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.
01 August 2009
16 May 2009
Liquidity trap
The US is in a liquidity trap these days - much like Japan in 1990-2000 (the lost decade). After reading Krugman's blog, I think now I understand this phenomenon better, than I did when I first read about the liquidity trap in 2000.
In a normal situation, the interest rates in an economy are determined by level of savings (S) and investment (I) in the economy. If there are excess savings, then interest rates fall to equillibriate S and I again; and vice versa.
However, currently US is in a different situation. There is an excess of S which cannot be equillibriated to I by lowering interest rates - because interest rates are already close to zero! This is called liquidity trap.
However, as Krugman points in his blog, this situation allows US govt to increase fiscal expenditures without crowding out the private investment. Thus, the govt can use excess savings pool to finance some public expenditure without increasing interest rates!
Now, the question is that where did these excess savings come from? After all, US people don't save much, right? I think the savings came from mainly China, since the Chinese kept there reserves in US in $!
In a normal situation, the interest rates in an economy are determined by level of savings (S) and investment (I) in the economy. If there are excess savings, then interest rates fall to equillibriate S and I again; and vice versa.
However, currently US is in a different situation. There is an excess of S which cannot be equillibriated to I by lowering interest rates - because interest rates are already close to zero! This is called liquidity trap.
However, as Krugman points in his blog, this situation allows US govt to increase fiscal expenditures without crowding out the private investment. Thus, the govt can use excess savings pool to finance some public expenditure without increasing interest rates!
Now, the question is that where did these excess savings come from? After all, US people don't save much, right? I think the savings came from mainly China, since the Chinese kept there reserves in US in $!
Why is inflation a fact of life?
I always used to wonder why, as I begun studying economics, is inflation a fact of life? Why do prices always seem to go up (on average)? Now I think I know the answer.
Inflation for a commodity could be due to its demand exceeding supply for a sustained period of time. However, I am here talking about overall prices. This I believe is mainly a monetary phenomenon (as pointed out by Friedman). Thus, historically, we have had more money chasing less goods and services. Hence, the overall inflation in most of the economies.
The questions is why would there be more money chasing less goods for a sustainable period of time?
I guess, the reason is deficit financing. Most governments over the world have been doing this. They print money to finance their welfare schemes and budgetary deficits. I guess this is the reason why we see inflation as a fact of life
The better the government's fiscal management, the lower the inflation. This relationship is evident if one looks at countries like US and Zimbabwe on two ends of the spectrum. India perhaps is somewhere in the middle with historical inflation in the range of 5%-7%.
Inflation for a commodity could be due to its demand exceeding supply for a sustained period of time. However, I am here talking about overall prices. This I believe is mainly a monetary phenomenon (as pointed out by Friedman). Thus, historically, we have had more money chasing less goods and services. Hence, the overall inflation in most of the economies.
The questions is why would there be more money chasing less goods for a sustainable period of time?
I guess, the reason is deficit financing. Most governments over the world have been doing this. They print money to finance their welfare schemes and budgetary deficits. I guess this is the reason why we see inflation as a fact of life
The better the government's fiscal management, the lower the inflation. This relationship is evident if one looks at countries like US and Zimbabwe on two ends of the spectrum. India perhaps is somewhere in the middle with historical inflation in the range of 5%-7%.
04 April 2009
The economy needs Ayn Rand
Today I read a debate on relevance of Ayn Rand's philosophy for today's economic context. I am now tempted to elicit my position on this debate. Thus I break a 1.5-year blogging hiatus!
I would not comment on the person who is against the motion in the debate, except that if I say that she is stupid than I would be making same kind of arguments that she has made in the debate.
However, I like the arguments made by the person in favor of the motion. His main argument is that it was not Greed but Government's (and Fed's) intervention that got us into this mess.
Before I describe my position, I want to mention that I have always admired Ayn rand. I find her writing and her interviews extremely clear and compelling. However, after my economics education, I have begun to slightly modify my views on capitalism and human nature. Below are my thoughts:
My position:
Why capitalism is not working today?
We have never been anywhere close to the ideal starting point.
Firstly, individual wealth have never been 'rationally' distributed. Secondly, individual incomes have seldom been 'rationally' earned.
If today the world moves to laissez-faire capitalism, I still will have an edge over lot of others. This edge will not be due to my own innate merit. Instead, it would stem from my parents' wealth - due to which I could go to the best educational institutes.
Hence, unless there is a 'fair' starting point for all, capitalism will not work its best.
Why socialism or govt. intervention is not the right answer to today's problems?
What can be done now to make capitalism work?
The only fix is to fix the starting points. Otherwise, we will continue to live in an imperfect economic world.
It is not at all easy to fix the starting points. However, below are my 2 cents:
All of the above is easier said than done! But one needs to say it first - right?
P.S. Since I have used the word 'rational' so many times above, it is important that I state what I mean by it. Instead of defining it, I would try and triangulate it below:
Conditions for a rational system:
I would not comment on the person who is against the motion in the debate, except that if I say that she is stupid than I would be making same kind of arguments that she has made in the debate.
However, I like the arguments made by the person in favor of the motion. His main argument is that it was not Greed but Government's (and Fed's) intervention that got us into this mess.
Before I describe my position, I want to mention that I have always admired Ayn rand. I find her writing and her interviews extremely clear and compelling. However, after my economics education, I have begun to slightly modify my views on capitalism and human nature. Below are my thoughts:
My position:
- Capitalism is the best economic system known to mankind
- However, only if there is an ideal starting point for the economy
- This ideal starting point is that individual wealth has been 'rationally' earned
Why capitalism is not working today?
We have never been anywhere close to the ideal starting point.
Firstly, individual wealth have never been 'rationally' distributed. Secondly, individual incomes have seldom been 'rationally' earned.
If today the world moves to laissez-faire capitalism, I still will have an edge over lot of others. This edge will not be due to my own innate merit. Instead, it would stem from my parents' wealth - due to which I could go to the best educational institutes.
Hence, unless there is a 'fair' starting point for all, capitalism will not work its best.
Why socialism or govt. intervention is not the right answer to today's problems?
- Because it creates 'unfair' starting points for a few individuals
- Because it removes 'rationality' from future income generation and distribution.
What can be done now to make capitalism work?
The only fix is to fix the starting points. Otherwise, we will continue to live in an imperfect economic world.
It is not at all easy to fix the starting points. However, below are my 2 cents:
- Abolish private property on natural resources (e.g. land, oil, etc)
- Enforce property rights on man made resources (e.g. Intellectual Property)
- Devise a redistribution mechanism so as to fix the errors of the past
All of the above is easier said than done! But one needs to say it first - right?
P.S. Since I have used the word 'rational' so many times above, it is important that I state what I mean by it. Instead of defining it, I would try and triangulate it below:
Conditions for a rational system:
- One can only keep the wealth that is earned by him, and by his own effort.
- One can only keep the income that is earned by him, and by his own effort.
- Universal sustainability: If the rules (or norms) of the game are followed by all, the system should be sustainable.
- Efficiency: The system should lead to the most optimal use of scarce resources
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