town.


A Second Republic!


A Republic WITHOUT any police - like the England of old, before Peel set up the Bobby. Like India of the Company, before the Crown passed the Indian Police Act in 1861.


TORTS - which are "crimes against the individual" and for which financial compensation must be paid by the tortfeasor to the victim: this will be better than any "criminal justice system." Anyway, ours doesn't work. And the minister is corrupt. Indeed, the Entire System is Corrupt.


So let us vow to throw the whole thing out, beginning with the Central Bank, and ending with the State Police.


Liberty! Property! Justice! The Pursuit of Happiness, Subjectively Defined!

WE DON'T GET FOOLED AGAIN!

(This turned out to be a 5-part series on Say's Law. The next post can be read here.)

Abolish The Ministry Of Commerce - And The Customs Department, Too

This news report makes it apparent that our Commerce Secretary, Rahul Khullar IAS, knows NOTHING about the Science of Economics, and is essentially a "mercantilist" who believes exports are good for India and imports are bad, because he is focused on managing the "trade deficit." In this report, Khullar says that India's markets are open to foreigners, because the trade deficit is rising. Really, dude?


What about the trade deficit of Karnataka or Goa or Pondicherry? How come we never think of that?


In reality, if money were GOLD - which would be "private money" - each Individual would manage his own trades, and ensure he is not in deficit. As far as the nation-state is concerned, in such a scenario, if there was a trade deficit, and gold was being exported, domestic prices would fall - and the deficit would correct itself as exports automatically increased.


In the current scenario, Khullar is deliberately misreading the signs: our trade deficit is rising not because we are open to foreign trade - we are not - but because the prices of some of our crucial imports are rising, like crude oil. Gold imports are also showing a steep rise. Otherwise, we are a closed nation: the ports of the West Coast export iron ore of low grade - and import nothing. This is mercantilism. Mercantilists look upon a positive balance of trade as "good," whereas the Science of Economics looks upon imports as the most beneficial thing about foreign trade - because what we import we cannot produce domestically at the same advantage.


International trade is best understood through the Law of Human Association - a law that has been developed by a correct reading of David Ricardo's famous Law of Comparative Advantage (or costs). According to this law, even in non-market situations, human beings associate gainfully with each other even if one is worse than the other in all respects. Thus, although my girlfriend is a better cook than me, and she also washes dishes better and faster than I do, we both gain if I do what I am "least worst" at - which is washing dishes. 


This law of human association, when taken into market situations, is even more telling - like the case of a surgeon and the man who looks after the cleanliness of his equipment. Even if the latter is much, much slower at the job, the surgeon gains by hiring him, so that he can focus of surgery, where he earns much more. I have a column explaining this vital Law of Human Association here.


The lesson to learn is that the "international division of labour" - which means "international specialisation" - increases the wealth and productivity of the whole world, including those who are the least competent and least skilled.


Thus, there can be either free trade - or there can be barriers to trade, which is what we have around our borders: protectionism, based on mercantilist fallacies. If we opt for free trade, then the customs department and the commerce ministry can both be abolished - and not only India, the whole world will gain. Say's Law of Markets will come into play - internationally.


If you understand the theories of free trade, you understand that the whole world will gain by such a policy - and there will also be international peace.


If you are a mercantilist, you keep your own people poor, you make the whole world poorer, you wage political wars over trade - and, what is worse, you convey the false impression to your citizenry that you are somehow doing something useful for the "national economy," like looking after the "trade deficit."


Which is why my t-shirt on the right-hand bar says "Private Economies."


I do NOT believe in the National Economy - nor do I trust those who purport to be its caretakers, like Rahul Khullar, IAS.

The Poor Need Freedom - Not Education, Nor Welfare

I am extremely pleased to see an old post titled "Shah Rukh Kahn and the Truth" top the list of "popular posts" supplied by Google on the right-hand bar. This post makes it obvious that inflationism is bad for the poor - a point I also made the other day, when I discussed the MGNREGS.


But the question remains: What is best for the poor?


Well, for one, SOUND MONEY.


Apart from that - PROPERTY RIGHTS.


And FREE INTERNATIONAL TRADE - so their consumption can improve.


Fourth - LIBERTY!


I gave the example the other day of the NIGHTLIFE INDUSTRY. Think about it: How did black slaves become "superstars" in America? Because of New Orleans - and jazz. In India, when I watch the talent shows on TV (in regional languages, too) the plain fact emerges that millions and millions of Indians are hugely gifted in song and dance, and in playing musical instruments. But they have no place to play - play "live," that is. This hurts the poorest of them all. The better off ones make do publishing music, and appearing in movies and television. The poor ones go broke. I have personally seen hugely gifted rock and jazz artistes in Delhi broke. Broke as hell. 


Now, let us say there is LIBERTY - and a 24-hour economy. Nightlife. Ganja-charas. Casinos. Nightclubs. 


Obviously, many, many poor people will make money.


Then, they will spend this money - and other businesses will make money.


Then, these businessmen will spend - and the cycle will repeat itself endlessly.


This is Jean-Baptiste Say's "Law of Markets." In a nutshell, it says that if X sells, demand is created for all non-X. 


Do read my column on this important economic law under the title "What Pumps Up An Economy" here.  Jean-Baptiste Say was known as the "Adam Smith of France." Great man. Vital law - of markets.


The poor do NOT need (mis)education from our The State. They know lots of things that school can never teach them - from making idlis to playing the guitar. As Jimmy Page said, "The good thing about the guitar is that they do not teach it at school." Freedom is what the poor need.


And as for welfare - it is phoney. It is funded by "funny money" - which erodes the capital of the poor. End this nonsense.


Liberty!