Battle of Economic Ideas

11 Nov

I recently had the opportunity to write a three-part series on the history of economic thought for the IFMR Blog. It turned out to be an immensely enriching experience. I titled the series “Battle of Economic Ideas” as my voyage took me through the work of great thinkers who had different visions of how society should be organized. Below are the links to the three parts,

Part I – 1650s to 1880s


Source: Battle of Economic Ideas, IFMR Blog

The underlying theme of the first post is the emergence of a rational and modern society during the Age of Enlightenment (1650s-1780s). Thinkers like Rene Descartes and John Locke questioned feudal doctrines of the past, paving the way for the rise of scientific thinking and political freedom. The subsequent era of the Classical Liberals (1750s to 1880s) witnessed the birth of modern economics through the works of Adam Smith. Smith’s ‘invisible hand’ hypothesis provided the justification for non-interference by the government in the workings of the market. This ‘free-market’, ‘laissez faire’ approach to economics coupled with political self-determination and the emphasis on ‘individual’ over ‘society’ was the hallmark of the Classical Liberal era.

Part II – 1850s to 1970s

Economic Thinking

Source: Battle of Economic Ideas, IFMR Blog

In the second post, we provided an overview of the Marxian and Keynesian backlash (1850s to 1970s) that challenged the ideas of Classical Liberals. This era witnessed the emergence of two great political-economic (and philosophical) thinkers – Karl Marx and John Maynard Keynes. Their writings provided a damning critique of classical liberalism and challenged long-established doctrines.

Part III – 1970s onwards

The third post provides an overview of the neo-liberal era (when a diluted version of Classical Liberalism was reincarnated), and comments on the current crossroads in economic ideas.

Hope you enjoy reading the posts!

I also delivered a talk on the above at the IFMR Spark Spring Edition – 2015. The link to video is below,

Tax pass-through for Alternative Investment Funds

18 May

Now that the Finance Bill 2015 has received the President’s assent, we can all rejoice that Alternative Investment Funds (AIFs) in India have been granted tax-pass through status. This has been a long standing industry demand and it was heartening to hear the Budget announcement regarding the tax-pass through status.

I had written on this issue for Mint prior to the budget. You can access the same here.

Hopefully, tax certainty becomes a permanent feature of our capital markets rather than being occasional gusts of clarity.

A few updates..

29 Oct

Some blogging has shifted to the venerable IFMR Blog, which I would highly recommend to anyone interested in the financial inclusion sector in India.

I have been quite fascinated with digital currencies, and you can view my article on Bitcoins here.

Thomas Piketty’s book Capital in the Twenty-First Century has been quite a sensation. My two cents on the inequality debate the book has ignited can be read here.

And of course, I recently had the pleasure of visiting Fort St. George in Chennai. A short note on the trip can be read here.

Hope you guys had a great Diwali.

How it all began…

22 May

Image Courtesy: Link

(A small post trying to dig the past to identify the origins of my interest in political economy and my disposition towards libertarian ideas)

Well, I am not really sure how it all started.

During my graduation days, I was supportive of leftist ideas. I thought such ideas provided a safety net for the poor. During my post graduation, I do not remember having thought much about political economy. However, a distinctive libertarian thought I harbored during those days was that the US subprime crisis was a result of easy monetary policy pursued by the Fed post the dot com bust (and hence I laid the blame for the crisis on the Fed which ran opposite to conventional wisdom of putting the blame on ‘greedy’ bankers). Though I harbored this thought, I was unaware this has anything to do with libertarianism –  in fact, I was unaware of what ‘libertarianism’ even means. At the same time, I remember reading Taleb’s Black Swan and Fooled by Randomness. As I think hard, it is in one of these books (I am not sure which one) Taleb said something similar to the vein that capitalism is the best system as it maximizes the probability of benefiting from randomness (given that a necessary condition for capitalism is freedom without which property rights are meaningless, and freedom is what allows one to position oneself for black swan events). Given that I pretty much took whatever Taleb said as gospel, I remember the above as the first instance of consciously making a value judgement in favor of capitalism.

After my post graduation, came work life and pop macroeconomics became the center stage of my interest in economics. It is during this phase that I came across Milton Friedman’s TV series, ‘Free to Choose‘. And this would easily be the moment I can recollect as the beginning of my interest in political economy. Once you hit off with this brilliant TV series, landing on webpages of prominent libertarians like Tom Woods (Milton Friedman was not a libertarian, but we can keep all this semantics for later. Suffice is to know that like libertarians, Milton Friedman was a strong advocate of free markets) was just a matter of time. And once you are on Tom Woods’ webpage, the libertarian world is thrown open to you – Austrian school of economics, Mises Institute, Robert P Murphy, Cafe Hayek, Lew Rockwell and the likes. My Google Reader (previously, now its Feedly) has some 15 feeds of prominent websites which debate a lot of economics through the lens of political economy (most of the times, I would be hard presses to go through even 5 percent of the posts, but it feels good just to have feeds from them in the hope that one day I will read everything).

Over the years, I have devoured a lot of libertarian literature through these sources and it has been a fascinating journey. Mises Institute is a great resource for everything libertarian. Tom Woods and Robert P Murphy update their blog almost daily, and Tom was kind enough to even reply to a query I had. Cafe Hayek is absolutely brilliant in demolishing statist ideas. My journey has now led me to political philosophy in trying to understand which is the best social (un)order. Needless to say, there is a mountain to read and think over, and it feels like I have only taken a peep.

I am still scratching my head for more events from the past to trace my ideological dispositions. Maybe thinking hard will help. But its all so foggy…

Socialism and the Poor

4 Jan

Came across this on twitter….


The story of a welfare state…

2 Apr


The welfare state starts with a few people on the wagon of government support. As time passes, more and more people clamor for government support and hop onto the wagon. It ends when the falling number of people pulling the wagon (i.e. people paying taxes) are unable to pull anymore (i.e. taxes are insufficient to meet expenditure).

For evidence, please see the European countries now bust.

Alan Greenspan and the Gold Standard

2 Apr

Alan Greenspan

Alan Greenspan was the longest serving chairman of Federal Reserve, from 1987 to 2006. And when the head of a central bank speaks approvingly of a gold standard, we should listen. Here’s what Alan Greenspan had to say in a January 2011 interview,

We have at this particular stage a fiat money which is essentially money printed by a government and it’s usually a central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or a currency board, because unless you do that all of history suggest that inflation will take hold with very deleterious effects on economic activity… There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard.

I read about the above in a Forbes article here and was surprised to know about Greenspan’s views. The gold standard is so antithetical to the existence of a central bank, that when a central banker says we need a “gold standard or a currency board”, you can’t help but think – is the gold standard really a “barbarous relic?”

Nullification and Gun Control

27 Feb

Cover page of Tom Wood's book on Nullification

Cover page of Tom Wood’s book on Nullification

Sheriffs in the Utah state of the United States have refused to implement any federal policy restricting gun ownership. In a letter to Barrack Obama, the Utah Sheriffs’ Association, consisting of 28 out of 29 Utah sheriffs, have declared that,

We respect the Office of the President of the United States of America. But, make no mistake, as the duly-elected sheriffs of our respective counties, we will enforce the rights guaranteed to our citizens by the Constitution. No federal official will be permitted to descend upon our constituents and take from them what the Bill of Rights—in particular Amendment II—has given them. (emphasis mine)

A similar situation in India might look like an association of Police officers refusing to implement a Government directive (either state or central) because they think it is against the spirit of the Indian constitution. To take a specific example, maybe the Police officers in Tamil Nadu refusing to enforce the State ban on Vishwaroopam because they believe it violates freedom of speech. I am not an expert on the Indian constitution, but my guess would be that such a move would clearly be unconstitutional. Police officers in India s are law enforcers and cannot choose whether to implement a law passed by the Indian parliament.

In a similar vein, the letter written by the Utah sheriffs may seem completely outrageous. But in the case of the United States, refusal to enforce a federal law may have constitutional backing through the right of nullification. Tom Woods defines nullification as,

 State nullification is the idea that the states can and must refuse to enforce unconstitutional federal laws.

Woods traces the power of the state governments to nullify unconstitutional federal laws to Virginia and Kentucky Resolutions, drafted by James Madison (a key Founding Father of the US, the fourth American President and “Father of Constitution”) and Thomas Jefferson (another key Founding Father and principal author of the American Declaration of Independence) in 1798.

The Utah sheriffs have come together to protect the rights guaranteed to US citizens under the Second Amendment to the US Constitution, which says,

A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.

The debate on nullification and the second amendment  in the blogoshpere is ideologically charged. The libertarians invoke the concept of nullification to question Obama’s move to restrict gun ownership in the US, while the liberals question the validity of nullification and resort to the Supremacy Clause, which the federal government has previously used to strike down conflicting state laws.

Any which way, it will be interesting to see how things unfold.

Raise that unemployment now

19 Feb

Sipping my morning cup of tea, I came across a horrifying article by Paul Krugman titled “Raise that wage now.” In the article, Krugman seconds Obama’s proposal in his State of the Union address to raise the minimum wage by 24% in the US. I knew immediately that this would have opened a can of worms with the blogosphere debating this in full swing. Here’s a short clip on what Milton Friedman had to say about minimum wages,


Don Boudreaux at Cafe Hayek has a good compilation of some libertarian links against raising the minimum wages. You can read them here.

Since so much has been written on this, and I think the title of this post is clear on where I stand on this debate, I thought of posting two cartoon strips on this topic.





Its a wonderful life with capitalism

30 Oct