The disparity in the wealth and poverty of nations is starkly evident and has been a perpetual source of puzzlement and inquiry for centuries. Why do some nations languish in heartbreaking poverty while others prosper? Is there a poverty trap that some fall into accidentally and are unable to get out of without external help? Can they be helped, and if so, how?
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Things change. That’s the nature of the universe we live in. There’s little we can do about that, and the change is not always to our liking. Still, we are better off with change. Had it been an unchanging world, we would not have been here. We are complex creatures and it takes time for complexity to arise from simpler beginnings. Change and with it increasing complexity has been around since the beginning of the universe some 13.7 billion years ago. By now you would expect that we would have worked out the implications of this and become fully prepared to deal with it. Sometimes in our blindness to them, we fall into traps of our own creation.
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People value freedom. Actually, not just humans, all sentient beings want to be free. But only in human beings does the impulse to enslave others find expression so widely across space and time. The desire to control others is a primitive instinct which I believe will be with us for a long time. That instinct lies at the foundations of organized religions and organized crime. It is also that same instinct that motivates the power-hungry to promote a command and control government.
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There are two broadly defined systems of organizing the production and allocation of goods and services in a society. One system is called the market and the other command and control. We all have first-hand experience with both systems since childhood. As kids when we traded stuff with our friends, we were using the market. At home, we were under the command and control system of our parents. Both systems worked in the limited contexts of family and friends. Do they work equally well in when the context is a large, modern-day economy?
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When you find that there’s a disconnect between expectations and reality, it is no use denying the reality. It may be time to question the assumptions that underlie the expectations.
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Counterfactuals are generally instructive and entertaining. But in some cases, it can be deeply distressing to consider them. Those leave us sadder although wiser. And at times they provoke us to anger and outrage because we finally understand what might have been. That outrage could motivate us to act and thus change what we can. As Omar Khayyam, the lovable old wino and polymath wrote about the sorry scheme of things, “Would we not shatter it to bits and remold it nearer to our hearts’ desire?”
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There comes a time in every endeavour when it becomes imperative that one does a bit of arithmetic. As the late John McCarthy used to say, “Those who refuse to do arithmetic are doomed to speak nonsense.” Doing a bit of arithmetic is important not only to avoid nonsense but also to get a feel for what we normally would miss since our brains are not naturally attuned to figuring out the state of the world without the help of numbers. In this piece I lean upon a few sums to help me understand the broad implications one factor of economies – namely their growth rates.
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