Consider a simple economy. It has two people,  A and B. And there’s the government (or state) G. Person A’s net worth is $100 in cash, and person B’s net worth is $0. This economy run on fiat money. Meaning, G has the power to print money whenever it feels like it.

Suppose G is concerned about inequality and prints $100 and gives it to B. The amount of stuff  in the economy that can be consumed has not changed. What the increase in money supply by $100 does is to raise the prices of stuff. General increase in the level of prices is called inflation. The same amount of goods but twice the amount of money chasing thoe goods. Inflation is therefore 100 percent. Continue reading “Inflation”

70 Years of China in One Image

Deng Xiaoping – The Man Who Saved China

The story of modern China is at once frightening and encouraging. It’s hard to comprehend something that involved hundreds of millions of people. It’s impossible to imagine what is is like to lift hundreds of millions of people out of extreme poverty. China did it. I don’t excuse the human rights abuses that China routinely indulges in but I celebrate the reduction in human suffering that it achieved. I have special contempt for the Chinese Communist Party leadership. They are evil but at least they did one thing right: they relieved the suffering of their people.

I would fall to my knees in deep gratitude to those who were responsible for sparing me the torture of a life of grinding poverty. Conversely, if I had been condemned to a life to unrelenting poverty — as is the fate of hundreds of millions of Indians even today — I would curse those responsible to be tortured in hell for eternity. That includes those of every political party that has ruled India since 1947. Continue reading “70 Years of China in One Image”


The earliest known instance of taxation dates back 5,000 years in Egypt. I suppose the pharaohs needed it to finance those pyramids. Before that, death was the only thing that was certain; after that, taxes became as certain as death. Good ol’ Ben Franklin[1] noticed that.

The Encyclopedia Britannica describes taxation as “imposition of compulsory levies on individuals or entities by governments. Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well.”

It goes on to add that:

Taxes differ from other sources of revenue in that they are compulsory levies and are unrequited—i.e., they are generally not paid in exchange for some specific thing, … While taxes are presumably collected for the welfare of taxpayers as a whole, the individual taxpayer’s liability is independent of any specific benefit received. Continue reading “Taxes”

Black Lies Matter

The US is going through some harrowing times. The movement called “Black Lives Matter” is doing what it set out to do: sow social discord. The lies they tell — about institutionalized racism — are easy to believe. Good thing is that even a cursory examination of the evidence shows that racism is not a problem any longer.

The problems that the US faces is not the subject of this blog. But it’s good to have a reasonable understanding of the problems that American blacks face. The bad news is that the wounds blacks in the US suffer is largely self-inflicted. The really bad news is that blacks don’t have leadership. It’s not that blacks don’t have good thought leaders; it that they invariably choose the bad guys. Continue reading “Black Lies Matter”

Scarcity and Economic Problems

It’s a truism that the basic economic problem is how to deal with scarcity. Our means are limited and our wants exceed our limited means to satisfy those wants. But will there ever be time when we are free of scarcity? If we have everything we need, will the economic problem disappear?

The fact is that we will never have everything, even if we have all the material things we want. Even if there were no material scarcity, there still would be an economic problem. Scarcity exists because time exists and only a finite amount of time is available to finite creatures (which includes us humans.) Continue reading “Scarcity and Economic Problems”

UP to become $1 trillion Economy

The American computer and cognitive scientist John McCarthy (1927-2011), the man who coined the term “artificial intelligence,” had this in his email signature line: “He who refuses to do arithmetic is doomed to talk nonsense.”

Refusing to do arithmetic is one thing; it quite another if a person is incapable of doing arithmetic. The inability to do arithmetic puts the person in the incorrigibly and naturally stupid category.

But that’s not the worst of it. What if the person is in a position of some authority? Imagine if, say, he’s a powerful bureaucrat with control over vast amounts of public funds — how much damage would he inflict on the public? He could impoverish the state.

Well, you don’t have to imagine that. Here’s a real life example of precisely such an incorrigibly and naturally stupid person. Continue reading “UP to become $1 trillion Economy”

The Truth about Institutionalized Racism

This lady says that all lives matter, not only when a white person kills a black person. Where is the outrage when blacks kill blacks in the US, she asks. She calls out the white people as racists. Watch:

This is not consistent with the dominant narrative of institutionalized racism. Also watch this video. YouTube will probably take it down soon.  Continue reading “The Truth about Institutionalized Racism”

Industrial Revolution

Why did the Industrial Revolution happen in England and not in someplace like India or China? That fascinating question has repeatedly been asked and answered for two centuries. On this blog too a reader asked that question.

Dozens of books have been written by serious researchers on the topic, and there is quite a bit of consensus among scholars regarding the causes of the Industrial Revolution, although emphases vary. In the following I briefly outline my take on the matter. First, though, here’s how wiki introduces the IR: 

The Industrial Revolution, now also known as the First Industrial Revolution, was the transition to new manufacturing processes in Europe and the United States, in the period from about 1760 to sometime between 1820 and 1840. This transition included going from hand production methods to machines, new chemical manufacturing and iron production processes, the increasing use of steam power and water power, the development of machine tools and the rise of the mechanized factory system.The Industrial Revolution also led to an unprecedented rise in the rate of population growth.

The Industrial Revolution began in Great Britain, and many of the technological innovations were of British origin. By the mid-18th century Britain was the world’s leading commercial nation, controlling a global trading empire with colonies in North America and the Caribbean, and with major military and political hegemony on the Indian subcontinent, particularly with the proto-industrialised Mughal Bengal, through the activities of the East India Company. The development of trade and the rise of business were among the major causes of the Industrial Revolution.

Something as complex and widespread in its impact at the IR can not be monocausal. A large set of factors, many of which were necessary and many others contingent, created the conditions for it to happen precisely where it did. These include historical, cultural, institutional, technological, scientific, commercial, climatic and geographical factors. Continue reading “Industrial Revolution”

Only Organized Violence Please

People condemn disorganized violence but are filled with pride and honor if violence is organized at the national level and projected internationally. That’s funny. Here’s Armen Alchian (1914-2013) in his book college economics textbook Exchange and Production:

Before condemning violence (physical force) as a means of social control, note that its threatened or actual use is widely practiced and respected—at least when applied successfully on a national scale. Julius Caesar conquered Gaul and was honored by the Romans; had he simply roughed up the local residents, he would have been damned as a gangster. Alexander the Great, who conquered the Near East, was not regarded by the Greeks as a ruffian, nor was Charlemagne after he conquered Europe. Europeans acquired and divided—and redivided—America by force. Lenin is not regarded in Russia as a subversive. Nor is Spain’s Franco, Cuba’s Castro, Nigeria’s Gowon, Uganda’s Amin, China’s Mao, our George Washington.

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