Goverment role in development finance

Is the government justified in offering loans to borrowers (e.g. small businesses) who typically do not get loans from the market?

No - it is morally wrong for the government to use tax payer's money to provide a private good to another group of individuals. It is equivalent to robbing Peter to pay Paul. The money comes out from the pocket of a tax payer, and gets deployed at lower-than-market rates.

So, what should government do?

Nothing. There are two different cases under which lending market gaps arise - and there is a case for government intervention in none.

In the first case, the loan applicant has dubious financial record, the market gap is a proper outcome of market mechanism.

In the second case, the applicant may be creditworthy but these is no information or credit history on him, hence the market gap.

In the first example, there is no case for any lending to such applicant. However, in the second case the government may feel tempted to intervene to fulfill its social mandate. However, this would be morally wrong as the govt. would again be robbing Peter to pay Paul.

So, what should be the policy response for such a situation?


I think that such a situation should be left entirely to the free market. The guiding principle being - there is no moral obligation on anyone to offer a loan without receiving the desired return. If no one desires to make a loan at any interest rate, then so be it. If someone desires to make a loan at exorbitant interest rate, then so be it. If someone desires to make a loan at zero interest rate, then so be it. Lending one's own money should be a matter of one's own choice, not somebody's force.

I also think that if free market forces are at work, there would emerge a win-win solution - simply because there is genuine opportunity for value creation in such a situation, and market participants would like to capture that value.

The value is being created due to the gains from trade - the lender is trading his surplus money with the borrower's promise to pay back with appropriate interest (risk-based). Both parties are gaining from this transaction in the same way as two trading parties typically benefit from mutual and voluntary trade.

Therefore, free market is best suited to address lending market gaps. If it chooses to not serve any of the gaps, then so be it. There is no obligation on any individual to sacrifice his money for this cause. In fact, such a situation gives an opportunity to an innovator to devise an approach to address the market failure - and it is proper for him to make money from the innovation.

A better alternative to meditation

I have always wondered what one does while meditating? I have never been able to meditate and find the entire process boring.

Now, I have begun to think that meditation may not be the best way to achieve concentration and calmness.

I think that calmness and joy proceed from concentration. Once you are able to concentrate intensely on something, and hence achieve a productive outcome, you feel immense satisfaction. If you do this repeatedly, you will make concentration and focus a way of life.

To achieve concentration, one needs to identify a topic worth concentrating on. One must have a question in mind on this topic. I find it ridiculous to attempt to focus on without-a-purpose topics (e.g. focusing on one's inner self, god, a point between one's eyes, etc). Such a focus is non-productive, and boring for a result-oriented person.

Instead, if one chooses a topic on which one has certain questions. Then, if one intensely focuses on the questions at hand, without letting any other distracting thought enter his mind, then this is true concentration. This should be the approach of meditation.

Traditional meditation may seem justified if one is really disturbed and can't focus on anything, and does meditation to empty and tranquilize one's mind. However even in such situations, one needs to think. One needs to introspect, weigh his priorities, and decide his response to his problems.

Therefore, I believe that mediation is pointless if it advises for suspending one's active thinking and passively focusing on vacuum, god, a point, one's breath, etc.

What is fulfilling is intensely concentrating on a question/problem that is worth one's interest an time. This intense focus will bring calmness and joy of achieving a productive outcome. This is true meditation.

Is knowledge good for its own sake?

One good thing I have learned as a consultant is: "Think answers, not analysis".

This means that any analysis should not be done for sake of analysis itself. Rather, it needs to be done to provide some actionable insights.

If I extrapolate this thinking to the overall learning and knowledge gathering process, the right approach seems to be to not go after knowledge to just become knowledgeable, but to seek knowledge to get closer to a defined goal.

Therefore, this thinking would suggest that one must start with a clear goal/question in mind, before one gathers knowledge to answer that question.

Is my thinking right?

I believe that until one is child, knowledge is good for its own sake. This is because at this stage, the child does not have full awareness to even have a sense to what questions to ask. He needs to know the world he lives in, before he can frame his goals and related questions. However, as we have seen in many cases, children loose interest in studies (e.g. abstract subjects such as Maths, etc). This is because they cannot relate that learning to its eventual use. Therefore, a good teaching approach would combine elements of knowledge dissemination for its own sake, as well as knowledge seeking driven by answering an interesting question.

However, for an adult, I believe that most of the learning should happen with a purpose/questions in mind.

Why?

I believe that an adult is already aware of the world around him, and can very well choose his goals. In this context, a purposeful knowledge seeking will make him more efficient and effective. He will be more satisfied as he acquires more knowledge and is able to answer his questions. Otherwise, the information content in today's world is huge. If one just memorizes facts and collects information, then he will be a good encyclopedia, but nothing more. In fact, he will nothing more than an inanimate computer.

I think that what makes Man superior species is his capability to problem solve and make decisions using his intelligence and knowledge. Hence, the purpose of knowledge acquisition needs to be to to answer questions, and to solve problems. This is how the world moves forward.

Can medicines treat Alzheimer's disease?

I believe that Alzheimer's disease can't be treated by medicines alone.

Alzheimer's is a disease that screws up the wiring of the mind in the following way:

- Nerve cells die
- Transfer of Signals between Nerve cells get impacted severely

Medicines can provide the chemicals that can clear the plaques and other obstructions impeding signal transfer.

However, the main issue is to restore the complex connections between the Neurons. These connections are something that an individual learns over time through the feedback from his daily experiences.

I believe these connections are broken due to two main causes:

1. Bio-chemical weakening of the brain (either due to lifestyle or aging)
2. Loss of active interest in life (which weakens these connections)

A medicine can address the first, but not the second. The second can only be addressed by understanding why the person has lost interest in life, and then considering what can be done to fix it.

Life is not a zero sum game

I believe that life is not a zero sum game.

What does it mean?

It means that the pie is not fixed, and can grow unlimitedly.

Which pie?

The pie of all wealth (goods and services) we produce. GDP is a close approximation of this pie.

How do I know it?

Well, earth is a huge plant - with huge natural resources. Nuclear energy has potential to address all our energy needs. Also, the composition of this pie may change over time (e.g. coal may cease to be available for energy), but the size of the pie and its ability to satisfy human needs can grow unlimitedly.

So, life is not a zero sum game because there unlimited resources on earth which can satisfy all our needs..and even wants! The key thing to note is that nature has abundant means of production (land) and resources (water, air, energy), though not enough produce for all of us. Human beings need to apply their labor (physical and mental) to produce.

So, what I am asserting is that there is unlimited possibility on earth to produce goods and services that will more than satisfy our needs and wants.

The only constraint, in a free society, for meeting one's wants is one's own effort.

Therefore, at a fundamental level, there is no scarcity for which human being need to compete with each other. The competition needs to be with oneself - to make as much effort as satisfies one's own wants, in accordance with one's own ambition.

Now, what could be the reasons that this simple concept is not well understood?

There could be three reasons. Firstly, people do not have access to means of production through free competitive markets. Secondly, people do not believe that there can be unlimited produce on earth (which is not the case as mentioned above). Finally, people may not believe that the distribution mechanism is 'fair'.

The remedy to address first and third root causes is to ensure that the means of production (such as land) are available by a free market bidding process, and distribution is done automatically through a market driven price mechanism.

Is science a Boon or a Bane?

I was unable to answer this question properly until a few months back. I have the answer now.

To answer the question we need to separate two aspects of this question:

1. Is the knowledge of science boon or bane? AND
2. Is the application of science boon or bane?

Often, the confusion in answering the Boon-vs-Bane question stems from not making the above distinction.

Knowledge of science is certainly good. It helps us understand nature better. This understanding increases our chances of survival.

As far as application is concerned - it is to be noted that we cannot answer the question at a 'fundamental' level. This is because human beings have volition. They can choose to apply science on either making an atom bomb, or inventing electricity.

So, those who say that science has been a bane, need to be told that the conclusion to be drawn (even if this is proved to be a historical fact) is not that we need to discard science, or that we were better off without science. The conclusion to be drawn is that we have progressed well on knowledge of nature. But, we may not have made the right 'choices' on how to use that knowledge.

The historical observation that science has led to destruction, pollution, etc does not imply that things had to be that way. Human beings have volition and can choose to use science constructively. The core issue is lack of a proper philosophy (mainly ethics). The progress on this front has not kept pace with that on natural sciences.

I was discussing this issue with an uncle of mine. He recently got a pacemaker installed, and was saying that science has not helped mankind. I told him that it is because of science that he is alive. To which he said that what was the use of his life. Hence, he made his negative conclusion on science. I could not counter his argument properly that day. Today, I understand how to do that. Science offered him the possibility to live (by using both scientific knowledge and its proper application - in form of the pace maker). Now, if he thinks that his life has no meaning and he was better dead, then it is his fault and a result of his choices. Science will not offer man a better life, unless he chooses it himself. Science will maximize his chances of survival; but is up to man to use his life productively. If he fails here, then it is his own volition that should get the blame - not science.

Sach Ka Samna

SKS seems to have ignited reactions from several people. I have not seen any episode of it, but have read about it, and believe that it is a disgusting show.

However, I would not go ahead and suggest that one morally polices such shows - 'coz that would be equivalent to suppressing freedom of expression.

I believe that if one really wants to counter such shows, then one must first understand why shows are succeeding, and then one must counter the underlying 'idea' such shows are based on.

SKS is succeeding 'coz it corroborates many people's underlying sense of life - that human beings are inherently degraded or corruptible. These people have sensed that they belong to this category, and hence they find comfort in seeing that other people's linen is dirty too.

I believe in the fundamental goodness of human beings. Hence, I think that such shows can be countered only by showing people that human beings are not fundamentaly 'bad' - that they have the potential to indeed be 'heroes'.

Epics like Ramayana and Mahabaharata projected such an image of man as a 'hero'. However, those heroes were elevated to be Gods or Avatars, and hence beyond human reach. If humans like Rama and Krishna existed, then it was a grave error to not portray them as human heroes.