Present Values

Essays on Economics and Aspects of Indian Society

S. Subramanian

• Publisher: Routledge India
• Year: 2020
• Print ISBN: 9780367481674
• eBook ISBN: 9781000075946
• Topic: Politics & International Relations
• Subtopic: Business General
• Index: Politics & International Relations

This volume is about economists, economics, and issues of concern to Indian society. Some essays are expository, and some satirical. Together, they offer a commentary on the state of the discipline of economics today and on aspects of contemporary India's society and polity.

The volume affords insights into, among other things,

- the pervasive influence of economists such as Kenneth Arrow and Anthony Atkinson, and thinkers such as Tom Paine, Jonathan Swift, and Dadabhai Naoroji;

- the place of markets and game theory (and even crime fiction!) in present-day economics;

- the affectations and convoluted mathematisation of a good deal of 'mainstream' economics; and

- India's recent political climate, and the conduct of various arms of the legislature, the executive, and the judiciary in the country.

Engaging and lucidly written, this volume should be of interest to scholars of economics, political science, development studies, South Asian studies, and, above all, the general reader.

Part I
On economics and economic themes, with some digressions

1
In memoriam

K. J. Arrow and A. B. Atkinson

Notes for the reader

This essay is a tribute to the learning, the genius, and the endearing human qualities of two very great economists of the last century and the present one.

2017 witnessed the passing of two extraordinary figures in the world of economics. Sir Anthony Barnes Atkinson (1944–2017) passed away on New Year’s Day, at the relatively early age of 72, after a battle with cancer; and Kenneth Joseph Arrow (1921–2017) passed away on February 21st, at the age of 95. This article is a brief commemoration of these two outstanding contributors to the realm of economic ideas.

Arrow’s work in economics is so seminal and so wide-ranging that he must be regarded as one of the first among equals in the list of those that have shaped the discipline. His research (in a space-saving exiguous catalogue) covers the fields of welfare economics, social choice theory, general equilibrium analysis, the economics of risk and uncertainty, and the economics of asymmetric information, not to mention work in econometric theory. It is impossible to avoid bumping into Arrow, no matter what area of economics one considers. Thus it is that we have (in another deliberately skimpy list) the Arrow Impossibility Theorem; Arrow’s Extended Sympathy; the Arrow-Debreu Model of General Equilibrium; the Arrow-Pratt Measures of Risk-Aversion; the Arrow Model of Health Insurance and Market Failure; and the Arrow-Chenery-Minhas-Solow Production Function. In 1972, Arrow was awarded the Nobel Prize in Economics – he is the youngest person, at the age of 51, to receive the honour. For the larger part of his academic career, Arrow was associated with Stanford University, and with three of its Departments – those of Economics, Operations Research, and Philosophy.

For a mathematical economist credited with importing formidable standards of formal rigour and technical finesse into economics, Arrow took a broad and humane view of the subject, which found ample space for both philosophy and poetry in his reckoning of it. Thus, in his 1971 book on General Competitive Analysis, written with another mathematical economist, Frank Hahn of Cambridge, we find an ironic reference to the Standard Model of Rational Economic Man in the form of a fragment from a poem of W. B. Yeats:

A levelling, rancorous, rational sort of mind
That never looked out of the eye of a saint
Or out of drunkard’s eye.

Another example of Arrow’s capacious catholicity is to be found in the inspiration for his rigorously conceived view of ‘extended sympathy’ as a form of ordinal interpersonal comparison of utilities: he discovered this inspiration, during a visit to England, in a 17th century tombstone bearing this inscription:

Here lies Martin Engelbrodde,
Ha’e mercy on my soul, Lord God,
As I would do were I Lord God,
And Thou wert Martin Engelbrodde.

It is typical of Arrow that he translated this sentiment into the formulation (x,i)P̃(y,j).

Atkinson, like Arrow, was a rigorous economic theorist, who started out studying Mathematics before switching to Economics, and was much influenced by the earlier-mentioned economist Sir Frank Hahn, at Cambridge, where Atkinson did his undergraduate degree. He is one of the few very great contemporary academics who never did a Ph.D. He is also one of the greatest modern economists – along, I would say, with Piero Sraffa, Joan Robinson, and Serge-Christophe Kolm – who was never awarded the Nobel Prize (a discredit to the Nobel Committee that is only compounded by some of the wholly undeserving names that have made it to the Nobel Laureates’ list). Atkinson’s name will be inextricably linked with the subjects of inequality and poverty. He wrote at least two path-breaking journal articles: one (published in The Journal of Economic Theory in 1970) was titled ‘On the Measurement of Inequality’; and the other (published in Econometrica in 1987) was titled ‘On the Measurement of Poverty.’ If he had written nothing else, these two essays between them would have served to account for a life-time’s work. Atkinson, at the end of his career, was Centennial Professor at the London School of Economics, and Senior Research Fellow at Nuffield College, Oxford.

The details of Arrow’s and Atkinson’s scientific contributions can be found in Wikipedia, among other sources. Here, I would like to share a couple of personal reminiscences that reflect both the extraordinary and the human-size features of their character. (If there is some suspicion that I am about to engage in a bit of name-dropping, then the suspicion is well-founded: I am not too proud to say that I feel deeply privileged to have had the opportunity, in my lifetime, of being associated with these gentlemen, however briefly and tangentially.) I have met Arrow just once. This was in the mid-1980s when Arrow was a guest of the Delhi School of Economics, and I was visiting that institution then. The economist P. R. Brahmananda, who claimed to possess some astrological skills, was present on the occasion, and he insisted on reading Arrow’s palm in which he said he detected ‘two stars,’ of which one had already been realized. Arrow chuckled and said the first star must be the Nobel, and he hoped the second star didn’t mean another Nobel was on the way – one was quite enough. During a quiet moment that evening I asked Arrow if the suggestion that he had cracked the Arrow Theorem in just three weeks, when he was still a Ph.D. student, was a true story or an apocryphal one. Arrow leant forward with a grin, and said in a confidential whisper: ‘Apocryphal, actually. Actually, it took me only two days. The first day, I proved that the result held for triples. After a disturbed night’s sleep, on the following morning, I generalized the result.’

Atkinson, like Arrow, was a simple, direct person, whose humility showed through his soft-spoken conversation. I once shared a long walk with him on the evening of a conference held in the city of Viterbo, not far from Rome. Somehow the conversation turned to the famously eccentric Cambridge don Frank Hahn (mentioned earlier) who had been a considerable influence on Atkinson in the latter’s student days. Atkinson recalled wryly that on the occasion when he first met Hahn, the latter opened the door to his knock and confided that he had been told to expect Atkinson who, Hahn added he had been informed, wasn’t quite the idiot he looked…. I had the great good fortune of working with Atkinson as a member of the Advisory Board of the World Bank-appointed Commission on Global Poverty. Atkinson was Chairman of the Commission, and the Report which he authored, as Chairman, was the last significant piece of work he did, toward the end of 2016. It is a heroic record of work, conducted against the impossible odds of his illness, and requiring him to balance the views of 23 other scholars on the Advisory Board, while finding a place in the Report for his own convictions and predilections. Like the man, the Report was firm, frank, principled, and polite: critical of the World Bank, but without carrying a sledgehammer to the criticism.

In the generally bleak intellectual and moral environment in which professional thinkers these days often find themselves subsisting, it is nice to be able to say, of persons like Kenneth Arrow and Tony Atkinson, that these were not only great, but also very good, men.

2
Tom Paine, Rights of Man, and the foundations of the welfare state

Notes for the reader

This essay presents a broad-brush picture of one of the great thinkers and social reformers in the history of ideas: Tom Paine—citizen, political analyst, promoter and defender of human rights, economic analyst, and in many ways a pioneer in the field of social welfare provisioning in the modern state.

The man

In the times and circumstances and the countries in which many of us live, what can be more germane to a contemplation of those aspects of polity and economy which shape human welfare than the subjects of human rights, society and civilisation, the substantive forms of government—hereditary and representative—, constitutionalism, democracy, religion and the state, capital punishment, war, debt, trade, public spending, taxation, and social security? These are the themes which some of our public intellectuals are continuously engaged in, each with her or his own subject of special interest and competence, while other public intellectuals downplay their importance in the scheme of things with opinions that either neglect or debase the themes.

Nothing very much would seem to have changed in the debates—except perhaps their quality—that informed the two great revolutions which the world witnessed over two hundred years ago: the American War of Independence of 1776, and the French Revolution of 1787. These debates culminated in the publication, in 1792, of one of the world’s great classics of reason and morality, Tom Paine’s Rights of Man, which covered the entire breadth of the themes sketched out above, with a felicity of language, passion of feeling, simplicity of expression, and directness of logic that is unsurpassed, in the opinion of many, for the virtues of genius, lucidity, and principle that it reflects.

Tom Paine was an Englishman by birth, and a citizen of the world by profession. A man who came to acquire an overwhelming passion for freedom matched only by his detestation of despotism, Paine travelled to the New World to participate in America’s war against his own country of birth, and contributed richly to the ideas which animated that struggle, in the company of such men of distinction associated with America’s independence as George Washington, Benjamin Franklin, and Thomas Jefferson. This should have been sufficient testimony to any single, quite extraordinary, human being’s allegiance to his principles, but Paine went further: pursuing a friendship conceived during the American struggle with the Frenchman La Fayette, he participated in the ensuing French Revolution as well, and was in a position to turn in an eyewitness’s account of the taking of the Bastille.

The French Revolution provoked fear and antipathy amongst monarchists across Europe, and one of the most celebrated tracts against France’s successful struggle was contained in the book Reflections on the Revolution of France by Edmund Burke, a man known for that stirring paean to reactionary sentiment which still routinely finds its way into the great quotations of literature: ‘The age of chivalry is gone. That of sophisters, economists and calculators has succeeded; and the glory of Europe is extinguished forever.’ Burke’s tract served as an occasion for Paine’s repudiation of the canons of conservative thought embodied in it, and Rights of Man, while directed against Burke’s Reflections, served as a much larger canvas for an exploration of those ideas in political philosophy and public morality which, with the ushering in of a new order as in America and France, cried out for systematic analysis and presentation. Paine’s great work struck a chord in the hearts of Englishmen of ordinary rank, and the book sold thousands upon thousands of copies, to the chagrin of the aristocrats who banked erroneously on Burke’s book appealing to a wide readership.

The book

Rights of Man is a book in two parts. Part 1 begins with a repudiation of Burke that is at once clever and cogent, clinical and mocking. A stirring account is offered of the events leading up to the taking of the Bastille, as a corrective to what Paine perceives to be Burke’s calumnies upon the French Revolution. These specific events are placed in the larger context of the principles underlying the revolution—and focused on the primacy of the rights of man—a notion which the jurist and philosopher Jeremy Bentham (the intellectual father of the system called Utilitarianism) dismissed as ‘nonsense upon stilts.’ Nothing deterred, Paine upholds the sanctity of what he calls the ‘natural’ rights of man (subsequently encoded as human rights in the United Nations’ lexicon), and distinguishes these from civil rights which are reposed by the individual in society as a part of a social compact by which society provides those arrangements that enable the transformation of formal entitlements into substantive realisations.

These considerations lead naturally to questions about the form of government which is compatible with an acknowledgement of the rights of man. Paine dissects and casts aside monarchical or aristocratic or hereditary government (and his observations on dynastic rule are relevant even today in many countries, when changes in form may leave behind no changes in the essence of the governance system). The notion of representative government is introduced and commended; and the place of equality and democracy in government premised upon the existence of inalienable human rights is emphasised. But prior even to a government so conceived is the requirement of a well-defined constitution, such as the Americans and the French gave to themselves, unlike the British who had to content themselves with the Magna Carta, a poor parody, in Paine’s view, of a genuine constitution.

In Part 2, Paine turns from France to America, describes the founding principles of that nation, and extols the virtues of representative government as the only form of government that will deliver democracy in extensive and populous societies (in distinction to the ‘simple democracy’ of ancient Athenian society). His reflections on parliamentary democracy—a social arrangement of recent vintage which we take for granted and whose degeneration we often fail to register on our consciousness—are fascinating. This ‘new’ form of government is contrasted with the ‘old’ form, one which draws its sustenance from ‘war and extortion.’

In a deep and brilliant series of analyses for the betterment of the civilisations of Europe and America, Paine expounds on how debt and strife keep out human development (as they do today in some of the poorest nations of the world); on how rational government requires the separation of Church from State (an outcome far removed from the theocratic ambitions of many States today); on the true meaning of toleration and intolerance (which should make us cringe when contrasted with the notions often peddled by the ruling classes of many countries in the contemporary world); and on the obligations of a civilised and (civilising) State toward the poor and the dispossessed (as much observed in the breach in many parts of the world today as in Paine’s natal country then).

In the course of time, every great work of the mind achieves, as the writer James Agee put it, ‘emasculation by acceptance.’ Rights of Man is no exception, not least when its precepts and ambitions are set against the tokenistic lip-service paid to good governance today in many countries of the world. For contrast a great deal of contemporary reality with Tom Paine’s moving expectation in the world around him: ‘…nothing of reform in the political world ought to be held improbable. It is an age of Revolutions, in which everything may be looked for.’ Looked for, we may add, but all too often not found! This is nowhere truer than in the context of the welfare state.

Social security and skewed priorities

Paine, who today would carry the labels of political philosopher, economist, and activist but in his time was more familiarly known simply as a pamphleteer, laid the groundwork for a system of social security for the poor over 230 years ago in Rights of Man. He dealt at length with a set of government policies which in his view would conduce to the betterment of Europe and America. The policies he dealt with related, among other things, to measures aimed at cooperative disarmament, the accommodation of religious plurality in a diverse society, the freeing up of trade both domestic and international, amelioration of the national debt, mitigation of the harsher aspects of taxation, the rationalisation and ‘humanisation’ of the pattern of public spending, and the provision of protection to the poor of the nation. These meditations of Paine bespeak a mind capable of the profoundest rationality, modernity, common sense, and moral reasoning.

His views on social security and the welfare state, in particular, are a marvel of prescience: they anticipa...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Contents
• Acknowledgements
• Introduction
• PART I On economics and economic themes, with some digressions
• PART II On some tendencies in the dismal science
• PART III On institutions, culture, and society
• Index