Community Currencies…….

Jamal Mecklai book review throws some new coins “there is a very interesting section on the QQ, a new Chinese coin created by online marketers, which has already moved into the real world. The second is a brief mention of Community Currencies, which, in many senses, are a reactionary response to globalisation.”

The benefits of failure

Peter T. Leeson has a nice article on The benefits of failure

Thanks to dismal science of economics

When every body talks about big spending including in India of course these people don’t understand all other alternatives to revive the economy, and some suggest that the only way left us is to continuously remind them. So that in the course, they will start thinking what has been told and untold to them. Here liberal economist Christopher Lingle writes in The Japan Times “Once again the laws of men are being implemented to supersede economic laws that require much price and wage adjustment during a recession so that markets can clear. This clearing serves the best interests of the overall community by enabling unemployed labor and misused capital assets to be put to productive and profitable use. Only then can there be a sustainable economic recovery”.

 

What is look more strangely is the children and student who try to learn economics with open mind, but taught all dismal side economics without showing the alternative method to think.

 

The childless British economist who famously quipped

JUDY SHELTON has an excellent article on why and how unsound fiat money kills lives and sound money makes life easy.

 

The idea of government is the idea of crisis

Kaushik Das writes in the Mint “History has shown time and again that all the previous business cycles or “general cluster of business errors” were the outcome of either the manipulation of interest rates, price levels, exchange rate, fiscal balances or a combination of all of these by government institutions.”

In fact Sauvik is right in a way to deeper sense of free enterprises system.

of free markets

The Mint has published a serious of article by different people about The Year I find less interesting to read those articles except Ramesh Ramanation’s “of free markets versus financial markets”. But I believe that if Sauvik would have written a piece on The Year could be loveable with his immense skill to interpret the events in such a way. But still there is room to bite:

• “Free markets are about entrepreneurs, people who start off invariably as small business owners who hire from the ground up, maybe two, three or 10 people, and then grow from there. Most often, these entrepreneurs will never get to use the sophisticated tools of the financial markets, other than the typical loan from the neighbourhood bank. But that’s all they need, because they aren’t looking for more than their own appetite for risk, creativity and hard work to help them move up in life, and for government to get out of the way, set fair and transparent rules of functioning, enforce them correctly, reduce red tape and provide the necessary social infrastructure. The true engines of an economy are these entrepreneurs—big and small, but mostly small. Financial markets are about one aspect of facilitating this—and not the end-all of a free market system. They play a role, a critical role, but they are not the centre of the universe. In fact, 2008 showed that an overemphasis on financial markets, an over-monetization of economic activity can have devastating consequences. 
  
• As we stumble into 2009, wallowing in our incoherence, doubts are beginning to emerge: Was it so bad to have a socialist mixed economy model, where the government was a benevolent dispenser of licences and all else? Is the market-based economy all that it’s made out to be? Could it really be possible that the communists—God forbid!—actually had it right, that we need to keep markets on a tight leash; that slow and steady is a much better path than see-saw uncertainty; that the Hindu rate of growth isn’t a bad thing after all?”
  

My reading at 12.18 Am!!

Anarchic capitalism vs. sensible capitalism by Prabhudev Konana, The Hindu. 

It is important to note a few paragraphs from Konana piece. 

• “The perfect storm of incompetent management, dogmatic unions, and imprudent regulations on bio fuel and mileage standards has now resulted in an economic nightmare. 
  
• Still sensible free-market capitalism is the most desirable system for wealth and job creation. While many, including me, have criticised India’s growth in the last two decades as one-sided development, the fact remains that millions of new jobs — some of which are very high-paying jobs — were created. There is passion and excitement among the educated class. It is disingenuous to assume that liberalisation and free-market principles are bad. However, any criticism should be on the government’s heavy handedness in violating the private property rights of farmers, heavily subsidising industries, and excessive preference to some sectors while ignoring infrastructure and neglecting education and healthcare for the underprivileged sectors. 
  
• There is a role for the government to facilitate economic activities with sensible regulations. Regulations play two important roles within a capitalistic system.  
  
• The economic ideologues at the extremes are harmful to any nation. India’s potential was trapped for decades by intense protectionism. Capitalism has unlocked that potential and is still the best path to prosperity”. 
  

The law is made by gathering some narrow view about individual citizen of country-one size fits all. These law makers are often stupidly called experts in government. What sensible law one can expect from these lawmakers who themselves think they are the big law for even one - BIG Government?

India lost over four decades experimenting with a system that has lost all credibility

Sharad Joshi has important article in the Business Line and it may be noted the following paragraphs which is dead crucial to understand the notion of freed enterprises or the market.  

“Markets are live organisms and not mechanical contraptions. They work like birds. The birds have to move their wings up and down in order to gain height. Even the strongest of the birds has to come down and take rest on a branch from time to time. That does not make the birds inferior to insects and reptiles.

 ….expressing their doubts whether Nehruvian socialism was not a better option than Dr Manmohan Singh’s liberalisation and globalisation. It’s funny how so many economists who spent a lifetime building socialist theories and institutions switched over to economic reforms soon after 1991. 

Politicians, as a species, view retrenchment as a certain vote-snatcher. At the very first signs of economic recession and retrenchment, politicians and economists appear flabbergasted enough to beat a hasty retreat towards the illusion of a safer and more comfortable welfare/socialist regime. These neo-socialists appear to lose sight of the fact that India faced large-scale secular unemployment during the epoch of socialism. 

The governments of the era concealed the massive unemployment by giving figures of employment created in the public sector rather than publishing the figures of those who remained unemployed. 

Let no one forget that the socialist welfare state spelt secular stagnation for all the years since Independence. A market-oriented system might have its ups and downs. That is inevitable in any free moving body — economic, social or aerodynamic.

It would be most unfortunate if the economists tried to frighten the people back to the days of the license-permit-quota-inspector raj, where no one was allowed to do anything; but nothing was disallowed to those with the necessary political pull. 

All living organisms have their ups and downs. A mother would not exchange her baby for a doll simply because the doll does not fall ill”.

Scientific Evolution of religion

Jeffrey D Sachs says in ET that in a “recent survey data by the Pew Foundation found that while 58% of Democrats believe that human beings are causing global warming, only 28% of Republicans do. Similarly, a 2005 survey found that 59% of self-professed conservative Republicans rejected any theory of evolution, while 67% of liberal Democrats accepted some version of evolutionary theory. 

To be sure, some of these deniers are simply scientifically ignorant, having been failed by the poor quality of science education in America. But others are biblical fundamentalists, who reject modern science because they take the word of the Bible as literally true. They reject geological evidence of climate change because they reject the science of geology itself. 

The issue here is not religion versus science. All of the great religions have traditions of fruitful interchange with — and, indeed, support for — scientific inquiry”.

In 2007, friend Vipin P Veetil wrote at CCS a article in which he says that the “Environmental problems cannot be solved with the domain of economics by calculating appropriate prices (inclusive of social costs and benefits), because the implication of environmental changes are not only interspatial, but are also inter-temporal in character. Therefore to calculate “correct” prices subjective relative valuation of various generations are necessary, this is beyond the scope of positive economics. The intellectual domain of environmental issues is not the monopoly of economists”. 

Cherish of Moral and Character

When I was faculty at School of Economics, DAVV Indore the MA and MBA (Business Economics) student were no longer ready to listen what the proponent of Globalisation say all about but that was not the case when they try to adopt what the opponents say, though it is illusion. Yet some came back with questions that was already addressed by many especially Professor Jagdish Bhagwati in his Book In Defense of Globalization.  

In Templetion Professor Bhagwati writes “I can attest from personal experience that, if you try to talk about the free market on today's university campuses, you will be buried in an avalanche of criticism of globalization. The opposition of faculty and students to the expansion of international markets stems largely from a sense of altruism. It proceeds from their concern about social and moral issues. Simply put, they believe that globalization lacks a human face. I take an opposite view. Globalization, I would argue, leads not only to the creation and spread of wealth but to ethical outcomes and to better moral character among its participants”.

Without surprise it is too true in India also.

He further says that “As for the influence that globalization continues to have on moral character, let me quote the wonderful sentiments of John Stuart Mill. As he wrote in Principles of Political Economy (1848):

The economical advantages of commerce are surpassed in importance by those of its effects, which are intellectual and moral. It is hardly possible to overrate the value, in the present low state of human improvement, of placing human beings in contact with persons dissimilar to themselves, and with modes of thought and action unlike those with which they are familiar.…There is no nation which does not need to borrow from others, not merely particular arts or practices, but essential points of character in which its own type is inferior.…It may be said without exaggeration that the great extent and rapid increase in international trade, in being the principal guarantee of the peace of the world, is the great permanent security for the uninterrupted progress of the ideas, the institutions, and the character of the human race”.

He argues that “Adam Smith famously wrote of "a man of humanity in Europe" who would not "sleep tonight" if "he was to lose his little finger tomorrow" but would "snore with the most profound security" if a hundred million of his Chinese brethren were "suddenly swallowed up by an earthquake, "because" he had never seen them." For us, the Chinese are no longer invisible, living at the outside edge of what David Hume called the concentric circles of our empathy. Last summer's earthquake in China, whose tragic aftermath was instantly transmitted onto our screens, was met by the rest of the world not with indifference but with empathy and a profound sense of moral obligation to the Chinese victims. It was globalization's finest hour”.

There are total eight essays in the forth in a serious of conversations among leading scientists.

Others include in the present list are:

Tyler Cowen

John Gray

Garry Kasparov

Qinglian He

Michael Walzer

Michael Novak

Bernard-Henri Lévy

Kay S. Hymowitz

Robert B. Reich

Born in Somalia

John C. Bogl and

Rick Santorum

Every one does their part to add the clarity in understanding of “Does the free market corrode moral character?”

Every marginal buyers increase risk into the market

Raghuram Rajan writes in the India Today “Essentially, the US financial sector managed to package mortgages to low-credit quality buyers and issued highly rated securities against these packages that foreign investors were willing to buy. They were putting lipstick on a pig. And hindsight suggests these were still pigs”.

Interestingly he writes that “I spoke to central bankers in August 2005, at Greenspan's farewell Jackson Hole conference, about the increasing risks in the financial system. A number of people were worried, but regulators were convinced that markets would take care of themselves”.

If the regulators were convinced wrongly about the market the problems is with regulators not necessarily on market.

What are the lessons for India?

The turbulence lies opportunity

Mr Vivek Gambhir writes in Economic Times that the “Economic turmoil creates more opportunities for companies to move into leadership positions than any other time in business.”

This is what the Austrian economists are arguing since long time that the market corrects itself and discover new avenues without the help of government or central bank intervention.

It is the Government Ironies

H.D.S. Greenway writes in Boston Globe “there are ironies heaped on ironies….the United States has touted free markets as the holy grail, and even liberal democracies have been excoriated by Washington for not wringing out their last vestiges of socialism. Today, however, much of the US economy is about to be run by the central government, which is supposed to be where socialism went wrong. Today, China is looking to the United States for inspiration on what to nationalize rather than privatize”.

Free Market has no End

There is enough wolf cry on the buzzed word of “bailouts” and many free market economists have expressed their positive signal.

Economist Raghuram Rajan, finance professor at University of Chicago's Graduate School of Business and former chief economist with the International Monetary Fund, said “the government had rushed to spend public money without trying all the private sector solutions”.   

Read also Let Them Fail by Peter Boettke at The Austrian Economists blog

Resources do not disappear, they get reallocated.  The market process is a mechanism for the continual re-evaluation and re-shuffling of scarce resources among alternative uses.  This is what is meant when we refer to the market as a dynamic process of entrepreneurial discovery and learning.

You don’t bailouts your mind by Chandra

The issues in “Witness government bail-outs of Wall Street firms: clear proof that one can’t depend on markets. State intervention is necessary” is totally different from his risks point of view.

However, there are several comments from prominent free market economist around the world. Just note three quite interesting one read here, here and here.

 Now you can think over it which one is actually bailouts!