India! I dare you to be rich

Category: Economics

Sudha Shenoy shows that things made in China are actually made across the world

Mises Institute has done Indians a favour by putting out the video of Sudha Shenoy (2006), the brilliant daughter of one of India’s greatest economists: BR  Shenoy.

Although the talk may appear to be slow and somewhat tedious, it is actually quite sharp and insightful. She has a gem of a mind – sharp and humorous. And she makes a point about trade that only those who understand economics can.

Of course, Sudha – who taught in the University of Newcastle, died in 2008. I wish we get more videos of her talks. It is great to get to know an Indian liberal. It is a shame I did not know about her before she died. I’d have travelled specifically to meet her.

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Bio-economics: the derivation of economics from evolutionary biology

I think the basic assumptions of economics must be derived from evolutionary biology.

Each of these assumptions can be readily derived from biology, making irrelevant any need to “assume” them.

In DOF I’ve already flagged quite a bit of the biological underpinnings of economics, but maybe I should compile my thoughts separately on this topic.

Inspired by EO Wilson, I propose to call this aspect of economics, bio-economics (unless the name is already taken).

More later.


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Why economics is confoundingly more complex than biology, physics and maths – by an order of magnitude

Two of my recent FB comments:

Comment 1


Since 99.99 per cent of economics is about things that are hidden from sight (the endless series of actions and interactions) it is literally impossible except for a highly trained person to understand what’s going on.

Economics is a discussion regarding these invisibles. Not for nothing did Adam Smith call the price system and the market an invisible hand.

In religion, too, people have failed to grasp the invisibility of God, so every religion has been forced to create visible artefacts/ temples/ mosques.

The question is how can one explain this to the ordinary person (including highly competent physicists) who are not used to looking at a vast series of actions/ interactions. In the physics lab scientists looks at a particular event, and then it is over. What happens further, and then further, etc. is converted into general laws of entropy.

In economics, however, any action (even the most modest) has a direct effect on the **entire** world economy. Its effects ricochet across the whole world, and not just in one generation: in multiple generations (like the effects of Indian socialism in driving out its best talent from India).

It is truly hard to get people to think about these hidden effects. The fact that amazingly brilliant people like Adam Smith, Bastiat and Hayek have been explaining this for hundreds of years but there is almost zero awareness of these hidden mechanisms and effects of economics action even today, suggests that that challenge to get the ordinary, untrained person to understand the economy is Herculean, close to impossible.

Yes, a little book project I am attempting could be a tiny drop in the ocean, but we need a widespread concerted effort to simplify the key elements of economics so every child can begin to see through the confounding fog of the price system, and stop railing against the only system that has taken mankind from a short, brutish life of misery, to health, wealth and abundance.

Comment 2

First imagine that 155 years after Darwin’s pathbreaking discoveries in biology, a vast majority of the people still believe in their religious mythologies about the origin of the world and of man.

Once we grasp the magnitude of this huge disconnect between basic knowledge and people’s beliefs, it becomes relatively less difficult to imagine why 240 years after Adam Smith’s pathbreaking discoveries regarding the economic system, and 25 years after the collapse of the murderous socialist Russian regime, a vast majority of the world still believes that socialism is good for them.

Biology is an absolutely TRIVIAL science – a mere kindergarten level science – compared with economics. I can honestly say (having been an outstanding student of biology), that it took me just about one month to understand the basics of biology, but around 20 years of (mostly sporadic, but some intense) study to begin to understand economics. Indeed, the vast majority of “trained” economists themselves have close to no understanding of the price system. They’ve learnt some tools, no doubt, but not developed any of the essential intuitions.

The amount of training and reflection needed to understand the economy is perhaps just too demanding for the human species. Till the end of their lives, even the best economists are nowhere close to fully understanding the system – and they gladly admit it.

If the common man finds it hard to understand elements of biology, imagine then how much harder it is for them to understand economics – the most confoundingly complex system of actions and interactions.

The IQ of the species would need to rise to a minimum of 120+ (compared with current brain development levels) in order for biology to become comprehensible to the ordinary people. And the IQ of humans may well need to rise to 150+ for economics to become comprehensible – with a lot of effort.

But here’s the problem: India has an average IQ of 85. The average Indian operates at the level of a moron.

This means it will only be purely by luck that India gets any good governance and economic policies.

One should definitely try (e.g. a simple book for children, SKC agenda), but let’s never be over optimistic about India’s future.

These things could well turn out to be like throwing pearls before swine.

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We need more jobs. Let’s tie up people’s left hand.

Once again, the brilliant Bastiat (Economic Sophisms).

This is a report to the king by his bureaucrats – a proposal to increase jobs (and “hence” prosperity).



When we observe these free trade advocates boldly disseminating their doctrines, and maintaining that the right of buying and selling is implied in the right of property, we may be permitted to feel serious alarm as to the fate of our national labor; for what would Frenchmen make of their heads and their hands were they free?

The administration that you have honored with your confidence propose a law TO PROHIBIT YOUR FAITHFUL SUBJECTS FROM USING THEIR RIGHT HANDS.

Sire, a profound study of the system of protection has taught us this syllogism, upon which the whole doctrine reposes:

The more men work, the richer they become;

The more difficulties there are to be overcome, the more work:

Ergo, the more difficulties there are to be overcome, the richer they become.

Let us personify the country, and regard it as a collective being with thirty million mouths, and, as a natural consequence, with sixty million hands.

Here is a man who makes a French clock, which he can exchange in Belgium for ten hundredweights of iron. But we tell him to make the iron himself: don’t you see we are providing employment for you? Sire, this is exactly the same thing in effect as if we were to say to the country, “Work with your left hand, and not with the right.”

As regards the efficiency of the measure, it is incontestable. It is difficult, much more difficult than one would suppose, to do with the left hand what we have been accustomed to do with the right. You will be convinced of this, Sire, if you will condescend to make trial of our system in a process which must be familiar to you; as, for example, in shuffling a deck of cards. For this reason we flatter ourselves that we are opening to labor an unlimited career.

The moment your new law comes into operation, the moment right hands are amputated or tied up, the face of everything will be changed. Twenty times, thirty times, more embroiderers, polishers, laundresses, seamstresses, milliners, shirtmakers, will not be sufficient to supply the wants of the kingdom, always assuming, as before, the consumption to be the same.

Yes, we can make a touching picture of the prosperity of the millinery business. Every dress will occupy a hundred fingers, instead of ten. No young woman will be idle.

Should your Majesty consent to pass the measure now proposed, a great principle will be established: All wealth proceeds from the intensity of labor. It will be easy for us to extend and vary the applications of this principle. We may decree, for example, that it shall no longer be permissible to work but with the foot; for this is no more impossible (as we have seen) than to extract iron from the mud of the Seine. You see then, Sire, that the means of increasing national labor can never fail. And after all has been tried, we have still the practically exhaustless resource of amputation.

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