Economics Then and Now: A Conversation

Preliminary

I am grateful to IIMC for providing me with an opportunity to share and continue the discussions that I have had the privilege of engaging Professor Amitava Bose[1] with over the years. Ever since I met him first, in 1970, in Rochester New York and almost upto his very very untimely departure exactly 8 years ago; whenever I wrote something, my first port of call, has always been Amitava. And he was always available to discuss, and offer valuable suggestions. I said continue because I am sure Amitava is listening and there have been of late, some things about the nature of the subject Economics, which I didn’t get to share with him.  I now have an opportunity to pose them before him and that explains the title.

Before passing on to the main matter, I thank the organizers to provide me an opportunity to revisit the Institution where my professional life began. In 1967, after competing my masters in pure mathematics from Calcutta University, I responded to an advertisement which sought someone with a background in mathematics and an interest in economics to work as a research assistant to the Economics Group in the IIM C; and I answered, was interviewed, and was asked to join immediately. The current campus did not exist and I think I am among the very few present today, who participated in the Foundation Stone laying ceremony for this campus (December 15, 1968 and by the then DPM Morarji Desai).

Any conversation with Amitava would often begin with Pete Swayne, 15 Arvine Heights and the University of Rochester. The main campus of the University is located along the banks of the River Genesee; right across the river was Arvine Heights; it was a short walk to 15 Arvine Heights, where Pete Swayne lived. He was my landlord for the first semester at Rochester; and when Amitava turned up, I promised Pete that Amitava would be a super tenant. Our first steps in Rochester were roughly the same. In near sub-zero (Fahrenheit) temperature, walking to the University was a task surely. We could have waited for a bus but since it was an expensive ride and buses hardly ever kept time in the real winter months, it was better to walk.

1. Economics: Theory Bubble

My background and training in Economics began in Rochester where there were only two seasons: winter and winter; only one of them had snow though, huge quantities of it, so that moving about was difficult if not impossible.  We had a curriculum which I shall describe. And I suspect that then this was the training imparted at the best graduate schools. We were fortunate that Rochester was at the top during the time we were students.

It was the same grinding that Amitava went through, except that he landed up at Rochester with a lot more of economics under his belt given his Presidency College and Delhi School training. In Rochester we were asked to read the classics as part of the course work; for instance, to mention some representative authors, we were asked to read Marshall’s Principles as part of the course on partial equilibrium methods of analysis, i.e., when we studied single markets in isolation; we read Walras and Adam Smith while covering general equilibrium methods of analysis, i.e., when we studied the workings and complexities of multiple markets; while studying macroeconomics, that is the problems that economies as a whole faced, we read Keynes and some of us read Kalecki as well; Ricardo was read while studying growth and international trade and so on. The Classical writers were our point of departure in each area of study. Thus, the development of the literature was presented right in front of our eyes.  Amitava and I were studying general equilibrium methods specially and we had the opportunity of learning it from a master: Lionel McKenzie. McKenzie was someone who was considered as one of the Big three, along with Arrow and Debreu.  A man whom we revered and used to refer to as “buro”, or old man. Much later when Amitava and I met up and inevitably we started discussing Rochester. Amitava pointed out that ‘buro’ was really a misnomer, since McKenzie had been then only around 52. I should add that we ourselves were in our 50’s when this discussion took place!

McKenzie ran the department when we were students. There were no computers except the mainframe where time had to be bought; students who worked on empirical problems and there were a few, had a hard time getting cards punched; they were running back and forth and then had to wait for the computer to tell them about various things. Among the courses we took, a great favourite was Ron Jones and International Trade: a mesmerizing teacher.  Among courses we did not study were the economic history course of Robert Fogel who got the Nobel Memorial Prize some years later and the econometrics courses taught by G S Maddala. I now regret that I did not study with them. They were experts and considered leading scholars in their respective fields; but I was in a hurry to complete and return. I got to know GS as everyone called him; he was unpredictable in his responses. Once someone asked him, what does GS stand for? He appeared to think for some time and said pleasantly, I do not remember. After the fellow had walked away, he looked at me and said why should I tell him, he won’t be able to pronounce it. I realised I would have enjoyed his lectures enormously.  Fogel was very well known for his work on the impact of Slavery which led to the very famous book Time on the Cross, written with Stan Engerman who was at Rochester; Fogel was working on the contribution of the Railroads to the US economy and the subject of Cliometrics was being developed right in front of us. And I found out about TFP (Total Factor Productivity) for the first time in 1970 or 1971. In a qualifying oral examination, one of the most terrible examinations that we ever encountered, Fogel asked the student appearing, to write down a Cobb Douglas Production Function. Now the Cobb-Douglas Production function is a functional relationship between inputs and output; so, named because Senator Douglas, an economist and Senator from Illinois, over lunch, requested his mathematician friend, Cobb to suggest a functional form for the relationship and as legend goes, Cobb borrowed a napkin and wrote down Q = A K^aL^b and the CD Production function was born.

This was straightforward but the student couldn’t answer the next question, which was to interpret the constant. The exams were held in a closed room, with four or more grilling the student. The student must have been grilled badly so when he came out, the first person, he met was me. And said something like, hey you are a theory guy, what is the A in the Cobb Douglas PF. And the best response that I could make was, what A? The student wrote down the entire thing and pointed; still the only thing I could respond was that’s a constant. See no one knows what that is, said Richard Thaler, that is who the student was and he too would get the Nobel Memorial Prize.  We were growing up in an economic theory bubble, but I now realize, it was quite an inclusive theory that we got.  When I returned to India, I learnt that what I had picked up was somewhat disdainfully called “neo-classical”; although as I realized, through the course of time, I had picked up some classical stuff as well.

• Post Rochester: Specific Models for Specific Results

The big thing that started while we were in Rochester was the advent of Game Theory and we had one of the almost founding fathers, James Friedman. We referred to him as the Bengali ‘Bhadrolok’, which he was. Both Amitava and I could have worked with him, but the attraction of working under McKenzie’s supervision, was too great. But Friedman was on our Thesis Committees, for both Amitava and myself. Industrial Organization theory which developed as a result of the development of game theoretic applications had as its early precursor, Imperfect Competition.  Even two years later when I had to deliver 15 lectures on Imperfect Competition, at the LSE, I was thunderstruck. How could I stretch whatever I knew to cover 15 lectures?  Morishima used to do it I was told, and so I was put to the yoke. The journals were full of papers but there were no books. A few years later 51 lectures wouldn’t have covered the main material.

In the development of new ideas, the handling of situations when information was not available or maybe could not be made available was certainly a major improvement.  However, a distinct development of economic theory needs to be noted: sharper and sharper results were announced by making the context more and more specific. In 1980, there was a lecture by John Sutton how almost any result was possible in the Theory of Industrial Organization. This was at the World Econometric Society Congress. I did ask him that his critique was fine but it did sound like a self-critique since he and Avner Shaked were some of the most spirited producers of this kind of stuff. And this specification of details appeared to me as a step in the wrong direction; the temptation for many was to use these results as being true in wider set-ups.  We from Rochester believed or were made to believe that only general conditions ought to be analysed. In what is called contract theory, for most of the basic results, the target functions were so chosen that all income effects are ruled out; that for us, was a sacrilege. I just mention how specific models had become. Otherwise, very determinate things could never be said. Or as McKenzie told me once, see, to pull a rabbit out of the hat, you have to put it in, first. I suppose the trick was not to let people know what was put into the hat or when.

• Growth at all costs

In addition, over time, with the introduction of computers and very efficient softwares, all kinds of exercises became feasible. And empirical studies began to proliferate. For instance, macroeconomics became quite empirical. Something else happened too. Very important economists put their weight behind policies which appeared not really defensible like insisting that growth is the only thing that matters. I at least and I suspect Amitava was too, bewildered by the Bhagwati-Sen debates which flourished at some stage. Amitava had reasons to be more perturbed, he had been taught by both. But I knew where he stood in this controversy. But far worse things happened and this is best related by means of the following.

Our friend Hiro Hino from Rochester, was probably Amitava’s batch or maybe one batch junior, had moved on in life. He had become the Economic Advisor to the Prime Minister of Kenya. At his invitation, Satish Jain, my colleague in JNU and also from Rochester and I had been invited to participate in a series of conferences held to study whether the existence of tribes in Africa would negate the workings of the market forces in the African context. This was our task and we were supposed to work in a multidisciplinary group. At the conference held at the beautiful resort at Naivasha in Kenya, the Mayor of Naivasha was the Guest of Honour at dinner and he posed the problem plaguing him and Naivasha. It seemed that the main source of income for Naivasha was from horticulture; flowers were grown and exported to Europe. But in trying to keep the flowers fresh, lot of chemicals were used. Unfortunately, the chemicals were draining into the lakes, there were many and they were interconnected. As a result, the hippos were dying; also, people working in these industries were falling sick. The Mayor, wanted advice on how to deal with this. No one spoke at first; our host, Hiro Hino, who is a friend, asked me by name to help out. This was a classic situation and I did say the polluter pays, of course. There was an explosion from the other side from an influential economist (he got the Nobel Memorial Prize a few years later) saying that’s exactly what shouldn’t happen; since then, jobs would disappear and the growth witnessed would vanish. I persisted by saying maybe then assign the property rights to the people of Naivasha and the hippos too. But effectively the polluter would have to pay. And the point being made was that the firms would then leave. This heated argument left most of us bewildered. But we should have known better, we forgot about a memo from the World Bank which advised polluting industries of the West to locate their industries in Africa or other undeveloped parts of the world. I suppose that’s why Union Carbide came to Bhopal[2].

I cannot resist from adding what happened in 2010 January; the last Kenya Conference was held at the Yale University. After the Conference, I went to Rochester to meet Lionel McKenzie; he was 91 and still driving around. He asked me what had brought me to the US; I described the conference; he didn’t recall Hiro Hino and asked me what he had done after Rochester and the nature of the conference. On hearing that Hino had been with World Bank and IMF, and the nature of his current job and the crowd I was with, McKenzie’s advice was to stay away from these people; he did admit that these guys are flush with cash though. And thanks to the project, we did get to meet. McKenzie died that year.

• An Economics Curriculum

Moving on, some years ago, I was asked to prepare a document to support a proposal for a School of Economics; I worked on the proposal seriously over a few weeks and came up with the following. First of all, given the pre-eminence of the existing Schools of Economics in India, a new school would have to address why there was a need for it. I began by noting that Economics was the only subject area which was truly interdisciplinary in nature. I am sure Amitava would agree that not only Mathematics, Statistics and History but Political Science, Sociology, Geography, Philosophy and Psychology had roles to play in studying many questions in Economics. And accordingly, in a four-year programme, where apart from learning some basic economics, which needs to be spelled out, the other subjects need to be studied too during the first three years. And the last year was to be devoted to economics. If that was too daunting, an escape at the end of three years with a degree BA and for those who completed the fourth year successfully, the BA (Honours in Economics) was the point of specialization. And my point was that most of the existing schools, if not all, did not address this crucial aspect in their curriculum. Consequently, there was a need to set this right by setting up an alternate school. Accordingly, a programme for identifying what the curriculum ought to be, was drawn up. A list of scholars in various subjects had to be drawn up who would set the curriculum for the various subjects and a partial list of subject experts were even constituted. As can be imagined, it was ambitious and drew upon a lot of resources and the donors were not interested. They actually wanted a programme for training students for the UPSC competitive examinations and my report was set aside. If I had been given an opportunity to respond, I would have argued that the scheme I had outlined was pretty good for that as well. You would have noticed a couple of facts about the sketch of the above curriculum: so far as economics was concerned, I had not divided among micro, macro, trade, economic history etc; nor were there descriptions of papers on mathematical economics or statistical economics and the like and I did not envisage a breakdown of economics into classical, neo-classical and so on.

I had worked out that whether one was a capitalist or a socialist, one had to understand how markets functioned; in fact, the only difference between the two, I thought, was that capitalists favoured the First Fundamental Theorem of Welfare Economics while socialists looked to the Second Fundamental Theorem of Welfare Economics. To understand the difference between these two results, one must understand the notion of an efficient state; an efficient state is one such that, among all other feasible states, one person cannot be made better off without making some one worse off. In some sense therefore, an efficient state involves no wastage. To clarify matters for the non-specialists, the First Fundamental Theorem states that a competitive equilibrium induces an efficient state; while the second states that any efficient state can be attained through the working of the competitive market provided endowments are redistributed. The efficient state that the markets may realize may not be ethically or socially desirable, and so the role of the second theorem becomes clear.

Both capitalists and socialists believed that markets ought to work. Amitava had found this dichotomy to be of interest. This also shows that across the whole spectrum of political beliefs, markets and their functioning must be understood so that deficiencies could be taken care of. There is no escaping that.

• A Change in approach

My proposal for the new curriculum had some points that were important enough to be talked about specially now when there is suddenly discussion about introducing changes in the study of Economics. It is clear to me that before talking about change, we need to understand why we need to change. Reading some of the pieces that have appeared, it seems to me that there are some points left rather unclear. It appears to be a cry for a change without analysing what we need to change. A Nobel Laureate’s claim that he was now against immigration in this context, is difficult to understand, for instance.

 Maybe I should say what changes I would like to see and this is where Amitava’s input would have been fundamental.  Consider for example, what a candidate answered while being considered for a senior position in a well-known Institution. The candidate revealed that his area of research and interest was “Development Economics”; someone asked him to explain what kinds of questions he would like to analyse or study; and the candidate explained that he was trying to understand why some regions were poor and others were rich and what could be done to redress such imbalances. Everyone nodded. At this point, I decided to ask him to name what he would consider to be the earliest treatise published in English in the area.  That stumped him and he could not decide on how he should respond. Before signing off, I asked him, what about Adam Smith’s Wealth of Nations; it did have a subtitle An Inquiry Into the Nature and Causes of the Wealth of Nations?  His response was oh, but that is Classical Economics. I was expecting a discussion of why he did not consider Adam Smith’s magnum opus fit to be called a Development Economics book.  But his answer showed exactly what is wrong with Economics today.

We have compartmentalised areas into Classical, Neo-Classical, Marxian, Orthodox and now something called, Heterodox. This classification is just what we should not have, particularly when definitions of areas are vague in themselves. At a conference the other day, much was being made of heterodoxy; I asked whether this could be explained in simpler and clearer terms; and the only explanation that could be obtained was that it was anything which was not orthodox. Clearly what is orthodox is not well defined as well; I tried to say that what was considered non-orthodox today may become the orthodox of tomorrow, couldn’t it? Was Adam Smith’s work considered heterodox in his time? Again, no answer was forthcoming. I would like to submit that this meaningless classification has not helped matters at all. We should rather focus on whether any body of knowledge helped us understand or analyse some phenomenon which may be of interest. At this stage, I can only recall the curriculum we had gone through; we read different authors during the course of study of a particular topic; for example, as I had pointed out before, while studying the workings of a single market, we looked into Marshall and tried to see where there were problems with the Marshallian analysis and whether we could figure out a way of avoiding them. Compartmentalizing areas is not the way to go.

• The Washington Consensus and its Lingering aftermath

Another very puzzling aspect of this need to change was the fact that the rethinking of Economics has been put forward from the pages of an IMF publication in Washington; this to me is, and I am sure it would have been to Amitava as well, quite bewildering, given that the so-called Washington Consensus (WC, hereafter) emerged out of the minds of thinkers belonging to the Fund and Bank located in that metropolis. And for our Audience today, I should make clear, WC was the name given to a bunch of proposals which were being imposed upon countries which were in distress and the name was a somewhat sarcastic reference from left leaning economists, first from the countries in Latin America and then, more-or-less everywhere. John Williamson in 1989, drew up a list of ten commandments, in consultation with IMF, World Bank, US Treasury and other similar bodies, which were supposed to encourage growth and economic development in countries which were in financial distress; these ten constituted WC. These were considered with great distrust given that in some cases, (detractors will say in all), the conditions did not improve.  Williamson passed away recently, and his obituaries mention how he summarised the WC to three major things: macroeconomic stability, free markets and open to the world economy and apparently, he also lamented that people attributed whatever they felt to the WC.

Macroeconomic stability, I should hasten to add to the uninitiated, entails governments to ensure that their expenditures and revenue are not too unbalanced and the exchange rate is at about correct levels as determined by WB and IMF.  Be that as it may, Joseph Sitiglitz in his well-known book Globalization and its discontents also discredited the WC. 

Note that the basic construct in the WC was the prevalence of the belief in the efficacy of free markets. Frank Hahn, in his 1982 lecture, “Why I am not a Monetarist”, commented on the matter, saying how he found it to be something which was a bit of mystery how “ .. the Arrow-Debreu model came to be taken descriptively; that is, as sufficient, in itself, for the study and perhaps control of actual economies.” And in any case, one size does not fit all.But WC enthusiasts did not pay attention to Frank Hahn.

• Evidence Based Research and the IGC

Although by now, the WC is largely discredited, persons adhering to the faith, still control the purse strings for research in economics. I realised this during my encounter with Mr Williamson, when he was evaluating the IGC (International Growth Centre) programme in India and elsewhere having been deputed by DFID to do so. The IGC was run out of LSE and University of Oxford with funds from the British Government. There were several places around the world where IGC thought that the governments were interested in looking for solutions to the many problems that confronted them. Expertise was however not available to them and IGC would help with funds to provide this expertise.  The IGC chose Patna as a place of interest since the new government, the NDA under Nitish Kumar showed signs of being interested in making a serious effort to make Bihar develop. This was in 2009 and the IGC stepped in to Patna in 2010 and asked me whether I would take on the job of being Country Director of the Bihar Programme, I accepted. The designation[3] should have warned me, but I was at a loose end, having retired from JNU.

Around mid-2011, DFID the funding father of the IGC programmes sent John Williamson to review the functioning of the programme at Patna; we had a long session, where I tried to explain what we were trying to achieve in Bihar. I was then going through my battles with my own health and I recall having discussed about the impending visit with Amitava. Some of the ongoing projects that we had either commissioned or were in the process of finalizing their acceptance, came up for discussion. In particular, the focus was on two projects. As it turned out, both had been defined by the Bihar Government’s concerned department and encouraged by me personally and their approval had been obtained under great strain. I was grilled thoroughly since they apparently were considered not quite suitable.  The IGC had a view that only those projects be funded which could be showed to directly contribute to growth of the region. I had supported these two areas, since it seemed that if we could offer some ideas to the government of Bihar, then that would contribute to growth in the state. One area was the problem of floods in North Bihar; could they be tackled better? The other was the question of the development of the food processing industries in Bihar: what bottlenecks there were and what could be done about them? Apparently, it was difficult to convince our funding fathers that answers to these queries could foster growth. I may add that I did manage to get some funds allocated and the reports led ultimately to two very satisfying Springer monographs and many have said that they found the contribution helpful in understanding what was at stake. But did the work contribute to growth? My view was that they certainly helped clarify issues but apparently my academic approach was not particularly appreciated.

In fact, the pursuit of very specific questions assumed centre-stage with the work on Famines by Amartya Sen in 1981; maybe this trend happened first elsewhere but in India, Sen provided the space to other investigators to pursue such specific queries. Contrary to popular belief that famines were due to FAD (food availability decline), Sen put forward the hypothesis that they maybe caused by Entitlement Failures (FEE: Failure in exchange entitlement), when real wages fall sharply curbing the people’s purchasing powers[4]. This indicates a very important policy prescription for tackling famines.  In a blurb, it was mentioned that Sen’s inspirations were supposed to emanate from the works of Kenneth Arrow, Adam Smith, John Rawls and John Harsanyi.

I should add too that a very preliminary version of evidence-based research was the work of Amit Bhaduri which resulted in the famous paper in the Economic Journal offering reasons why in West Bengal land owners did not find it profitable to invest in their lands. While these two above mentioned were early examples of evidence-based research, what was remarkable about them was the theoretical foundations of both the analyses.

Why did WC-type beliefs persist in policy making in spite of such illuminating developments?  Recall that WC insisted on competitive markets and openness and macroeconomic stability. Competitive markets and openness were really taken then without any further qualification; this must be due to the firm belief that the First Fundamental Theorem of Welfare Economics works more or less all the time leading to efficiency. That this works only under some conditions is usually glossed over but these are SOME conditions indeed. What are these conditions?  

There are many reasons why markets may fail to attain efficiency. In Slide 1, we have listed together these cases of ‘market failures’.  Each correction, to be effective, requires the rule of law being alive and functioning, as the last column indicates.  Consequently, that following the WC led to disaster in some cases, is no surprise. But that is not the fault of the subject Economics; it was because the recommendations did not take into account the requirement of the rule of law. Opening up the country would mean that there could be even more areas of scams and corrupt practices. The World Bank toxic memo is a case in point. I wonder what happened to the hippos in Naivasha.   Based on such heritage, people who are cogitating about changing economics, can they be trusted?

• Concluding Comments: Need for a fair and efficient law and order mechanism

Incidentally, the requirement of a fair and efficient law and order mechanism was pointed out by many from ancient times:  Chanakya, Adam Smith; even somewhat later economists like Milton Friedman and others mentioned that governments should ensure this[5]. Certainly, such concerns should be encountered in any Economics Curriculum.  But then these people are not read, they are Classical Economists and yet, we blame the subject and I doubt very much even if those who claim to be specialists in such areas, read such texts. However, the 2024 Nobel award appears to have corrected this somewhat. I like to end by sharing the following slide (2), which depicts the performance of different countries according to some indices.

The first column is a list of countries, the second column is the ranking of these countries according to the Prosperity Index, while the third column is the ranking of these countries according to the World Justice Project. Just notice the match, between the second and third columns; almost as if they are measuring the same thing; as I had pointed out, in Slide 1, a fair and just law and order machinery is crucial to the functioning of markets. And further, notice too that per-capita income cannot be the sole point of concern while discussing well-being. However, the correlation between prosperity and the rule of law rankings appears quite strong. And certainly, deserves more attention and study.

Many seem unaware of how the subject has evolved and is evolving. Who would have thought that fifty years after Milton Friedman, Luis Zingales[6] and others would consider that corporates only maximising profits will not do; they need to pay attention to society’s requirements as well. Recall who was claimed to be Amartya Sen’s muse. In passing, what I am trying to point out is, that while the importance of the role of institutions, mentioned in the work of Acemoglu, Johnson and Robinson cannot be overemphasized, the foundation of the roles of all institutions is the rule of law which in turn ensures that markets function appropriately.

Rethink surely, but do examine where there is a need for change and reformulation. Creating artificial boundaries within the areas of study only obscures.

SLIDE  1

Features	Corrections suggested in Lit	Agencies involved
Externalities[7]	Pigouvian Taxes/ Property Rights[8]	Government in framing rules , Judiciary, Police ensuring compliance
Asymmetric Information, product quality uncertainty[9]	Certifying Agencies, which certify product quality	Government and other Agencies as above
Breakdown of contractual agreements, which may occur in any transaction	Detection and Penalties	Government in framing rules, Police Judiciary in ensuring compliance
Markets with uncertainties, when future involved. Temporary equilibrium in current markets given future expectations is the notion used.	No insider trading or control agents who have private inform.	Bodies such as SEBI in India. Other bodies such as courts to ensure no conflict of interest.

Notice that to make markets function smoothly, the Government has a major role to play. Notice too that the last column indicates that the functioning of the rule of law is crucial.

As points of interest, rows 4 and 5 are related to my earlier conversations with Amitava Bose; the fourth is essentially what I spoke on (“ Is Competitive Behaviour a Best Response?” In Emerging Issues in Economic Development: A Contemporary Theoretical Perspective, Edited by S. Marjit and M. Rajeev, Oxford University Press, Delhi,2014) and the fifth was what Amitava Bose got me to write for a common friend (“Money and Market Failure: A Theoretical Perspective”, in  Economic Theory and Policy Amidst Global Discontent, Edited by A. Ghosh Dastidar, R. Malhotra and V. Suneja, Routledge, New York, 2018. South Asia Edition, 2018.

SLIDE 2

Countries	Prosperity Index[10]	Rule of Law Index[11]	Rank Per Cap Inc[12]
Denmark	1	1	9
Sweden	2	4	14
Norway	3	2	2
Finland	4	3	18
Switzerland	5		4
Netherlands	6	7	11
Luxembourg	7	6	1
Iceland	8	10	8
Germany	9	5	20
New Zealand	10	8	22

Items included in the construction of the Legatum Prosperity Index:

safety and security, personal freedom, checks and balances on government power, social capital, investment environment, enterprise conditions, infrastructure and market access, economic quality, living conditions, health, education and natural environment.

Items included in the World Justice Project (WJP) construction of the Rule of Law Index:

Extent of Government Powers, Whether Government is Open or not, Fundamental Rights and their Importance, Absence of Corruption, Order and Security, Regulatory Enforcement, Civil and Criminal Justice

Incidentally, the claim is made on WJP site that the recession in the global Rule of Law continues!

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[1] This is the text of the Amitava Bose Memorial Lecture delivered on January 15, 2025 at the IIM C. I had the privilege of discussing this material at various stages with Krishnendu Ghosh Dastidar, Subrata Guha, Satish Jain, Mritiunjoy Mohanty, Amal Sanyal and Soumyen Sikdar. I am grateful to all of them.

[2] For more complete coverage of the World Bank story,  see,

https://www.harvardmagazine.com/2001/05/toxic-memo.html. Incidentally, all the persons involved in both the above accounts are eminent economists.

[3] Typically, a World Bank cadre.

[4] See however, Omkar Goswami, 1990, “The Bengal Famine of the 1943: re-examining the data”, IESHR who shows with the same data that there was FAD which triggered off price increases and with stagnant money wages, led to FEE.

[5] For details of these references see, for instance, Mukherji, Arnab and Anjan Mukherji, “Sushasan: Governance and the New Bihar, in The New Bihar: Rekindling Governance and Development, Edited by N. K. Singh and Nicholas Stern, Harper Collins, India, 2013 

[6] Milton Friedman: 50 Years Later e-book , edited by Luis Zingales,

[7] Such reasons of market failure are very much part of the literature and hence specific references are omitted.

[8] The original reference is Coase, R., (1960), “The Problem of Social Cost”, Journal of Law and Economics III, 1-44.

[9] See for instance Akerlof, G., (1970), “The Market for Lemons: Qualitative Uncertainty and the Market Mechanism”, Quarterly Journal of Economics, 84, 488-500

[10] Legatum Prosperity Index 2023 (prosperity.com/rankings) India’s position 103/167

[11] World Justice Project Rule of Law Index 2023 (https://worldjusticeproject.org/rule-of-law-index/) India’s position   79/142. For some reason Switzerland is not ranked for even 2022

[12] https://statisticstimes.com/economy/projected-world-gdp-capita-ranking.php per capita May 2024