Is China Capitalist?

The question — ‘Is China capitalist?’ — is surprisingly hard to answer for many reasons, not the least of which is that one could disagree on what the words ‘capitalist’ and ‘capitalism’ precisely mean. They get used in ordinary conversation, not just in academic writings, frequently enough that it misleads us into a false sense of certainty about their meaning. Much confusion ensues from differing semantic priors. Continue reading “Is China Capitalist?”

Trade Deficits and other Disasters – 2

This is  a continuation of a previous post which was in response to points that Mallikarjuna asked about trade deficits and Chinese exports to India.

First let’s understand trade. Voluntary trade is good for both parties. This is true in the case of individuals trading among themselves within a region, for obvious reasons. If both parties didn’t gain something from the trade, it would not happen since by definition the trade is voluntary. For less obvious reasons, in general voluntary trade across political borders also leads to gains.

We have discussed an important theoretical concept called “comparative advantage” in this class. In the context of international trade, even if country A has a lower productivity in every activity compared to country B (meaning A has no “absolute advantage” over B), both countries would have an “comparative advantage” in some activity. Continue reading “Trade Deficits and other Disasters – 2”

Trade Deficits and other Disasters

During the presentation yesterday, Mallikarjuna wrote on chat:

Trade deficits are bad. China runs huge trade surplus for itself with almost every other country. That is killing the local industries (silk producers, primarily.)


Cheap/Cost-Effective Exports with malware (USA Printers in mid-east, telecom & electrical equipment by Chinese) … How to get over this? Is it beyond economics?

I gave a very brief response during the session. This is an elaboration. I appreciate the concern that he has for his family’s silk production business. Continue reading “Trade Deficits and other Disasters”

India’s Poverty is a Crime

To a recent post on the great enrichment and the great divergence, Prabhudesai posted this comment:

US and India comparison just depresses me. 300 years ago USA was basically just a country with barely any history, culture, any achievements, no educational system, no philosophers, artists, kings. Basically a large tract of land with lots of warring tribes that were oblivious to the outside world. Then a bunch uneducated sailors arrived on this land and soon they became the engine of the world capable of landing men on the moon.

Sometime in the 1990s my family considered buying a two-wheeler. It was hard to get one. Rarely any used models were available and for new items there was a much longer waiting period. Rajdoot and Chetak were the most popular two wheelers but we settled for a cheaper “Moped” that ran on petrol, had peddles and was probably had a 60cc engine. Continue reading “India’s Poverty is a Crime”

The Constitution Question

In a comment to the post “What Should Governments Do?“, Siddhesh wrote:

Although constitution dictates as to what a government can do, the government itself amends constitution to expand its powers and have control over economy. How can we prevent use, or rather misuse of power?

The short answer is that the government is directly in control of the constitution and therefore it can do whatever it pleases to it. The constitution is a piece of paper. The government can disregard the constitution, and literally and figuratively shred it to pieces, and discard it at will. India’s constitution has been amended over 100 times at the whims and fancies of various prime ministers. Continue reading “The Constitution Question”


In the post on free markets, Walter Sylesh asked:

How do we understand the role of regulators such as Securities Exchange Board of India (the Indian equivalent of SEC), Competition Commission of India among others in enhancing ( or degrading) free markets? The justification of their existence is an additional criteria to “free markets” that are referred to as “fairer markets”. Is that mere rhetoric or is there merit to their existence?

Regulatory institutions are fairly common. Examples are SEC of the US, and SEBI and CCI of India which Walter mentions. The primary justification, as implied by the word, is to oversee the relevant industry to ensure that the firms in the industry play fair and according to the rules that the regulatory agency sets. Continue reading “Regulation”

Politics Increases Time Preference

Since we discussed politics yesterday, this tweet by Per Bylund is interesting.

Channeling my inner Christopher Hitchens, I am tempted to say that “politics poisons everything” but I channel my inner James Buchanan and recognize that politics is useful when it is considered as a form of exchange. Continue reading “Politics Increases Time Preference”

What is the Government?

We all have some conception of what the “government” is and consequently what we think the government should do. In the next session we are going to focus on this. What or who is the government and what function each of us expects it to do? This is an important question not in some abstract sense but it matters in the way the world works.

Each one of us is part of various collectives. The range is from our nuclear families to neighborhoods to the big nation states. How we in the collective think about the nature and role of the state matters enormously.

Do reflect on this question — What’s the nature of the state and what is its role? — and we will have a discussion the next time.

More People, Better Earth — Part 4

{Read part 3 here.}

In his extended comment, Ghost of Hamlet wrote:

…  More innovation leads to better quality of life. … But is this relationship truly infinitely scalable? Can we have 50B people on earth and have an exceptionally advanced society ?

Is anything infinitely scalable? No but some things can be indefinitely scalable for practical purposes. With 10th century CE technology, the world could not have supported even 10 million people at the average level of consumption that 7.8 billion people currently enjoy. And with 21st century technology, it is reasonable to expect that the average standard of living (which is another way of saying consumption) will continually increase — barring the insanity of some global nuclear conflict.[1] Continue reading “More People, Better Earth — Part 4”