The Concluding Part — 3

Education

The material well-being of a nation depends on the productivity of its workers. How much workers produce—the productivity of workers—is a function of how skilled they are in their various occupations, which is directly related to how good their education is. The fundamental determinant of a nation’s prosperity is the quantity and quality of its educational institutions.

India’s education system is arguably the worst among the major economies of the world. That’s not because Indians are remarkably natively incompetent to run educational institutions or have some special handicap that prevents them from becoming educated. It’s because they are prevented from creating world-class educational institutions in India and lack the opportunity to get an education that they are capable of. Continue reading “The Concluding Part — 3”

The Concluding Part — 2

Prosperity is Downstream of Freedom

To understand why freedom matters for prosperity, we have to recognize that nobody is simultaneously all wise, all knowing, and all prescient. Our altruism, rationality and foresight are severely bounded.

Therefore we cannot predict with any certainty what people will figure out if they have the freedom to experiment in whatever field they are naturally inclined to do so. The progress that humanity achieves is a result of trial and error by people who could not have been identified in advance. We get to know of the eventual successes but only ex post; ex ante we can’t. We don’t learn about the failures but we can be certain that there must be many more of them than the successes.

That fact requires the philosophical stance of epistemic humility. We have to be humble because our knowledge is limited, not just about the future but about the past and present too. Continue reading “The Concluding Part — 2”

The Concluding Part — 1

In the final session of the class we address a question that’s been leading up to this. The question is the one that motivated my professional study of economics: why is India poor in the modern world of widespread economic prosperity?

Normative and Positive Analysis

In much of the previous part of this course, we engaged in what is called positive analysis. Positive analysis seeks to understand what the world is, how it came to be that way, and how the world is likely to evolve. In contrast to positive analysis, normative analysis seeks to address the question of how the world should or ought to be. Note that the word ‘positive’ is not a value judgement; it’s neutral and does not imply good in any moral or ethical sense. Continue reading “The Concluding Part — 1”

Steven Pinker on Human Progress

Oxford Union Web Series published this presentation with Steven Pinker on Jan 31st, 2021. Pinker touches on some of the same points that we discussed on our first online discussion on Jan 15th (here are the recordings of that session.) Pinker’s presentation lasts for less than 20 minutes. Though by now you may be familiar with some of the points he makes, it still makes sense to watch his presentation.

How to Think about Climate Change

The previous post was just a brief poll about climate change. Here’s an excellent presentation by Dr William Happer which I believe makes a lot of sense. The presentation was at Hilldale College just a couple of weeks ago.

I am a big opponent of what I call “climate change hysteria.” I wrote this Climate Change Hysteria Considered Dangerous back in 2017. The TL;DR Summary:

The global hysteria whipped up by certain groups regarding climate change is fascinating. It represents a toxic mixture of politics, economics, science, ignorance, myopia, stupidity, fear, hubris, technology, power dynamics, racism, benevolence, malevolence and arrogance.

Climate is changing, as it always has. The data show the rise in temperature. Humans affect climate. Humans adjust to change too. Technological advances in the near future will allow humans control over the environment. Doing anything to control C02 emissions now by edict will be too expensive, be extremely harmful to the poor, will shift resources from other important matters, and have no discernible benefits for future generations. Continue reading “How to Think about Climate Change”

The Great Enrichment and the Great Divergence

Among the important points that we have touched upon so far, one of the striking points about our world is that the modern world is remarkably new and different from the long history of humanity. The modern world we live in is only about 250 years old, whereas the world that preceded it is around 250,000 years old (that’s the time since anatomically modern humans appeared on the scene.)

Economic historians like Deirdre McCloskey call it the “Great Enrichment”: the world became around 30 times richer per capita in just two and a half centuries.  Economics explains why that astonishing change occurred. Continue reading “The Great Enrichment and the Great Divergence”

What Should Governments Do?

What is the proper role and function of a government is an important question. Should the government intervene in the economy to help the poor, to provide education, healthcare, produce public goods, reduce inequality, and a few hundred different activities?

That question has been asked and answered variously by a variety of people. As a classical liberal economist, my position is quite simple to state: I don’t want the government to intervene in the economy at all.

I believe that we should have something analogous to the “wall of separation between the state and the church” (see the 1st Amendment to the US constitution) in the constitution which expressly prohibits the government from interfering in the economy. Continue reading “What Should Governments Do?”

What do Economists do?

In a comment, Nithya asked what do economists do. What economists do is hard to define precisely. Just as one may ask what do doctors do. Clearly they provide medical services. But that could mean a lot of things: internal medicine, surgery, pediatrics, primary medical care, etc., etc.

Economists also come in a variety of forms. Some work on broad big questions such as why are some nations rich, some work on narrow issues like what are optimal subsidies and taxes, some on macroeconomic matters like inflation, unemployment, banking and finance, and so on.

The subject matter of economics, in the ultimate analysis, is people. Therefore everything that humans do — everything — falls into the purview of economics. Continue reading “What do Economists do?”