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Why people gravitate toward socialism is a question that has been asked and answered by economists for a while. The fact is that we all grow up in an ideal socialist setting, namely our family. That molds our moral intuitions which then guide our normative positions. That is, our beliefs about how the economy should function is grounded on our intuitive understanding of how the world works, which are formed in our (what else) formative years.

Thus we reach conclusions that are at odds with the reality of the world. For example we believe that order cannot emerge without orders from above. This has intuitive appeal — something is true and needs no analysis or investigation — because we see that to be true in families and firms, not to mention in armies. So it is an alien concept that order can emerge without orders in a free marketplace. (Free here means that there are no barriers to entry or exit.) Continue reading “The Perverse Persistence of Socialism”

This year’s Oct 3rd will mark the 100th birth anniversary of a man I intensely admire, just as Oct 2nd marks the 150th birth anniversary of a man I equally intensely detest, Mohandas Karamchand “Mahatma” Gandhi. Rarely do two humans occupy such diametrically opposite ends of the spectrum of human thought, action, morality and ethics.

James McGill Buchanan was born in Tennessee on Oct 3rd 1919 to a family of  high social status (his grandfather was the governor of Tennessee in the 1890s) but of modest means. He received his Ph.D. in economics from the University of Chicago in 1948. He was the architect of “public choice school,”[1] and for his contributions to that academic enterprise he was awarded the Nobel Memorial Prize economics in 1986. Continue reading “Happy 100th Birthday, James M. Buchanan”

To pick up where I left off in the previous post — “Governments fail because usually the citizens are not very clever, the politicians are power-grubbing cretins, and the bureaucrats are corrupt ignoramuses. The solution is therefore to keep government small and its scope severely limited” — let’s ask “What is the proper role of the government or the state?”[1]

For a start, we should define “the state.” The state, according to the German sociologist Max Weber (1854 – 1920), is a “human community that (successfully) claims the monopoly of the legitimate use of physical force within a given territory.” This characteristic of the state, more than anything else, determines and constrains its scope. Continue reading “What’s the State?”

When governments fail — and they do so with predictable regularity — nations fail. But why do governments fail? That’s because humans constitute the government, and humans by nature are myopic, greedy, ignorant, egotistic, and stupid. Those flaws, generally present in modest measures in all of us, get exaggerated in people who wield power. People in government can be relied upon to be the worst exemplars of the human race. The greater the power, the lower on the humanity scale a person is likely to be. As Lord Acton said, “Great men are almost always bad men.”[1]

The basic problem is that for the government to do its job, whatever that may be, it has to have power. That power attracts the most power-hungry, anyway. But even if by some chance, someone with little ambition does get in a position of authority, that authority itself frequently corrupts the person.

So there’s the bind: government has to have power; power attracts the worst kind of people; these people are usually not wise and are corrupt; they end up destroying the nation through poor governance. The slogan is “Minimum government, maximum governance.” And the reality is “Maximize government, minimize governance.”

Solution: limit the role of the government, and keep it small so that those in government have very little power. That is, limit the role of the state.

In the next few posts, I will explore this topic of why government must be severely limited. For now, here’s a bit from an entry from 2008: Of Kakistocracies, Principals and Agents. Continue reading “Why Governments Fail”

“What’s the state of the Indian economy, and what needs to be done?” asked K. Srinivas. The Indian economy is not doing too well but neither is it in dire straits. The rough indicator of the health of an economy is its GDP growth rate. It’s around 5 percent per year, which is not really robust for a country as poor as India. That rate would be fabulous for a rich country like the US, but for India it spells continued misery.

The government, of course, would like to claim a higher GDP growth rate and do so by manipulating the numbers. But quibbling over small numbers doesn’t buy you much. Regardless of whether it is 5 or 6, the bad news is that the economy is in trouble. Why is that so? Continue reading “The State of the Indian Economy”

Today is the first day of Fall in the Northern hemisphere, and at 3:50 am Eastern Time (7:50am UT)  was the beginning of the September equinox. At 3:50 am ET, the Sun crossed the celestial equator.

“An equinox is commonly regarded as the instant of time when the plane of Earth’s equator passes through the center of the Sun. This occurs twice each year: around 20 March and 23 September. In other words, it is the moment at which the center of the visible Sun is directly above the Equator. … On the day of an equinox, daytime and nighttime are of approximately equal duration all over the planet. They are not exactly equal, however, due to the angular size of the Sun, atmospheric refraction, and the rapidly changing duration of the length of day that occurs at most latitudes around the equinoxes.” [Wiki.]

At my location (39.66N, 75.67W) sunrise was at 6:51 am and sunset will be at 6:59 pm, making the day 12 hours and 8 minutes long. Continue reading “Change of Seasons — Fall Begins”

At heart, I am an anarchist. The average person will recoil with shock and horror from such an admission because ‘anarchy’ almost always implies social disorder, chaos and disaster.

But that reaction is wrong, and not surprisingly so. After all, that same fellow would get starry-eyed at the mere mention of democracy. India is the largest democracy in the world, don’t you know!

As a system of governance, anarchy resonates most with how I approach the world. I reject hierarchy and authority. I had arrived at this conviction long before I got to know about the French politician and philosopher Pierre-Joseph Proudhon (1809 – 1865), the first self-professed anarchist.

Proudhon in his Confessions of a Revolutionary defined anarchy as “order without power” and “the absence of a master,” and wrote that “whoever lays his hand on me to govern me is a usurper and tyrant, and I declare him my enemy.”

I concur.
Continue reading “Small is Beautiful. Government is not.”

It is fun to learn new stuff. Today I learned some interesting things about the global oxygen cycle. Of course, I had known about photosynthesis from my school days. It is the process which converts CO₂ and H₂O and produces oxygen and the stuff that trees and plants are made of.

Aside: Many people don’t realize that all plants are basically carbon and that the carbon comes from atmospheric carbon-dioxide. Therefore higher concentration of CO₂ implies higher rate of plant growth, and so increasing CO₂ concentration has the beneficial effect of faster plant growth (and not just global warming.) Continue reading “TIL about the Global Oxygen Cycle”

Any serious analysis of the structural causes of India’s dysfunction has to refer to the institutional deficiencies. One major causal factor is that the government has practically no constraints on it. An unconstrained government has the power to effect radical change if it so desired, or to impose the status quo by not allowing any innovation or dissent. The content of the actions of an unconstrained government, therefore, matters immensely.

Unconstrained government power is wonderful provided good and wise people govern. But good and wise people, by their very nature, are the exception in the population, and even rarer in government. Given that an unconstrained government has the power to extract and exploit riches from the economy, the most avaricious and the most corrupt can be expected to compete for the power to govern. The outcome is predictable: a kakistocracy — the government of the least capable and the most corrupt. Continue reading “From the archives: Unconstrained Government”

Adam Ferguson (1723 – 1816) was a moral philosopher and historian. He was a major figure in the Scottish Enlightenment. In his An Essay on the History of Civil Society (1767) he observed:

“Every step and every movement of the multitude, even in what are termed enlightened ages, are made with equal blindness to the future; and nations stumble upon establishments, which are indeed the result of human action, but not the execution of any human design.”

The claim is that sometimes order emerges from the actions of the collective without there being some master plan that was being followed. The term “spontaneous order” describes that well: “the emergence of various kinds of social orders from a combination of self-interested individuals who are not intentionally trying to create order through planning. The evolution of life on Earth, language, crystal structure, the Internet and a free market economy have all been proposed as examples of systems which evolved through spontaneous order.” (wiki) Continue reading “Order without intent”