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.)

And

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”

Facts don’t matter, emotions do

Frank H. Knight (1885 – 1972), Univ of Chicago economist, taught economics to Nobel laureates Milton Friedman, George Stigler and James M. Buchanan. Knight said:

“The serious fact is that the bulk of the really important things that economics has to teach are things that people would see for themselves if they were willing to see. And it is hard to believe in the utility of trying to teach what men refuse to learn or even seriously listen to.”

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”

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 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”

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”

Regulation

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”