Friday, December 19, 2008

India need Hayekian

S. S. Tarapore has an article on “Hayekian approach: Lasting relevance for India in the Business Line. 

Quite interesting article but along Indian economists made mess of teaching and research in economics including F A Hayek ideas which is totally invisible. It is worthwhile to note the following lines. 

“Despite the fact that that Keynes’ General Theory was written over 70 years ago, we in India treat it as contemporary thought. What is more unfortunate is that most Indian economists are not appreciative of the roaring debate in the 1930s between the theories of Keynes and Hayek. 

The absence of familiarity with the Hayekian approach is particularly unfortunate as it has great relevance to current macroeconomic policies in countries like India

Hayek was a multifaceted scholar, with monumental contributions in the fields of law, liberty and ethics. The young Hayek had made a lasting contribution to macroeconomic thought through his fundamental work on ‘Prices and Production (1929)’; this monumental work was difficult to follow, though it was published in English, as it was Germanic in thought and, therefore, not easily understood in Anglo-Saxon circles. 

John Hicks had postulated that it is desirable to creep along the ceiling of growth and to actively use monetary policy to ensure that the limit to growth is not exceeded. Neither the Hayekian approach nor Hicks’ recommendation is palatable to Indian policymakers and, hence, these theories have been totally banished from having any influence on Indian policymaking. 

Hicks, in his Critical Essays in Monetary Theory (1967), has an insightful Chapter on “The Hayek Story”. While the Keynesian approach was appropriate for the 1930s, the Hayekian approach could be relevant at other times, particularly in developing countries. In the heat and dust of the Third and Fourth Indian Five Year Plans, no economist in India would have dared to espouse the Hayekian approach, and the few who did were banished into oblivion”. 

The author has failed to point out several other important works done by F A Hayek.

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