Arundhati Roy, Division of Labour, And Cities

Arundhati's latest book is out. Called Broken Republic, excerpts from the introduction have been published in Outlook. Below is how she begins:

The minister says that for India’s sake people should leave their villages and move to the cities. He’s a Harvard man. He wants speed. And numbers. Five hundred million migrants, he thinks, would make a good business model.

She then proceeds to demolish the minister. And I thought it was Ms. Roy who once wrote, "India does not live in her villages; she dies in her villages."

Frankly, I am on the side of the minister on rural-urban migration. 500 million such migrants is a great idea - and we could easily be a nation of 1000 cities then, instead of just five. The USSA has 350 million in 200 cities. Very few Americans - less than 2 percent - live on farms. If we did the same in India, farm labourers would be rich - because their wages would shoot up when the majority of them shift to urban areas and out of agriculture. And farms would be mechanised - hence, more productive, too.

In either case, whether Ms. Roy likes it or not, Indian villagers have been migrating to cities in droves - just look at the slums and the overcrowding. Why do they do that? The only answer: these villagers are better off in crowded cities than in the vacant countryside; further, they know their fortunes improve because of the greater division of labour in the cities. Allow me to explain this point in some detail, beginning with an example that came to mind the other day.


I saw a construction labourer the other day, and his shirt was dirty and torn. My question: Why does this man not sit with a charkha, spin some yarn, weave some cloth, and make himself a new shirt? Why does he work at construction instead - that too, building a house for someone else? The only answer: He sees his work as a faster and better way to obtain not only a shirt, but all else that he needs to survive. This is the magic of the division of labour - which is specialisation and not self-sufficiency. Each human mind is capable of realising this - we all possess a "sense of gain."


As Mises put it (and this was quoted in an earlier post, too):

The fundamental facts that brought about cooperation, society and civilisation and transformed the animal man into a human being are the facts that work performed under the division of labour is more productive than isolated work and that man's reason is capable of recognising this truth.

The extent of the division of labour is limited by the size of The Market. A chai shop in a tiny, remote village may not be able to yield much profit. You cannot be a taxi-driver, receptionist, plumber or electrician in a sleepy village. It is for this reason, to participate in the greater division of labour possible there, that people migrate to cities. They are attracted by The Market; they smell economic gain. In the cities, they "become" what they want to be: actor, dancer, musician, writer... whatever. No one is "self-sufficient." All are specialised. It is in order to specialise that people move to cities.


There is no reason why India should remain a nation of just 5 big cities - and not 1000. There is enough land, for sure. With unilateral free trade, just the twin coasts could host 100 new cities. Add to that their satellite towns - and we are looking at an Indyeah that is predominantly urban - and rich. With so many new cities and towns, urban overcrowding would end. With good transport connections - roads, railways, tramways, the automobile - there would be enough urban space for all, because transportation adds to the supply of urban land. We must therefore dream a new dream: not the Gandhian dream of "self-sufficient village republics," but an Indyeah of thousands of free trading and self-governing cities and towns - that is, an Indyeah fully incorporated into the "international division of labour."


The division of labour is elaborated upon in the very first chapter of The Wealth of Nations - but it is Mises who put it best when he wrote:

The principle of the division of labour is one of the great basic principles of cosmic becoming and evolutionary change.... Human society is an intellectual and spiritual phenomenon. It is the outcome of a purposeful utilization  of a universal law determining cosmic becoming, viz., the higher productivity of the division of labour.

Arundhati Roy needs to study some basic Economics. I am confident that, if she does so, she will eventually come on to the right side in the State-Market Debate. Today, she is anti-State - and anti-Market, too. But there is no Third Way! It can be either the State or the Market; either coercion or voluntarism; either Force or Liberty.


The Welfare State is what has brought Europe and the USSA down. In India, where the vast majority are poor, welfarism cannot work. A big Welfare State printing money, borrowing, and taxing us to the bone will only wipe out Capital - which needs to be invested in real businesses and in physical infrastructure like roads if the poor are to benefit. In my view, the poor need Liberty, Property, Free Trade, Urbanisation and Sound Money. Welfarism funded by inflationism will destroy them. I hope all those who have the true interests of the poor at heart realise this.

Private Property - And Public Roads

Abheek Bhattacharya, formerly of Mint and now with The Asian Wall Street Journal, has written a blog post on the recently concluded elections in West Bengal - in which the Commies were trounced by the Trinamool party. The post is titled "Property Rights Fuel Indian Politics" – and concludes thus:

Trinamool's rise is a story not just of how Indian Communism was felled by its internal contradictions. It shows that property rights occupy a pre-eminent place in Indian politics today. The country's eminent domain laws give the state too much power, while constitutional protection for property is weak. This means, barring reform, conflict is inevitable as India industrializes faster.

 

This month, Congress Party scion Rahul Gandhi was arrested in Uttar Pradesh—the state that sends most legislators to Parliament—for agitating against land acquisition. A leader of India's other national party, the Bharatiya Janata Party, went on a fast last week in support of these farmers. Clearly, both parties have learned the lesson from Trinamool's victory: If Communism's bastion in Bengal could fall, no party can afford to be on the wrong side of the land issue.

I am in full agreement with Bhattacharya - but I would like to add a point that has been missed: and that is, roads raise the price of land. Connect Village X to Town Y with a good, motorable road - and the price of land in the village will inevitably rise, while the overall price of land in the city will tend to decline because the supply of urban land has increased.

With more and more Indians owning automobiles, these people will be able to live a little distance away from the city – that too, with more space and open air – and commute to work and back.

The fact that roads raise the price of land is brought out in two stalled “expressway” projects: the first, which was mooted in the late-90s (and is yet to be completed) is the Mysore-Bangalore Expressway; and the second, of course, is the Yamuna Expressway, over which landowners are now battling the Mayawati  government in UP. In both cases, politicians have been hogging up land adjoining the expressway – which will rise in value the most once the road has been completed.

Therefore, one question that needs to be urgently addressed is: How are farmers going to be paid for the land they sell for building these roads? The Land Acquisition Bill now being discussed contains a provision that farmers owning “agricultural land” will be paid according to the prevailing price of agricultural land – and not the price of commercial land, which is what that land will end up becoming. This is cruel; this is also cheating.

If Wal-Mart buys up some mustard fields in the vicinity of Nude Elly, surely they will pay the mustard growers a price for their land that reflects its new use as a supermarket – the mustard farmers will demand it. Road builders must do the same. This applies moreso if the roads are to become “public roads.”

In the case of these expressways, this must apply all the more, because both are going to be tolled, private expressways. Thus, the new use of the land makes it many times more valuable than agricultural land. The project-affected landowners would therefore rejoice over their good fortune – instead of sabotaging the project.

Look at it this way: What is the price of land adjoining the expressway? Let us say it is Z rupees per square foot. In which case, the land on which the road is built must be worth much more – because without the road, all the adjoining land would be practically worthless. Thus, deliberately not paying farmers commercial rates for agricultural land that is to be used for other purposes is fraud – and our The Predatory State is committing this fraud; that too, with great deliberation. The bastards!

Whereas highways, expressways and truckways must be private and tolled, country roads will most probably have to be funded by taxes: local taxes on land and property. Building these roads must be the constitutional duty of the local government – and if landowners have clear titles, if property is inviolable, then these roads will add to the value of all agricultural land.

This is the direction in which we will have to proceed: make Private Property Inviolable by all, including The State; and second, make it the constitutional duty of local governments to connect all properties in their jurisdiction with a pucca, motorable road. It is these local governments who will collect property taxes, award titles in exchange, maintain up-to-date land records, and build, own and maintain local roads.

I conclude with an interesting anecdote: I have a friend who entered the USSA illegally and spent some 15 years there, during which time he took up various occupations, including that of a lumberjack. He tells the story of one forested state in which he worked felling trees, where “homesteading” was The Law.

Once he had got his job, he was told to select a site upon which he wanted to build his house, after which he was to inform the local authorities of his selection, so that they would build a road right up to his residence. The state favoured this policy as it would lead to increased settlement in their underpopulated state.

My friend selected a site a little distance away from the existing road, next to a river. The authorities then cut a swathe through his property in order to build a road right up to his door. In the process, they cut many trees – which were the Property of my friend, because they were on his homestead. He sold the trees – and with the money, built a house. So he had land, house and road completely free. He stayed there a few years, after which he sold the place for a fortune!

Get my drift? Let’s do that on the Western Ghats!

Against Inflationism, For Gold

The news has it that all coins of 25p and below are being withdrawn from circulation. This is a sign of price inflation. It means that the metal in the coin is worth more than its face value. Thus, we could profit by melting them down and selling the metal. Wonder why they use metal anyway, for these coins of small denomination are just tokens - like the plastic chips you get to play with in casinos. Only, in this case, when you return your metal chips you get - nothing! Casinos are more honest than central banksters (as in "gangsters").

The entire planet is on such dishonest "funny money." And in our case, as I explained the other day, the rupee is losing value both internally as well as externally. Twenty years ago, the US dollar was worth less than 10 rupees; today, it is worth around 45 rupees - and the people, and the media, cheer, thinking we are "promoting exports."

What is the idea of promoting exports if we are simultaneously erecting tariff barriers against imports?

Actually, we enter into foreign trade only to obtain imports - that is, to obtain goods that are either not available domestically, or which are produced cheaper abroad. And we export only in order to pay for these imports. This is the rationale for engaging in foreign trade.

Now, what happens if the value of our currency keeps going down vis-à-vis that of our trading partners? The "mercantilist fallacy" consists of viewing the "correct" trade policy as that which "encourages exports and discourages imports." Thus, a depreciating currency is viewed by them as a "good thing." But this is a fallacy - as Mises explains:

What really happens is this: The country exports more than it did before, and it gets, as compensation for these increased exports, a smaller amount of foreign products. Exports are, as it were, subsidised and imports penalised to the burden of the natives. The inflation is, by and large, tantamount to a tax imposed upon the domestic consumers in order to cheapen the consumption of domestic products by foreigners.

Such a policy is - strictly speaking - "anti-national." Perhaps the powers-that-be engage in such anti-national activities because their own assets are denominated in foreign exchange, and not in Indian rupees. So they gain, anyway. Nobody is a fool.

Mises goes on to explain why a Gold Standard is the best:

The main argument in favour of the Gold Standard is that it renders the formation of the monetary unit's purchasing power independent of arbitrary action on the part of governments, political parties, and pressure groups [like exporters]. It places a check on inflationary policies, and is the only standard which can possibly become an international, a world standard.

Can one country - that too, a "poor" one - shift to the Gold Standard on its own, or does this require "international co-operation"? Let us hear Mises again on this:

The nineteenth century very successfully set up the gold standard as a monetary international standard. At the beginning of our century [the 20th - this was written in 1944, and not published till 2000, well after Mises' death in 1973] almost all commercially important nations had adopted the gold standard or the gold-exchange standard as their national standard. Both of these monetary systems tied a particular country's national currency unit to a definite quantity of gold, fixed by a duly promulgated act of that country's legislature. A divergence of the purchasing power of the national currency unit from the purchasing power of its legally fixed gold-parity was effectively prevented.... International trade and commerce, international credit transactions and investments, transportation, and travelling were not hampered by any monetary friction.

This satisfactory state of affairs was not the outcome of any international treaties, agreements, or conventions, or the operations of an internationally established institution or bank. It was an achievement of the various national governments acting of their own accord and aiming at nothing else but the most convenient arrangement of their own nation's economic matters. Governments were eager to stabilise foreign exchange rates because they considered such stability as beneficial for their own people's economic well-being. A sound money policy was not designed for the benefit of foreign interests, but as a policy highly beneficial for a country's own welfare....

The maintenance of the gold standard is possible only if a nation strictly abstains from all endeavours to inflate its currency system, either by the issue of additional paper money or by bank credit expansion. Nothing else is needed....

There is but one means to keep a nation's domestic currency at par with gold and the sound currency of other countries: to abstain from credit expansion and inflation.

As I pointed out in a column advocating India's unilateral adoption of the Gold Standard:

Any nation can unilaterally revert to the gold standard whenever it chooses. If we do so, our rupee, now pegged to gold, will always appreciate against the rest of the world’s fiat papers. This will help us become big importers. And cheap imports, including of capital goods and components, will make our manufactured exports competitive in terms of technology, quality and price. Our banks will attract the world’s savings, and we will possess capital, the vital ingredient of “capitalism”. All prices will steadily fall and the consumption of the poor will rise in leaps and bounds. This is the power of “sound money”.

Note that our "consumption of imports" will increase - precisely the opposite of what is happening today. And improved consumption is what better economic well-being is all about. We will no longer be a poor country. We will be rich!

Thus, all this Anna Hazare-Kiran Bedi-Prashant Bhushan "Lok Pal" business is nonsense. The real corruption in the world - and in our own country - revolves around the "funny money." Gold is the answer.

To get there, we must disabuse ourselves of just one false idea - that increasing the supply of money "stimulates the economy." Actually, even an increase in the supply of gold does not stimulate the economy. In both cases, price inflation is the inevitable result. If the quantity of gold in circulation increases, the price of gold declines - and all prices pegged to gold rise. The only difference in the two scenarios is this: today, The State can unilaterally increase the supply of paper money. With gold, only gold miners can. 

Whom do you trust?

Remember: Private gold miners will not increase the supply of gold because they will earn less in exchange as the price of gold will drop. Gold supplies will therefore increase only marginally, and slowly. There will be monetary stability.

Karnataka - And A New Constitution

The shameful happenings in Karnataka politics are an occasion to reflect on India's Constitution. The BJP chief minister has already been indicted for nepotism and corruption. The governor, a CONgressman, has written to Nude Elly asking for the dismissal of the state government - and the chief minister is now threatening a mass agitation. It is CONgress vs. BJP: both corrupt, both headquartered in Nude Elly, both "socialist" - but not "secular." Hah! 

In the meantime, as anywhere else in India, all the cities and towns in the state are a mess. Bangalore has gone down the tubes - despite its wealth. And Karnataka is a huge state, possessed of immense natural resources, including a 300-mile long seafront. India's only gold mine is located here.

To begin, let us understand that over-centralisation has to go. A Second Republic must be built from the bottom - based on self-governing and free-trading cities and towns, run by mayors, independent of all higher authority: the Principle of Subsidiarity. Only those subjects that these mayors cannot handle must be handed to higher levels of government - first, the state, and then, the centre. The pyramid must be inverted.

Today, the system is "corrupt by design." What is this "political design"?

The way I look at it, if you join Indian politics, you can get elected either to the state assembly as an MLA, or to the central assembly as an MP. If your party is in office, you can try and become a minister. In which case, you will have a budget - a huge amount of "funny money" to foolishly spend. This is how you "recover your investment": everyone knows it costs a fortune to get elected, and no one spends that kind of money for nothing in return. No one is interested in "public service." This is the crux of the problem.

This problem is an India-wide problem. This is true of tiny Goa. This is true of the new "small states" - like Jharkhand, Chattisgarh and Uttaranchal. This is true of West Bengal, too, where the newly elected government will find it impossible to restore Calcutta - a great city that the Commies have destroyed. But then, Nude Elly has been destroyed too - despite the fact that the city is a full-fledged "state" of this so-called federation. Just today, I read of a report damning the Delhi Development Authority (DDA) - the land monopolist. Bangalore has a BDA - a DDA clone. Mangalore has one too. 

Note that both Bangalore as well as Mangalore fork out enormous sums in taxes - almost all of which goes to the centre. Then, from Nude Elly, the funny money "trickles down" - and these cities get nothing. There are mayors in Karnataka - six of them - but they are powerless as well as budget-less. The tenure of a mayor is just one year.

Now, it must be acknowledged that the spending priorities of Nude Elly are all wrong. Money is simply wasted by the powers-that-be in Nude Elly - from MGNREGA to the Army in Kashmir and Manipur, to all kinds of undeserved - or even foolish - subsidies. We are being sucked dry - paying road taxes on automotive fuels, and then paying tolls on "notional highways." Double taxation! And then Nude Elly wants to give free rice and wheat to "the poor" - and "free and compulsory education," too. What nonsense!

Two important points: 

First: If we Indians want to survive, we must understand that our only hope lies in a Free Market. With a free market, we can earn our keep. Without it, we are doomed. That is, we must not expect anything from our The State. Only  sycophants hang around these ministers. To that extent, we must oppose taxes. We must oppose Big Government - especially Big Government Spending. I have an earlier post on this. They do not "stimulate the economy" with their spending - which comes from taxation, borrowing and printing paper notes. Rather, they simply "consume capital." They cause inflation - which sucks us dry, too. Ludwig von Mises - and not John Maynard Keynes - ought to be our guide. As Mises wrote, quite categorically:

History does not provide any example of capital accumulation brought about by a government. As far as governments invested in the construction of roads, railroads, and other useful public works, the capital needed was provided by the savings of individual citizens and borrowed by the government.

Second: Small political units are the best. India in 1947 comprised over 650 "princely states" as well as some French and Portuguese enclaves. There was no problem. Mysore, for example, was much better run by its Maharaja. Look at it now - under either the BJP or the CONgress.

We must think, therefore, of small political units - like "free cities." The basic advantage in small political units is that these perforce have to be free trading. Anything that a free city needs must be "imported." No protectionism will be tolerated by the citizens of a free city. Europe survives pretty well with dozens of small, independent states, including "city states" like Monaco and Lichtenstein. In an earlier age, between the 13th and 17th centuries, a host of European cities formed the free-trading Hanseatic League. Arnold Toynbee called theirs an "aborted civilisation" - but here in India, such a civilisation can be reborn. Even Africa is composed of many independent nations - and some are doing rather well, like Botswana.

To me, the idea of powerful centralised states covering vast areas - ours is a sub-continent - is dangerous. Power corrupts. Ours is corrupt by design. If we want to end all this corruption, we must design everything anew. 

That is: 

First, a free market and laissez faire, laissez passer Capitalism, which must include Private Property as well as Sound Money. 

Second: Subsidiarity - so that taxes are paid to mayors for specific goods and services. 

And lastly, a "private law society." This last idea has been very well explained by Hans-Hermann Hoppe, so do read it carefully. I too have written a brief column advocating a private law society.

The problems of Karnataka politics cannot be solved by a changing of the guard - because here the fence eats the flock: Predatory State. The only solution is to get rid of this present Constitution.

A Second Republic beckons.

Inflation - And the Crony Academic "Sophistocrat"

Pratap Bhanu Mehta (whom I have lambasted on an earlier occasion) chairs a State-owned "think tank" - and is best described as a "sophistocrat": like the sophists of old, he "specialises in ‘making the weaker argument the stronger,’ or, in other words, convincingly presenting lies as truth by dressing them in the misleading cloth of the arguer’s expertise." 

In his regular column, he has this time focused on inflation. This former Professor of Law & Government at JNU says inflation is "governance induced" and caused by "governance failures" - and I wonder why he does not use the word "government." The word "governance" is pure fiction - as I have explained in an earlier post. These are failures of The Government of India, Professor Mehta!

What is inflation? Older economists looked differently at this word. Ludwig von Mises (1881-1973) wrote how the very meaning of this word had changed during his lifetime:

What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation.

This is the "classical quantity theory of money" - which was NOT mechanistic and mathematical like that of Irving Fisher's MV = PT. But even Fisher knew that increases in the quantity of money cause a rise in all prices. The difference between the classical and modern quantity theories is just that the modern version says prices rise "proportionately" while the older economists knew that prices rise depending on "where the new money goes." So, if you "follow the money" all will be clear.

Today, money is NOT gold. It is just fiat paper - monopolistically produced by The State. Thus, increases in the supply of money are caused by The State. It is The State that produces inflation - deliberately, to fund its expenditures and to buy support. As Mises wrote:

The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.

Professor Mehta does not say this. Instead, he says:

When inflation is persistently high there is good reason to believe that there are significant supply bottlenecks in meeting increased demand. So the question is: what is it about the Indian economy that is making it difficult to generate supply responses to increased demand? In certain areas of agriculture there are long-term issues around productivity. There is simply no excuse why these issues should not have been addressed seven years into the UPA. But the supply of every single input cost, from energy to services, from land to credit for small businesses, seems to be alarmingly high. Each of these input costs can be directly linked to governance failures. Proper regulation is needed in many areas. But the form in which regulation is administered at so many levels of government is exacting a huge toll on the ability to create supply responses.

This is Professor Mehta's sophistry: to blame inflation on something else - like demand and supply of various goods, instead of nailing The State as the only cause. Yet, "creeping inflation" has been on for decades: when I was a little boy, a bottle of Coca-Cola cost 30 paise. When I bought my first motorcycle, petrol was 3 rupees a litre. When the first Maruti 800 rolled out, it cost 45,000 rupees. Inflation is nothing "new." As long as deficit financing continues, inflation will continue too.

Under the old International Gold Standard, if a nation "inflated" the supply of paper notes to finance The State, this would affect the foreign exchange market, and all foreign currencies would rise in value relative to the domestic currency. This would make imports expensive and exports cheaper. The public then viewed this as a "bad thing" - and condemned it. Today, however, people think this is a strategy to "boost exports" - and they cheer! This is because Keyenesian "education" has dulled and corrupted their minds. As Mises explains:

In the course of the depreciation, foreigners are in the profit-making position while domestic residents are in the losing position. Foreigners can buy more of the domestic products of the country that has inflated its currency and have to pay for their purchases by selling a smaller amount of their own products. The inflation-producing country, its is true, exports more, but it receives less for its exports. Inflation forces upon that nation a restriction on consumption. Only people completely blinded by mercantilist fallacies can view such an outcome as advantageous.

The Indian rupee has been losing value internally as well as externally - for decades. The US dollar was worth 8 rupees, the Deutsche Mark was 2.50 rupees, and the UK pound was 27 rupees in 1989, when I went to study abroad. Today, the dollar is 45 rupees, the Euro is over 60 rupees and the pound about 80 rupees. My course fee of £5000 cost me less than Rs. 1,50,000. Today, the same course would cost Rs.4,00,000 - and, yes, the exporters are laughing! When will we realise that foreign trade is about imports, about improving domestic consumption?


Indeed, Professor BR Shenoy's "Note of Dissent" to Nehru's Second Five-Year Plan was on precisely this point: inflationism. As Lord Bauer wrote in his tribute to this honest Indian economist:

They [the majority of economists] envisaged large-scale money creation for the financing of the highly ambitious Second Five Year Plan, maintenance and expansion of a wide range of economic controls, and extensive nationalization. In his Note of Dissent, Shenoy rejected the general spirit of the Majority Report as endangering personal freedom and a democratic political system. He also disagreed with several major proposals, including the scale of money creation, the maintenance and extension of state economic controls, and the scope of nationalization. He argued specifically that money creation on the scale envisaged by the Majority Report and under the Second Five Year Plan would result in inflation or a balance of payments crisis or both—a prediction that was fulfilled barely a year after the inception of the plan.

The difference between now and then is just this: then, they printed money to build steel plants under their ownership; today, they want to fund "welfare." And our chacha (and his guru Amartya Sen) were on the inflationary side then, just as they are now. Interestingly, both are from Cambridge, and both were taught their craft by Keynes' greatest disciple, Joan Robinson. In Sen's case, he was also a member of the secret Cambridge group called "The Apostles" - a group to which Keynes himself belonged, and who called themselves "amoralists." (See the wiki on Amartya Sen.)

Let us return to Professor Mehta's piece and his critique of chacha manmohan's claim that "there is a trade-off between inflation and unemployment." This is typical Keynesian bull - the notion that the more the government spends, the better the fate of the economy, "because there is more money floating around." 

In reality, this is but a means of cheating the working class - by agreeing to the trade unions' demand for higher wages, while at the same time engaging in inflationary finance. By inflation of the currency, The State "consumes capital." This is bad for the nation - though a handful of people gain, including crony exporters. The working classes lose because there is less Capital to invest, less jobs on offer, and wages cannot rise because productivity does not. Consumption falls - including consumption of imports (like oil). As Mises wrote:

Keynes did not teach us how to perform the miracle of turning a stone into bread, but the not at all miraculous procedure of eating the seed corn.

It is time we realised that the lesser a State spends, the better-off we all are: that is, the more of our income we ourselves retain, to save and invest; the less we pay in taxes; and that the same applies to government borrowings as well as money creation. I have an earlier post explaining this in full.

The only real solution is a return to the International Gold Standard - which will place "golden handcuffs" upon the wrists of every finance minister.

But there is still more sophistry in Professor Mehta: this time, he also talks about the high price of land - that is, urban land. Mehta writes, in support of a new Land Acquisition Act:

The bill will, if well drafted, help create fairness and transparency in compensation. But it will not solve all the principle land issues. It will solve the fairness issue. But whether it will solve the shortage or zoning issues is still an open question. Some land acquisition is location-specific. Land-acquisition problems are a product of the fact that the entire ecosystem for land planning is mismanaged. 

Actually, urban land is expensive only because of one reason: The State (of course!) which is a monopolist of urban land (the "urban development authorities") as well as a monopolist of roads. Around all our metropolitan cities there is abundant land - that is, "unowned land" that is not linked to the city by roads. 

Thus, the dual monopolist exploits us for his own, selfish gains. He makes urban land prohibitively expensive - deliberately; by "policy." Ditto for inflation, which is also "deliberate policy." 

All the urban development authorities must be abolished. And the road monopoly must go too. City mayors must be constitutionally installed - with the specific constitutional duty of providing roads to any real estate development coming up in the periphery of the city; further, roads must also be built to connect all the satellite towns to the primary city. 

Here again, all we have from Professor Mehta is blather and sophistry. Below are words that Mises' himself might have directed at Professor Mehta had he been alive now. But these words were targeted at people like him and his boss, chacha manmohan:

The pretended solicitude for the nations welfare, for the public in general, and for the poor ignorant masses in particular was a mere blind. The governments wanted inflation and credit expansion, they wanted booms and easy money.

Mises said "it is not the duty of the economist to be fashionable and popular; he has to be right. Those timid souls who fear challenging spurious doctrines and superstitions because they have the support of influential circles will never improve conditions. Let them call us "orthodox"; it is better to be an intransigent orthodox than an opportunist time-server." 

IMF vs. Gold - and our chacha

As the world comes to realise that the IMF is headed by a rapist, and that the only alternative to the IMF is an International Gold Standard, here is some  comforting news from Zimbabwe, where inflation crossed 400 billion percent some years ago: the news is that their central banker, Dr. Gideon Gono, has said the following to State media:

There is a need for us to begin thinking seriously and urgently about introducing a Gold-backed Zimbabwe currency which will not only be stable but internationally acceptable.

Dr. Gono added:

We need to re-think our gold-mining strategy, our gold-liberalisation and marketing strategies as a country. The world needs to and will most certainly move to a gold standard and Zimbabwe must lead the way.

Read all about it at EconomicPolicyJournal.com. The chief of the Zimbabwe Central Bank has also dismissed the US dollar as a stable base currency because of the excessive deficit financing the US Fed is engaged in.

The news also says that our chhota ustad montek might become IMF chief - so ask yourself: Do you trust gold? Or do you trust montek, the great socialist central planner?

While you mull over that, let us take a look at montek's boss - chacha manmohan s gandhi - whose speech the other day to the Afghan parliament is available here. It seems wee the sheeple are donating US$2 billion ($200 crores = 9,000 crore rupees) to Afghanistan in exchange for........ NOTHING!

It is easy to do such things with "funny money."

Note: All this funny money is going to the Afghan STATE: this is all a "government-to-government transfer." Clientelism.

We are spending our scarce resources building roads, providing electricity, gifting buses, building schools and hospitals - all this in Afghanistan, when much of our own nation is denied these.

What if we did what the Zimbabweans are talking about: the Gold Standard?

Well, then chacha would be unable to "produce money" out of a hat. His budget would be "limited" to what gold he receives in taxes. So if he wanted to give $2 billion worth of gold to Afghanistan, he would have to perforce look for something in exchange - like Afghani hashish and opium.

In which case, the gold would go to hashish and opium farmers and traders - and not to the US puppet, Karzai.

And wee the sheeple would have something good to smoke!

And montek would be studying Austrian Economics 101.

Get my drift?

Rapists are running the world. Rapists are in charge of the MONEY!

We must move to the Gold Standard - and Private Money.

Our Great Leader, chacha manmohan s gandhi said the following to Afghanistan's parliament:

Our ambitions and aspirations for growth and prosperity cannot be realised unless there is peace and tranquillity that will allow our people to live and work in honour and dignity.

There will be peace with trade - not with aid.

And "honour and dignity" is deserved by their hashish farmers, too.

End the US- and UN-sponsored "War on Drugs" - and only then will there be peace.

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.