ET2002 (15)

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Aenean ac dolor facilisis, pellentesque turpis ac, posuere ex. Integer dictum neque nec feugiat tristique. Nam interdum tempor augue, at eleifend augue interdum fringilla. Maecenas eget augue et mauris eleifend lacinia. Duis ac nunc mauris. Nullam venenatis dui eu purus pulvinar gravida. Integer ante dui, laoreet porttitor sagittis ac, condimentum et ligula. Quisque hendrerit nisi sit amet neque volutpat auctor vel rhoncus ligula. Donec ut tempor libero.

Welcome Aboard Mr. Stern

Abandoning the exclusive focus on the rich country protectionism and complacency towards the poor country protectionism, the World Bank Chief Economist has now forcefully condemned the latter. This is good news. But the World Bank also needs to pay attention to the nuances while propagating the view that agricultural subsidies and protection in the rich countries inflict huge injuries on the poor countries. The removal of these intervention will no doubt benefit the developing countries as a whole but it will also hurt the majority of the poorest countries. December 18, 2002 World Bank Chief Economist Nicholas Stern is reported to have told a gathering of economists in New Delhi this past month that poor countries should unilaterally dismantle their barriers to trade in agriculture in spite of European and American “hypocrisy” in raising farm subsidies. “There is no point in saying to the developed world: ‘You are shooting yourself in the foot so we are going to shoot ourselves in the foot as well,’” said Stern. “The best response is not to shoot yourself in the foot at all.”…

Continue reading...

A tax system for the 21st century

In less than two months, the Kelkar taskforces on direct and indirect taxes have spoken. They propose to overhaul the Indian tax system. The question is whether Jaswant Singh will show the necessary courage. WEDNESDAY, NOVEMBER 20, 2002 I have argued in this column and elsewhere that with the Indian economy now producing goods and services worth approximately Rs 20,00,000 crore annually, policymaking has become too complex to be left exclusively to career bureaucrats. The bureaucrat's instinct is to give priority to putting out daily fires while lighting a few of his own; the specialist is eager to address issues of architecture and engineering of policy. Therefore, when Jaswant Singh appointed Vijay Kelkar as his advisor within days of taking charge as finance minister, he was signalling his intention to repeat the success he had achieved as the external affairs minister. Kelkar is not only a first-rate economist with a Ph D in economics from the University of California, Berkeley but also a long-time insider with a keen sense of how to design good policy in the context of the…

Continue reading...

Tackling the Crisis in Higher Education

Besides, railways and nuclear power, the only state monopoly remaining in India is the one on issuing university degrees. Universities in India can be established only by an Act of Parliament, Act of a State Legislative Assembly or by the University Grants Commission (UGC) "deeming" an institution university. UGC centrally controls all major functions of universities and colleges. Not surprisingly, the Indian higher education system is in a quiet crisis on both quantity and quality dimension. Economic Times, October 23, 2002 A striking feature of the U.S. higher education system is its ability to sustain excellent public universities. Not only do these universities impart decent education in most states, many of them figure prominently in the national rankings. The University of California-Berkeley, University of California-Los Angeles, University of Michigan, University of Wisconsin-Madison and University of Minnesota are all public institutions. There are three complementary reasons why public universities have flourished in the United States while their counterparts in the rest of the world including Great Britain and continental Europe have declined. First, the United States has an excellent collection of…

Continue reading...

Experimenting in economics

This year's economics laureates — economist Vernon Smith of George Mason University and psychologist Daniel Kahneman of Princeton University — have both been pioneers in the field of experimental economics. But the similarity between their contributions ends there. MONDAY, OCTOBER 14, 2002 This year's economics laureates — economist Vernon Smith of George Mason University and psychologist Daniel Kahneman of Princeton University — have both been pioneers in the field of experimental economics. But the similarity between their contributions ends there. Vernon Smith has used experiments to test and essentially validate existing theories of market. Daniel Kahneman, on the other hand, has applied experimental data to question the assumption of rationality in the traditional theory of decision-making under uncertainty and constructed an alternative theory. To be sure, several economists including his teacher at Harvard, late Edward Chamberlin, preceded Smith in applying the experimental approach to testing theories. But having made the most important early contributions and trained a large number of young researchers, Smith remains the undisputed central figure in the field. Smith's most celebrated contribution, made in 1962, tested the…

Continue reading...

A case for import substitution?

Does evidence point to ISI leading to a golden age of growth in developing countries and liberal trade policies, deregulation and privatization going no where? Economic Times, September 25, 2002 Taking issue with my conclusion in the May 22 column that the Indian industry needs further trade liberalisation, labour-market reforms, an end to the small-scale industries reservation, effective bankruptcy laws and privatisation to catch up with China, my friend Professor Dani Rodrik of Harvard University writes in a personal note: “Most of the countries of Latin America did all of that, and the result was a rate of industrial growth (and TFP expansion) that is way below the levels experienced under ISI [import-substitution industrialisation]. The least that India can do is to learn from this experience and not assume that all the good things will follow as soon as trade liberalisation, deregulation and privatisation takes place.” Rodrik is among a handful of thoughtful critics of trade liberalisation and deregulation who ground their views in serious scholarly research. Therefore, one cannot summarily dismiss his advice. So how does one respond to…

Continue reading...