Sen vs Bhagwati

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And now that the dust has settled on popular media coverage of Sen vs Bhagwati, a coverage punctuated by sweeping generalizations, grotesque over-simplifications (Bhagwati is Modi and Sen is Rahul Gandhi) and of course the gratuitous, knee-jerk intolerance (“Take back his Bharat-Ratna”) that characterizes much of public discourse today, it may be time  to look at what exactly is the difference between the world-views of these two great economists.

There is much intellectual and theoretic nuance here, which only a specialist can explain.

I am not such a specialist, which is why I believe I am not qualified to comment on this topic.

But I can present to you someone who is.

Dr. Alok Ray, retired professor of economics at Indian Institute of Management, Calcutta who has also held faculty positions at places like Cornell and U of Rochester.

He also happens to be my father.

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The Question of Compensation

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One of the simplest ways of explaining to people why they and their successive generations have been saddled by the biggest credit card debt in human history is to just shake one’s head preacher style and say “Human greed”—-greedy black suits on Wall Street and dumb-ass investors hoping to make thousands on the back of the housing boom essentially gambled away your grandson’s college fund while everyone from Manhattan to Washington DC, being in on the take, looked the other way.

This explanation is comforting mainly because it is simple and understandable while at the same time by and large true.

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The Wall Street Meltdown Part 3

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[For context, please read Part 1 and Part 2 first]

The Dow Jones Industrial Average (DJIA) gains 936 points on a spectacular Monday. And then, like the proverbial monkey on the oily pole, drops 733 points on Wednesday, making it the second worst single day drop in Wall Street history.

The stock market has now entered a most dangerous period—-a time of high price volatility. As an investor, you say to yourself—”The market has gone the lowest it can go, equities are as cheap than they have ever been for a long time and I can start buying stocks now.” And the moment you think its safe to go into the water, the market goes into a free fall once again. Naturally, you panic even more and keep holding onto whatever investments you have. Unsure as to which direction the market will go and fearing for the worst, you start having a fire-sale of your holdings. Other people do the same thing. The market drops further. Then perhaps some little gains are made, market sentiment perks up and you again wade in. The shark however sneaks up once again and before you know it, you are holding a bloody stump where once your investment portfolio was.

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The Great Wall Street Meltdown Part 2

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[Continued from Part 1. Again this is a long post.]

With investment banks and financial institutes sitting on stockpiles of toxic mortgage-backed securities and  credit default swaps, the same instruments that Warren Buffet had dubbed “weapons of mass financial destruction” (with the only point to note is that unlike the “weapons of mass distraction” and Santa Claus, these really existed),  lenders were as eager to loan these people money as anyone would be to leave their kid alone with Michael Jackson.

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The Great Wall Street Meltdown Part 1

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Warning number 1: This is a long post, part of a multi-post series on the crisis in the financial markets.

Warning number 2: I never took an Economics or Finance course in my life. I will not quote economists or provide citations and statistics. Not because I want to be simple and lucid. It’s because my knowledge of finance is extremely limited. All that follows is based on my understanding of the present financial situation, an understanding formed by reading the popular press.

Warning number 3: Which means that everything I say below may be wrong. But what’s wrong in that? At least, I didn’t get half a million dollars bonus and an apartment in Manhattan as reward for being “wrong”. Right?

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Loanacy

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One of the things that I usually do not comment on is the Union Budget. The reason is simple. I know very little about economics and I have mentioned that before. For me the budget is all about special-interests driven fiscal dribbling: tariffs lifted on consumer electronics, an extra cess on cell-phones and exactly the opposite the next year.

In other words, nothing worth commenting on or getting too worked up about.

But then once in a few years, usually right before election time, the government decides to make a grand populist gesture. It gets excellent press, is politically extremely correct, can be spun of as a “crowning achievement” in the coming elections, allows poster painters to put down “savior of the common man” below gigantic cut-outs of leaders, and most importantly serves a vested interest or two. What’s positively evil genius about such gestures is that once you take even a slightly close look at it— you see that it’s blatantly unfair, isn’t that much of a big deal anyways, helps people who don’t need it that much, does not help all those whom it is supposed to and does absolutely nothing to solve the larger problem.

Yes I am talking about Sonia mam’s historic 100% government loan write-off to farmers who own less than 2 hectares and 25% loan write-off for overdue loans for all other farmers (provided they pay back 75% of their loan as negotiated) irrespective of financial condition or location , an amount that will directly cost the exchequer, as originally reported, 60,000 crores.

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Budget Mysteries

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We never celebrated Valentine’s Day growing up. But that doesn’t mean our Februaries were fallow. Because we always had the Union Budget.

A little background. My father is (was, he is retired as of March 1) a professor of Economics at IIMC and my mother is a Masters in Economics from the University of Rochester. Thus watching the budget was a family ritual—-Baba would be taking down notes, Ma would be engrossed in the proceedings while I counted the seconds as to when this torture would end.

Its not that I did not like the Budget—-but that was only because following the Budget, Baba would be asked by newspapers for analytical articles and then there was the occasional television/radio interview where Baba would explain to the laymen the inner workings of the government’s fiscal policy in the same gentle tone that he used to teach me. Except that he did not threaten to stop explaining when the other panelists disagreed. He almost always did that with me. Of course to be fair to Baba, the panelists did not throw temper tantrums.

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