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.

The Four Pillars of Gross National Happiness

The wikipedia states that “Gross National Happiness (also known by the acronym: GNH) is a philosophy that guides the government of Bhutan. It includes an index which is used to measure the collective happiness and well-being of a population. Gross National Happiness is instituted as the goal of the government of Bhutan in the Constitution of Bhutan, enacted on 18 July 2008.”

Here I note, for the record, the four pillars of Gross National Happiness:

  1. Extreme silliness. Happiness cannot be aggregated like beans. It’s a subjective experience that cannot be measured nor interpersonal comparisons made.
  2. Extreme stupidity. The stupidity of trying to ape a measure created to estimate aggregate production of an economy in a year — Gross National Product or Gross Domestic Product. Sure, GDP is useful. But coming up with a measure of say, Gross National Sweet Taste, is stupid.
  3. Extreme idiocy. It is idiotic to believe that coming up with a silly measure helps you figure out what to do to increase whatever that is supposed to measure.
  4. Extreme ignorance. It is ignorant to believe that measuring something automatically increases your understanding of what’s measured. Inability to distinguish between the name of an object and the object usually leads to ignorance of this sort.

What Delayed Human Prosperity

In a comment to part 4 of the essay on poverty, Shri Kalra asked, “if just existence of markets and process of exchange brings prosperity, why societies did not become prosperous soon after agriculture came to be practised and exchange markets came up to trade the surplus? Why is it that prosperity started coming in only around 18th century?”

Indeed it is true that for nearly all of human history that stretches back at least 200 to 300 thousand years, there was little improvement in the material prospects of life. The total output of the world economy for the last 2000 years was nearly flat until around the year 1500, and then it slowly started creeping up before it took the hockey stick shape around the year 1800, when it crossed one trillion international dollars.

Figure 1 Click on image to visit the source site Our World in Data.

Given that the scale on the horizontal axis is 2000 years, it appears that total world GDP took off vertically life a rocket. And seen from the perspective of thousands of years, it was indeed a sheer climb. A related graph about world population is instructive. Continue reading “What Delayed Human Prosperity”

An Essay into the Nature and Causes of Poverty — Part 5

At the end of part 2 of this essay, I had briefly touched upon the notion of credit-constraint and observed that the necessary condition for being poor was the inability to borrow. To reiterate, if you have wealth then of course you are not poor. Even if you have no wealth, you are not poor as long as you can borrow.

It’s time to explore that bit. We are all born poor. We are born without a dime in our pockets — indeed we are born naked. But those of us who are fortunate enough to be born to non-poor parents are not poor at birth. Our lifecycle is such that our parents “loan” us what we need to survive and grow. You could say that they release our credit-constraint.

The credit our parents provide us allows us to become skilled and thus create wealth, only part of which we consume. The rest we provide to the next generation to release their credit-constraint, just like our parents did for us. In effect, we repay the loan from the previous generation by giving loans to the next generation. It’s an intergenerational transfer of wealth. Continue reading “An Essay into the Nature and Causes of Poverty — Part 5”

The Destroyer of Worlds

Among scores of things I find on the web I particularly enjoy podcasts. Thanks to the smartphone, I can listen to them whenever I am on “auto-pilot” mode — house cleaning, driving, walking, etc.

Here’s one podcast that I have been thrusting on people around me. It’s Dan Carlin’s Hardcore History. To give you a sense of what Dan’s podcasts are like, listen to episode #59 — The Destroyer of Worlds.

Image credit: Jack W. Aeby, July 16, 1945, Civilian worker at Los Alamos laboratory

Just reading the title of the episode I guessed what it was about and where the title came from. The first nuclear fission bomb was developed by a team based in Los Alamos, New Mexico which was headed by the physicist J. Robert Oppenheimer.

Oppenheimer later recalled that on watching the awe-inspring spectacle of the detonation of the bomb, he was reminded of that instance in the Bhagavat Gita when Vishnu (in his incarnation as Krishna) reveals his true form to Arjuna on the battlefield of Kurukshetra, and declare, “Now I am become Death, the destroyer of worlds.” Continue reading “The Destroyer of Worlds”