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My Friend Sancho

My first novel, My Friend Sancho, is now on the stands across India. It is a contemporary love story set in Mumbai, and was longlisted for the Man Asian Literary Prize 2008. To learn more about the book, click here.


To buy it online from the US, click here.


I am currently on a book tour to promote the book. Please check out our schedule of city launches. India Uncut readers are invited to all of them, no pass required, so do drop in and say hello.


If you're interested, do join the Facebook group for My Friend Sancho


Click here for more about my publisher, Hachette India.


And ah, my posts on India Uncut about My Friend Sancho can be found here.


Bastiat Prize 2007 Winner

Category Archives: Economics

Governments are the problem, not markets

John Stossel writes:

[Bill] Gates spoke at Harvard recently, urging graduating students to take on the “world’s deepest inequities [including] world hunger ... the scarcity of clean water ... children who die from diseases we can cure”. All of us want those problems solved, and through their charitable foundation, Gates and his wife, Melinda, have certainly put their money where their mouths are. But Gates seems unaware that these problems can’t be eliminated in the simplistic way he advocates.

He told the grads, “The market did not reward saving the lives of these children [in poor countries], and governments did not subsidize it. So the children died because their mothers and their fathers had no power in the market and no voice in the system.”

What is Gates talking about?

Can he name one poor country that permits the free market to operate? The problem is not that the market doesn’t make it profitable to save lives—it most certainly does. The problem is that Third World countries have overbearing, corrupt governments that are obstacles to private property and freedom. That’s why the children’s parents have no voice or power.

Read the full piece—I think the last three paras are a superb summation of the problem. India, alas, is an excellent illustration of how government smothers free enterprise.

PS: And while on spontaneous order, one of my favourite posts on the subject, one that I’d linked to here and Rahul reminded me of recently, is “A Simple Rule For a Complex World” by Don Boudreaux. An excerpt:

While declaring “Let the government handle it” comes across as a solution, it’s no such thing. Instead, it is merely a sign of a simple and baseless faith—a simple and baseless faith that people invested with power will not abuse it; that political appointees possess or will find better answers than will millions of people pursuing solutions in their own ways, and staking their own resources and reputations on their efforts; that only those ‘solutions’ that are spelled out in statutes and regulations and that have officials paid to implement them are true solutions.

So yes, show me a problem and I’ll likely respond “Let the market handle it.” I’ll respond this way because I know that not only is my own meager knowledge and effort never up to the task of solving big problems but that not even the Einsteins or Krugmans or Bushes amongst us can know the best solution to any social problem.

Solutions to complex social problems require as many creative minds as possible—and this is precisely what the market delivers.

Posted by Amit Varma on 20 June, 2007 in Economics


The Mikulski Principle of Taxation

Let’s go and get it from those who’ve got it.

Heh.

Posted by Amit Varma on 19 June, 2007 in Economics


Why government regulation is counter-productive

“Competition is a better option than controls in ensuring quality,” writes Premchand Palety in an excellent piece in Mint, “Scrap this regulator for business schools”, in which he explains the damage that government regulation has done to the business schools of this country.

It’s a familiar story across sectors, frankly, with MBA education in India being just one illustration of it. Competition in the marketplace always results in better products and services than well-intentioned government regulation. Imagine, for example, what would happen if the government looked at blogs, found that most of them are terrible, and decided to regulate the blogosphere to ensure quality. That’s a scenario Ravikiran Rao examined in his magnificent post, “Most Blogs Are Terrible,” a couple of years ago. Do read, I think it is hard to disagree with his conclusions.

Posted by Amit Varma on 18 June, 2007 in Economics | Freedom | India


Does economic growth lead to family breakdown?

Yes, says Chris Dillow, and explains why:

Start with the dishwasher. This embodies an important feature of economic growth - it’s given us labour-saving household technologies. Thanks to dishwashers, microwaves and the like, people no longer need to spend hours on household chores.

This has had several effects, described by Jeremy Greenwood. It means it’s more technically feasible for men and women to live alone. That alone has reduced the marriage rate and increased the divorce rate. It also means wives have had the time to enter the workforce. That’s led to more affairs - as men and women meet more often away from their spouses eyes at the workplace. And in giving women an income outside marriage, it’s increased their ability to divorce their hubbies.

This, though, is not the only way in which divorce has risen, and marriage fallen, because women no longer need a meal ticket. One feature of economic growth is a decline in relative demand for physical strength and increased demand for intellectual or social skills. This too has led to increased numbers of women workers - and the more skilled among them are not marrying and having children.

There’s more, read the full post.

Frankly, if economic growth leads to family breakdown because it empowers women and gives them more control over their lives, then I’m not going to mourn the family too much. It’s far better to aim for individual happiness than to pay homage to family values and suchlike.

(Link via SMS from Just Mohit, who saw it excerpted in Mint.)

Posted by Amit Varma on 15 June, 2007 in Economics


The comfort of a worldview

This is the 18th installment of my weekly column for Mint, Thinking it Through.

The other day I was at a party with some highly intelligent people with strong views on the world. We talked about politics, economics, movies, and, as you’d expect from Indian men, cricket. Among the subjects that stirred up heated arguments were global warming, farmer suicides and the existence of God.

You might think that of all these worthy subjects, debating the existence of God is pointless. It is a matter of faith, and lies beyond reason. I agree. But I’d point out that for all practical purposes, the other subjects we argued about aren’t too different.

Everyone present there had strong views on global warming, but none of them completely understood the science behind it, or could explain the difference between a climate model and a ramp model. All of them vociferously offered conflicting solutions for our agricultural crisis, but their belief was rooted in intentions, without a historical perspective of what had actually gone wrong, and how markets and prices work. As the hours slipped by and the pegs piled up, we conducted opinionated drawing-room discussions on complex subjects whose intricacies none of us had mastered.

Now, this is not a condemnation. The world is terribly complicated, and it isn’t rational for each of us to try and master every subject around us. If that was a prerequisite to having opinions, we wouldn’t have any, and would wander around baffled by everything. It is natural and sensible for us to seek cognitive shortcuts to understanding the world. Such shortcuts often result in neat little packages known as worldviews.

Read more...

Posted by Amit Varma on 14 June, 2007 in Economics | Essays and Op-Eds | India | Politics | Thinking it Through


Poverty and planning

Historically, poverty has never been ended by central planners. It is only ended by searchers, both economic and political, who explore solutions by trial and error… A Planner thinks he already knows the answers: he thinks of poverty as a technical engineering problem that his answers will solve. A Searcher admits he doesn’t know the answers in advance: he believes that poverty is a complicated tangle of political, social, historical, institutional and technological factors.

—William Easterly, quoted in Niranjan Rajadhyaksha’s column in Mint today, “Antidotes to Poverty.”

Also worth reading: Nitin Pai’s “The Great Leap Backward.”

Posted by Amit Varma on 13 June, 2007 in Economics | Politics


The economics of apologies

Tim Harford writes:

[A]n apology… represents a choice to appear loveable but bumbling. The alternative is to admit nothing and look like a competent hard-man.

This is immensely problematic for men, especially, because the chicas dig both ‘loveable’ and ‘competent hard-man’. The best way to avoid this choice would be to do nothing wrong, so an apology is never required. (World peace would also be nice.) Sadly, that is an impossible condition.

(Link via email from Ravikiran.)

Posted by Amit Varma on 12 June, 2007 in Economics


Where America’s taxes go

Nandz writes in to point me to an excellent graphic representation of where America’s taxes go. He wonders if I could do one for India.

Well, I’d actually once contemplated building a “Where Your Taxes Go” calculator, where you could feed in the amount you pay as tax, and get an itemized breakup of where that money is spent. It would be personal and easy to relate to, and would illustrate beautifully the extent to which our taxes are wasted. Sadly, I don’t think there is enough public data to be able to do this accurately. If you think otherwise, and believe that it can be built, feel free to write to me.

(Where your taxes go: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21. Also see: 1, 2, 3.

My essays on taxes and government: Your maid funds Unani, A beast called government.)

Posted by Amit Varma on 12 June, 2007 in Economics | India | Old memes | Taxes


Employment and charity

Oddly, there are people who confuse one for the other. A friend of mine, who is a doctoral student at a big American university and wishes to remain unnamed, writes in:

Our department [recently] ordered some new analytical software. The CDs have been lying in the office since last week. My advisor, for whom it was ordered, got impatient and said he will install it himself on his machine. He was told that someone from IT will come and install it. He said he knows how to install it, so he could do it. He was told that they have specific instructions to only let the IT people install it, not for any safety reasons, but because that is a job for someone. If everyone starts installing their own software it means a couple of jobs becoming redundant. So to contribute to [the university]‘s employment, we can’t install the software on the machines in our own office rooms.

Posted by Amit Varma on 12 June, 2007 in Economics


No one to defend freedom

Jerry Rao writes in Mint:

With the possible exception of Narasimha Rao (and that, too, for a short period), no Indian leader or party seems to have a genuine sympathy for, or commitment to, market-friendly principles in a political sense. At best, they pay obeisance to the market when forced to. By upbringing and temperament it is an interventionist state that they are comfortable with. At the first chance, or under the slightest pressure, they revert to the tired socialist doctrines of envy and distribution of largesse. The BJP preferred not to privatize oil companies when it had the chance. The patronage associated with doling out petrol dealerships was too important to lose. The Congress seems to suffer from nostalgia for the “Hindoo” rate of growth because if no one gets wealthy, there is no one to envy!

That is why we are forced to ask ourselves: should we not have a political party that is a khullam-khulla defender of markets and an opponent of an intrusive state?

Well, that is quite the question I’d asked as well in my first piece for Mint, “Where’s The Freedom Party?” Sure, we should spread those ideas of freedom, but how? I’m not sure writing a blog or a few columns makes any difference at all.

Posted by Amit Varma on 09 June, 2007 in Economics | Freedom | India | Politics


Where your taxes go: 21

Building malls.

You have to wonder what we have learned in the last 60 years. The BMC is reportedly planning to “construct ‘municipal malls’ at various spots in the city,” where “prices of commodities would be regulated ... so that they could ‘cater to the masses’.” Mumbai Mirror rightly lashes out:

All this focus on a ‘business enterprise’ comes at a time when hundreds of roads across the city are still dug up, a large part of the Mithi river is yet to be cleaned up though the monsoon is already here, the city’s massive parking problems need urgent solutions, the Jijamata Udyan needs a thorough clean-up, octroi evasion is depriving the BMC of crores of rupees, the question of adequate and 24/7 water supply is still to be resolved, most BMC schools are on the verge of closure, and Mumbaikars on the whole want the city’s crumbling civic services to be improved.

The populist rhetoric accompanying the proposal is startlingly naive. These malls, a ‘civic official’ is quoted as saying, will “accommodate small shops that have been forced to shut because of big malls and also the BMC’s development projects.” The BMC should ask itself a few basic questions: If some small shops have shut down because of big malls, why is that so? When they don’t regulate prices outside those malls (with good reason!), how will regulating them inside the malls help? If those shops could function at a price lower than the market, wouldn’t they have destroyed the big malls, instead of the other way around? Isn’t the whole point of a market to satisfy the needs of the consumer, and is there any point accommodating stores inside government malls that the consumers have rejected outside them?

My prediction: If any such malls come up, they will become vehicles of enrichment for rent-seeking officials. Space within the malls will be allocated to merchants at the discretion of municipal officials, and corruption will be rampant. These malls will not turn a profit. You and I, again, will end up as shmucks. And the roads will still have potholes.

(Where your taxes go: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20. Also see: 1, 2, 3.

My essays on taxes and government: Your maid funds Unani, A beast called government.)

Posted by Amit Varma on 06 June, 2007 in Economics | India | Old memes | Taxes | Politics


Why free trade rocks

John Stossel writes:

How many times have you paid $1 for a cup of coffee and after the clerk said, “thank you,” you responded, “thank you”? There’s a wealth of economics wisdom in the weird double thank-you moment. Why does it happen? Because you want the coffee more than the buck, and the store wants the buck more than the coffee. Both of you win.

Bang on. Read the full piece, it’s outstanding.

(Link via Cafe Hayek.)

Posted by Amit Varma on 31 May, 2007 in Economics


Politics is different

The employee of a corporation who buys something for $10 and sells it for $8 is not likely to do so for long. Someone who, in a family setting, does much the same thing, may make his wife and children miserable throughout his life. A politician who wastes his country’s resources on a grand scale may have a successful career.

Ronald Coase, quoted in The Myth of the Rational Voter by Bryan Caplan, a book I’ve just started reading.

The excerpt above reminds me of Milton Friedman’s brilliant quote about the four ways in which you can spend money. But why don’t voters punish such extravagance? Well, that’s what Caplan’s book seeks to explain, so if you see it at a local bookstore, pick it up. I love what I’ve read of it so far, and you can read more about it from Tyler Cowen, Don Boudreaux and Greg Mankiw.

Posted by Amit Varma on 25 May, 2007 in Economics | Politics


Giving something back to society

Rediff has a headline today that says, “Don’t show off wealth, pay back to society: PM.”

I know one great way in which rich people can “pay back to society”: By spending their money. There is no better way to spread wealth. Buy a service or a good, and everyone involved in manufacturing and distributing it benefits.

Thus, I find it odd when Manmohan Singh says that Indians “cannot afford the wasteful lifestyles of the Western world.” There’s nothing wasteful about any lifestyle from the perspective of spreading wealth, unless it involves sitting at home and refusing to buy or sell anything, which is a waste of the abilities a person is born with.

Manmohan says many other astonishing things in that piece. For example:

Read more...

Posted by Amit Varma on 24 May, 2007 in Economics | India


The Sandman and Spiderman should have teamed up!

Megan makes a good point:

[I]f the Sandman and Spiderman could have just gotten away from their positional stances (“I need to take money” and “I need to catch crooks” respectively), to their underlying interests (“I need to help my little girl” and “Dude, I’m all about helping the people”), they could have found some common ground. There was opportunity there, and it could have saved a lot of expensive plate glass and I-beams and cars being thrown about.

True, but my question is this: What if “I need to take money” was the Sandman’s underlying interest and “I need to help my little girl” just a rationalization, and thus a positional stance for himself? Heck, even Spiderman could have had a crook-catching fetish, and the altruism, and the story that the comic books and films tell us, could have come later. I haven’t seen the latest Spidey flick, actually, but who can tell the difference between reason and rationalization? Huh?

(Link via Marginal Revolution.)

Posted by Amit Varma on 22 May, 2007 in Arts and entertainment | Economics


Socialists - 1. Madisonians - 0

Shruti Rajagopalan, fellow libertarian and gurgling buddy, has an excellent piece in Wall Street Journal Asia today titled “Indian Property Wrongs.” (Subs. link, but the piece is also on her blog here.) It narrates the story of how “the socialists managed to out-shout the Madisonians” when our constitution was being written, which led to property rights not being adequately protected in India. And as a result of that, we have Singur and Nandigram. Fine piece, do read.

Posted by Amit Varma on 21 May, 2007 in Economics | Freedom | India


The Devil’s Compassion

This is the 12th installment of my weekly column for Mint, Thinking it Through.

This is the transcript of a speech given by the demon Beelzebub at the 90th Annual Convention of Demonic Beings.

Comrades and Monsters,

Welcome. I can barely express my joy at the unspeakable horror of being present among such hideous monsters as yourselves – demonic beings dedicated to the ruin and damnation of humanity. In various ways, under the cunning guise of doing good, we have brought sadness and misery upon humanity. We have perpetuated poverty, hatred and ill-health. I wish today, for the sake of the young apprentice beasts present here, to speak about our primary tool of achieving all this: Compassion.

Humans, you see, are fooled by appearances. Come to them as a wrinkled monster with horns, and they recoil. Pretend to be a loving grandpa, and their defences are down. We senior demons realised long ago that to hurt the humans, we have to pretend to care for them. Even as we have nothing but their marination in mind, we must appear compassionate. Stating the most noble intent, we must unleash the very worst of policies. Even better, we must fool some humans, who themselves wish to appear compassionate, into pushing these very policies.

And how we have succeeded! Everywhere there are politicians sincerely pushing well-intentioned policies that are disastrous for the people they are supposed to help. Of course, some people see through our evil designs and protest, but they are dismissed as cruel and uncaring, for they are questioning compassion itself. The irony!

Read more...

Posted by Amit Varma on 03 May, 2007 in Economics | Essays and Op-Eds | Freedom | India | Politics | Thinking it Through


Understanding inflation

If you have a few minutes, and the slightest interest in the subject, I urge you to read Sumeet Kulkarni’s excellent post, “Inflation for dummies - by a dummy.” It explains, among other things, why “inflation is a tax which we pay equally, independent of our income,” how Indian’s export successes are subsidized by “you and every Indian citizen – including the poorest,” and why “export-import balance” is a meaningless term.

(Link via email from Gaurav Sabnis.)

Posted by Amit Varma on 24 April, 2007 in Economics | Freedom | India


To understand inequality…

... figure out Harry Potter. Alex Tabarrok writes:

[JK] Rowling’s success brings with it inequality.  Time is limited and people want to read the same books that their friends are reading so book publishing has a winner-take all component.  Thus, greater leverage brings greater inequality.  The average writer’s income hasn’t gone up much in the past thirty years but today, for the first time ever, a handful of writers can be multi-millionaires and even billionaires.  The top pulls away from the median. 

The same forces that have generated greater inequality in writing - the leveraging of intellect, the declining importance of physical labor in the production of value, cultural and economic globalization - are at work throughout the economy.  Thus, if you really want to understand inequality today you must first understand Harry Potter.

Of course, inequality isn’t a bad thing, and is certainly better than being, in Joseph Brodsky’s words, “equal in poverty.” Most of the people who rail against Rowling’s success—and Bill Gates’s, for that matter—are just jealous. That’s all there is to it.

Posted by Amit Varma on 23 April, 2007 in Economics


Where your taxes go: 20

Spending thousands to deny Rs 2:

The Department of Posts is prepared to spend thousands of rupees on expensive litigation in the High Court to prevent a 75-year-old pensioner from getting an additional benefit of Rs 2 as part of his pension.

Sigh. And how ironic that every time this gentleman buys something, he is contributing to the thousands of rupees spent to deny him his Rs 2. Such it goes.

(Link via email from Kunal.

Where your taxes go: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19. Also see: 1, 2, 3.

My essays on taxes and government: Your maid funds Unani, A beast called government.)

Posted by Amit Varma on 23 April, 2007 in Economics | Freedom | India | Old memes | Taxes


Akhilesh Yadav on Rahul Gandhi

Remember how Rahul Gandhi shot his mouth off a couple of days ago? Well, Akhilesh Yadav, Mulayam Singh Yadav’s son, has responded in an interview:

Q: What do you think about Rahul Gandhi’s comment that his family divided Pakistan?

A: See, our socialist values do not encourage division of society. In fact, we encourage a European Union model where everyone can live together. Rahul, who the Congress says is its prime ministerial candidate of the future doesn’t know anything.

Heh. Such options we have when it comes to political leadership, no?

Anyway, I was informed by Mint that my column last week, “The Nehru-Gandhi Legacy of Shame,” got large amounts of appreciative mail. Here’s a cross-section of them. I thought N Bala Ganesan made a great point:

Ill-conceived policies and callousness can be as deadly as tyranny.

Indeed. The only difference is that you can’t count the lives lost due to the former.

Posted by Amit Varma on 18 April, 2007 in Economics | India | Politics


Where your taxes go: 19

Subsidies for pilgrimages. The Times of India reports:

In its determination to protect Haj subsidies, particularly in view of the ongoing elections in UP, Centre has told Supreme Court that it was ready to offer similar support, at state expense, to pilgrimages organised by other communities.

Positing its offer as being in sync with the “secular ideals” of the Constitution, Centre virtually made a policy announcement by agreeing to provide financial assistance to Hindus, Sikhs, Christians, Jains and other religious communities.

This is not secularism. To me, secularism has two implications:

1 A complete separation of state and religion.

2. Every person in this country having the right to follow a religion of their choice, as long as they don’t impose it on others.

The right to follow a religion of your choice, of course, is completely different from a right to having your religion sponsored by other people’s money, which is nothing short of theft. Do remember, after all, that “state expense” comes from my pockets and your bank account and suchlike. Money does not fall from the skies, and even if the government actually printed money to afford these subsidies, inflation would result, which is an indirect form of taxation.

If Sonia Gandhi or Manmohan Singh genuinely believe that pilgrimages deserve to be funded, I recommend that they shell out their own money for the purpose. There is no justification for taking away our hard-earned money and spending it on building votebanks for themselves.

(Link via SMS from little n.

Where your taxes go: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18. Also see: 1, 2, 3.

My essays on taxes and government: Your maid funds Unani, A beast called government.)

Posted by Amit Varma on 15 April, 2007 in Economics | Freedom | India | Miscellaneous | Old memes | Taxes | Politics


Equality of outcome…

... is deeply undesirable. Check out Kurt Vonnegut’s classic story, “Harrison Bergeron,” which illustrates that beautifully. (Via Cafe Hayek.)

Posted by Amit Varma on 14 April, 2007 in Arts and entertainment | Economics


The Nehru-Gandhi legacy of shame

This is the ninth installment of my weekly column for Mint, Thinking it Through.

Last week I caught an episode of the charming show, Koffee with Karan, in which Karan Johar was chatting with Shobha De and Vijay Mallya. I enjoy the rapid-fire round on this show, because it reveals much about the celebrity-culture of our times, as well as about our celebrities. One question Johar asked De and Mallya on the show stood out: “Rahul or Priyanka?”

Now, Johar wasn’t asking De and Mallya which of the two Gandhis was better looking or suchlike. He wanted to know who they preferred as a politician. There was an implicit assumption that one of them is certain to be a future prime minister. This has nothing to do with with their political skills or leanings, of which little is known. It is all about their last name, which is the most powerful brand in the biggest market of India: our democracy.

Rahul understandably wants to exploit this, and build the brand: a few days ago, while campaigning in UP, he spoke of how the Babri Masjid would never have been demolished had the Gandhi family been active in politics. It’s natural for Rahul to invoke the Gandhi brand, given the resonance it carries in this country. But it’s also somewhat ironic. Despite their iconic status among our economically illiterate masses, the Nehru-Gandhi family has been nothing but disastrous for our country.

Read more...

Posted by Amit Varma on 12 April, 2007 in Economics | Essays and Op-Eds | Freedom | India | Politics | Thinking it Through


Legalize poppy production in Afghanistan

The Independent informs us:

Tony Blair is considering calls to legalise poppy production in the Taliban’s backyard. The plan could cut medical shortages of opiates worldwide, curb smuggling - and hit the insurgents.

This is immensely smart. George Bush is opposed to it, but it’s probably about time that Blair said to him, “I’m a poodle, here’s my paw, it has a middle finger.”

And do check out General Musharraf’s quote in the piece about buying all the poppy so that it can be destroyed—what a clown.

(Link via email from Gautam John. And on the subject of legalizing drugs, here’s my essay, “Don’t punish victimless crimes.”

Posted by Amit Varma on 04 April, 2007 in Economics | Freedom | Politics


How to save the tiger

A few months ago, I’d linked to a superb piece by Barun Mitra about how endangered species such as the tiger could best be saved by market economics. To recap, Mitra had written:

[L]ike forests, animals are renewable resources. If you think of tigers as products, it becomes clear that demand provides opportunity, rather than posing a threat. For instance, there are perhaps 1.5 billion head of cattle and buffalo and 2 billion goats and sheep in the world today. These are among the most exploited of animals, yet they are not in danger of dying out; there is incentive, in these instances, for humans to conserve.

So it can be for the tiger.

Well, Arvind Kala has a piece today in Mint that makes a similar argument.

Right now, our wild animals are a wasted resource. Only private companies can unlock their true value by turning them into a dollar-earning tourist attraction. Wild animals flourish in South Africa, Zimbabwe, Namibia and Botswana because these nations treat their wildlife as an industry. They give land owners full property rights over the wild animals that roam on their land. The rights include hunting the animals and selling their meat, hides and horns. Thousands of privately owned ranches in these countries have switched to wildlife and safari tourism. They attract wealthy Americans and Europeans who pay $500-1,000 a day to go on photographic or hunting safaris, which typically last two to three weeks. So we have a paradox. These countries have booming wild animal population. But India’s wildlife diminishes even though shooting a partridge is a criminal offence. The paradox stems from a simple reason. Landowners of southern Africa protect their wildlife because they earn from it.

India’s tigers or elephants die because nobody owns them.

In other words, it’s the tragedy of the commons. Kala asks later in the piece: “If the private sector can run our phones, airlines and high-tech hospitals, why can’t it run game sanctuaries?” Indeed.

Or do you trust the government to protect these animals? Heh.

Posted by Amit Varma on 03 April, 2007 in Economics


Three percent of GDP

After reading my piece, “Don’t Punish Victimless Crimes,” and the follow-up post to it, my friend Devangshu Datta was kind enough to send me an old article of his on legalising betting. It’s a wonderful piece, and was first published in Business Standard, though they don’t have it online anywhere. With Devangshu’s permission, I’m reproducing some paras below the fold. Note that it was written in January 2001, but though the absolute numbers would have changed, the arguments and the macro percentages probably remain valid:

Read more...

Posted by Amit Varma on 31 March, 2007 in Economics | Freedom | India | Sport


An “I, Pencil” moment

Banker Friend writes in:

I have been working this week on a credit limit for a customer of ours who export most of their production to Africa where its used as raw material by local FMCG industries. The application will run into trouble with Credit Acceptance because the customer’s repayment record has not been faultless.

So probe. Why hasn’t his account been faultless? Because he was late on an export bill payment.

Why was he late paying the bill? Because his export customer, a distributor in Ghana, didn’t have the cash to pay the full amount, and delayed paying our customer.

Why didn’t the customer’s customer have the cash? Because his customers, the manufacturers in Ghana had temporarily stopped manufacturing and weren’t buying raw materials any more.

And why is that? Because there have been severe power cuts in Ghana and industries have had to cease production.

Not that I like having to answer even more queries from credit, but I find the fact that a power shortage in Ghana creates extra work for me in India to be weirdly delightful.

It reminds us (me and Banker Friend) of one of our favourite essays, Leonard Read’s “I, Pencil.” If you haven’t read it, please do, it is magnificent, and illustrates the power of freedom better than whole books on the subject.

Posted by Amit Varma on 17 March, 2007 in Economics | Freedom


Reading about libertarianism

There’s a feast of good reading on libertarianism available at the moment: the latest issue of Cato Unbound has a lead essay by Brian Doherty mapping the growth of libertarianism through the last few decades and speaking about its prospects. In a reaction essay, “Libertarians in an Unlibertarian World,” Brink Lindsey explains why he feels optimistic despite the fact that:

As an intellectual movement, libertarianism has come a long way. As a political movement, however, we’re still pretty near square one.

Tyler Cowen’s essay, “The Paradox of Libertarianism,” takes a contrarian view, which is responded to superbly by Arnold Kling and Bryan Caplan. Also read Tom G Palmer’s essay, “Libertarianism or Liberty?” in which he explains the perils of confusing “the promotion of liberty and the promotion of libertarianism.”

The greatest insight of all, though, comes from a fine essay, “Horror and Freedom,” in which we are informed: “Cthulhu is the State.” Immense trembling ensues.

(Links via separate emails from Confused, Kuttan, Gautam Bastian and Nitin Pai.)

Posted by Amit Varma on 16 March, 2007 in Economics | Freedom | Politics


Free markets and democracy

Imagine you want to buy a cola. But you’re not allowed to just buy the cola you want. Instead, all cola drinkers in the country get to vote for a cola brand of their choice. Whichever brand the majority chooses, that’s the one you’re forced to drink. So if you like Coke and the majority votes for Pepsi, too bad. Coke will have to wait four years.

That’s the difference between democracy and free markets.

Now, obviously I’m not suggesting that we all have the MP we want and have separate governments for each of us. That would be absurd, if enjoyable to watch. The point I’m making is this: people who praise democracy for empowering individuals with the power of choice should like free markets even more, for offering that empowerment to a much larger degree. But too often in our country, votaries of democracy rant against free markets. Isn’t that strange?

Posted by Amit Varma on 15 March, 2007 in Economics | Freedom | Politics | Small thoughts


A beast called government

This is the fifth installment of my weekly column for Mint, Thinking it Through.

There is nothing in the world as dangerous as blind faith. No, no, this is not yet another rant against organised religion: there is enough damnation already scheduled upon me. There is another beast that benefits from blind faith quite as much as religion, and that causes as much harm from our lack of questioning: a beast called government.

Don’t get me wrong, we need government. We need it to take care of law and order, of defense, and for a handful of other things. (I don’t have a very large hand.) But the governments we have, not just in India but virtually everywhere, are vast, monstrous behemoths that are many multiples of the size they need to be. The cost of this, of course, is borne by us: we pay far more tax than we should need to in order to keep government going, and to justify its size the government clamps down on private enterprise and individual freedoms.

Part of our blind faith in government comes from the way we view it. Governments are not supercomputers programmed to work tirelessly for the public interest, nor are they benevolent, supernatural beings constantly striving to give us what we require. On the contrary, governments are collections of people, individuals like you and me, motivated by self-interest. The actions of government are the actions of these men and women, and the best way to understand how they are likely to behave—and therefore, how governments are likely to behave—is to consider their incentives.

Read more...

Posted by Amit Varma on 15 March, 2007 in Economics | Essays and Op-Eds | India | Politics | Thinking it Through


Let us trade with Pakistan

My belief in how we should deal with Pakistan was outlined in an earlier post, where I wrote:

I embrace what appears to many to be two contradictory approaches: an uncompromisingly hard line when it comes to terrorism, and a deepening of trade and people-to-people contact. Both work towards the same end.

I remmbering discussing this with Nitin Pai over a series of emails, trying to bring him round to my point of view, and Nitin has now come out with an excellent Op-Ed in Mint that elaborates on my point about using trade to subvert the military’s hold on Pakistan, and explains how the peace process should be re-engineered. Do read.

Posted by Amit Varma on 14 March, 2007 in Economics | India | Politics


Singur: Media bias or media ignorance?

ATimes of India report begins:

Protests against Bengal’s industrial revitalisation could receive a new fillip after the suicide of a 62-year-old cultivator, an organiser of the Krishi Jami Raksha Committee (KJRC) in Singur, who lost nearly an acre of land to the Tata Motors project.

This is either dishonest reporting or shoddy journalism, and I shall give the benefit of the doubt to the reporter and assume that it is the latter. The protests at Singur are not against “Bengal’s industrial revitalisation” but against the forceful appropriation of land by the government. As I wrote in an earlier post on eminent domain and Singur, it really does not matter if the farmers got compensation: if they did not want to sell, it is theft.

Now, eminent domain might be justifiable as a last resort for matters of public use, such as building roads, but it is outrageous when it is applied to take land from poor farmers and give it to a rich industrial house. The irony here is that Tata would probably have been willing to negotiate with the farmers for the land directly, but by law, farmers aren’t allowed to sell their agricultural land for non-agricultural purposes. Yes, that’s right: even if Tata was willing to talk to the farmers and negotiate with them, and farmers were willing to sell, it would have been an illegal transaction. So Tata had no choice but to go to the government, which, of course, is not into negotiating, and simply took the land by force.

I entirely agree with Shruti Rajagopalan when she writes here that the fundamental right to property, revoked in 1978, should be reinstated in our constitution. An “industrial revitalisation” is only sustainable when property rights are sacrosanct. Otherwise it’s a mockery.

Posted by Amit Varma on 13 March, 2007 in Economics | Freedom | India | Journalism | Politics


Pervez Musharraf’s incentives

Headlines like “India-Pak terror pact sinking fast” exasperate me. Whaddya expect? As I have written before, the India-Pakistan peace process is a charade. While it is in General Pervez Musharraf’s interest to talk peace with India, as it makes him appear responsible in the eyes of the international community, it is equally in his interest to continue the conflict, which Pakistan’s military needs for its sustenance. All talk, no walk, in other words.

Similar incentives drive Musharraf’s actions as far as the War on Terror is concerned. As I wrote here, appearing to be America’s ally gets the foreign aid flooding in (1, 2), which Pakistan’s economy desperately needs. However, if al-Qaeda and the Taliban are actually defeated, then that aid will begin to dry up, as Musharraf and Pakistan will no longer be needed so badly.

In each case, Musharraf is doing what any rational person in his place would do. The only way to solve either problem is to change his incentives. And, much as the mandarins in New Delhi may shudder at the thought, the Americans can do that far better than we can.

The next few months will be interesting.

(Some earlier posts on Musharraf.)

Posted by Amit Varma on 12 March, 2007 in Economics | Politics


Why Liz Hurley is good for India

Because the economy benefits from her marriage to Arun Nayar. Times of India reports:

The hospitality sector estimates that the Jodhpur wedding [between Nayar and Hurley] should cost about Rs 1 crore.

I’m assuming that with so many foreign guests coming down, and some of them perhaps being tempted to return later, the indirect benefits of the wedding will be even greater than that. And much of the money spent may not have been spent within India if not for Liz Hurley. Thus, however much we may envy the rich their ability so spend so ostentatiously, we should actually encourage them to do more of this, because it ends up creating jobs for people at the bottom of the ladder throughout the hospitality industry.

Also read: “Lavish weddings are good for the economy.”

Posted by Amit Varma on 09 March, 2007 in Arts and entertainment | Economics | India


Your maid funds Unani

This is the latest installment of my column for Mint, Thinking It Through. It is an elaboration of my concerns behind my ongoing series, Where Your Taxes Go, and I’d like to thank all the readers and bloggers who have sent me links for that. Keep them coming, and keep expressing your outrage on your own blogs as well.

These are good times for Unani. In his latest budget, the honourable P Chidambaram allocated Rs. 563.88 crores for the Department of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homeopathy. I kid you not, I am not making this up for your satirical amusement. That departments exists. And you work your ass off, and make sacrifices, so that it can be funded. You and your maidservant.

On my blog, I have a section called “Where Your Taxes Go,” where I document strange instances of how our taxes are put to use. There is much there that is trivial and amusing—a moustache allowance for a havaldar in Lucknow, compensation for a bank employee mistakenly declared dead, salary for an 11-year-old teacher, relocation of monkeys from New Delhi to MP (only Rs. 25 lakhs). There is also much there that underscores the irresponsibility of our politicians—toilet refurbishment allowances for Jharkhand legislators, parliament hold-ups that cost 20k a minute, the 90 lakh free TVs that the DMK promised in Tamil Nadu to get elected there. Most of us are so used to government wastage that we shrug this off. “Pata hai yaar,” we say together in a gruff chorus of a billion nonchalant voices. “So what is new? Gorment is like this only.”

Read more...

Posted by Amit Varma on 08 March, 2007 in Economics | Essays and Op-Eds | India | Old memes | Taxes | Thinking it Through


The mistake some of us make when we talk about the budget…

... is in assuming that government spending can solve all our problems. The government may spend more on education, but that doesn’t mean that Indian kids will get anywhere near the education they should, or that the education system will become better. Our mai-baap sarkar may announce a safety net for workers, but that doesn’t mean that workers will benefit. It may extend the REGB, but that doesn’t mean that it is doing anything to enable the growth of employment in this country. In some cases, it might actually be harming the cause of those it claims to benefit, by spending money inefficiently that, had it never been taxed in the first place, would have done more good for the economy.

Beyond that broad point, I will offer no comments on the budget—there’s enough of it out there in the MSM already. I’m just glad there isn’t a cess on blogging.

Additional notice: My “Thinking it Through” column won’t appear today in Mint, because they needed the space for budget analysis, some of which is very good. Regular service resumes next week.

Posted by Amit Varma on 01 March, 2007 in Economics | India


Enough carrot. Time for stick

Dick Cheney landed in Pakistan a couple of days ago to urge Pervez Musharraf to get serious about fighting al Qaeda. About time. This acknowledges that Pakistan wasn’t doing enough to wipe out al Qaeda to begin with, and no sensible man would expect otherwise. As I wrote here and here, it is not in Musharraf’s interest to end the battle with al Qaeda by winning it. Pakistan’s economy has flourished after 9/11 because it is the USA’s main ally in the War on Terror, and an end to the War on Terror means an end to aid and preferential treatment.

So the carrot was never likely to work. Will the stick fare better?

(Previous posts on Musharraf.)

Posted by Amit Varma on 27 February, 2007 in Economics | Politics


Socialism and the Sirius Cybernetics Corporation

Kunal Sawardekar writes about how Douglas Adams’s description of the Sirius Cybernetics Corporation fits socialism as well:

Their fundamental design flaws are completely hidden by their superficial design flaws.

Kunal expands:

Whenever a Socialist policy fails, the blame falls on some minor (in the greater scheme of things) deviation from the Socialist Golden Path. For example, the National Rural Employment Scheme is a brilliant solution to rural poverty, it will only fail because the bureaucrats have weakened the Employment Guarantee Act. Forcing banks to give farmers in Vidharba low-interest loans in a good idea, the problem is that the interest is not low enough. Five-year-plans are a great idea, its just that our planners sucked. And so on.

Indeed. Always blame the execution—or order one, if it comes to that. That’s the way of socialism.

(Link via email from Ravikiran. And here’s an old Op-Ed by me on the REGB.)

Posted by Amit Varma on 26 February, 2007 in Economics | Politics


Newspapers and regulation

I spend the whole day at the Kitab festival, hanging out with pals like Jai, Chandrahas and Manish, meeting the litty sorts and bitching about them like bloggy sorts should. I was also part of a session on journalism in India, and found some eminent people expressing the view that journalism needs to be regulated in India. The logic: The Times of India is indulging in monopolistic practices, and, in Delhi, forming a cartel with the Hindustan Times. To ensure competition, there should be government regulation.

I couldn’t think of a worse solution to the problem. (Leave aside the issue of whether there really is a monopoly emerging; Mumbai alone has HT, DNA and IE on the stands, among daily broadsheets.) The industry actually needs fewer controls, not more. If foreign capital was allowed to pour into that sector, and foreign ownership of media was enabled, there would be more competition, and monopolies and cartels would be less likely. Consumers would be empowered with more choices. Competition is the best regulation.

Government regulation, no matter how well-intentioned to begin with, always ends up favouring the entrenched players, and making it harder for newer players to enter. The protectionist lobbying that some of the top media houses in the country have done to keep foreign media out is a good example of this.

In my clumsy, inarticulate way, I did try and make this point, but I’m a better blogger than speaker. Anyway, the high point of the evening was the presence of Bhaskar Das, the executive president of the Times Group, who rightly got assailed about how the Times of India sells editorial space. “We don’t do it on all the pages,” he argued. “Only some of them.”

The best moment came when someone asked Das why the ToI didn’t have the basic decency to indicate which articles were paid for. His reply:

“The clients wouldn’t like that.”

Joy. It reminded me of Devi Lal, in that it was honest, and shamelessly so.

Posted by Amit Varma on 24 February, 2007 in Economics | Freedom | Media


Where your taxes go: 15

To space.

You see any earthly reason for it? I don’t.

(Where your taxes go: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14. Also see: 1, 2, 3.)

Posted by Amit Varma on 22 February, 2007 in Economics | India | Old memes | Taxes


Why India needs school vouchers

This piece of mine was published on January 15, 2007 as an Op-Ed in the Wall Street Journal Asia. (Subscriber link.) It was also posted on India Uncut.

On India’s Republic Day, January 26, the New Delhi-based Centre for Civil Society will launch a campaign for school choice. It’s an apt day for the event. While India’s constitution guarantees universal and free education, the government has utterly failed that mission. It’s time to encourage the private sector to step in.

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Posted by Amit Varma on 15 February, 2007 in Economics | Essays and Op-Eds | Freedom | India | WSJ Pieces


Empowerment, not slavery

A version of this piece by me was first published on November 8, 2005 in the Wall Street Journal as “Self-Delusion.” (Subscription link.) It was also posted on India Uncut and the Indian Economy Blog.

Organized slavery ended decades ago, but to go by the criticism of some leftist commentators in India, one would imagine that it is alive and flourishing in the world’s largest democracy.

Recently it has become especially fashionable to hit out at call centers, or business processing outsourcing (BPO) units as they are officially known. A study published by an institute that comes under India’s Labor Ministry compared conditions in Indian BPO outfits with those of “Roman slave ships.” Chetan Bhagat, the author of a new book set in one such unit, “One Night @ The Call Center,” recently claimed that call centers are “corroding a generation.” It is common, almost clichéd, to hear call-center workers referred to as “cyber-coolies.”

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Posted by Amit Varma on 15 February, 2007 in Economics | Essays and Op-Eds | Freedom | India | WSJ Pieces


The kidnapping of India

A version of my piece below was first published onOctober 5, 2005, in the Asian Wall Street Journal (subscription link). It was also posted on India Uncut and the Indian Economy Blog

Imagine this scenario: someone kidnaps a child and, for decades, maims and exploits him. Then, in a sudden revelation, we learn that the kidnapper was once under the pay of a branch of the mafia that is now defunct. There is instant outrage, and everyone condemns the crime. “How could you have taken money from the mafia?” they ask.

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Posted by Amit Varma on 15 February, 2007 in Economics | Essays and Op-Eds | Freedom | India | Politics | WSJ Pieces


Good intentions, bad ideas

A version of my piece below was first published on September 15, 2005 in the Asian Wall Street Journal (subscription link). It was also posted on India Uncut and the Indian Economy Blog.

The road to hell is paved with good intentions—and nobody knows that better than India’s poor. There can be no better intention than removing poverty but, for more than half a century, a well-intentioned and bloated state has only perpetuated it with misguided policies and regulations. And New Delhi still hasn’t learned from these mistakes. The Indian government is soon to embark on perhaps the grandest waste of taxpayers’ money yet: the Rural Employment Guarantee Bill.

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Posted by Amit Varma on 15 February, 2007 in Economics | Essays and Op-Eds | India | WSJ Pieces


The myth of India’s liberalization

The piece below by me was published on June 16, 2005 as an Op-Ed in the Asian Wall Street Journal, titled “India’s Far From Free Markets” (subscription link). It was also posted on India Uncut.

Indian Prime Minister Manmohan Singh is due to visit Washington in a few weeks, and editorialists and commentators have already started writing about the emerging economic power of India. New Delhi’s decision to start liberalizing its economy in 1991 is touted as a seminal event in India’s history, the moment when it threw off the shackles of Fabian socialism and embraced free markets. It is the stuff of myth—and to a large extent, it is exactly that.

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Posted by Amit Varma on 15 February, 2007 in Economics | Essays and Op-Eds | India | Politics | WSJ Pieces


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