One-stop shop to make India 20 times richer

Preachers, Teachers, Doers – a theory of leadership

There are three ways to influence change: to preach, to teach, or to do it (by force or through persuasion).

Preachers

These are the lowliest form of "leaders". Their message is (at best) meant for books and papers, exhorting others to do something. Most religious preachers (who are copycat followers of the past), but also journalists and ordinary academics who teach by rote, and most ordinary citizens, belong to this group. Thus 99.99% of Indians fall into this category. They would rather preach at others in their dinner conversations, emails, or blogs. For instance, they want 'character' improvements in society, but that should be done by someone else! They want this or that, but they will NEVER raise a finger to do anything about it. That spares them the pain of formulating a strategy, and the pain of repeated failure.

There is no difference between a preacher and a clerk. They are basically copy-cats without any original idea. They spend their life looking backwards, singing praise about how grand their country's history was. (How does it matter if India was great in the past to the orphan child who has to scavenge in a pile of garbage for his next "meal"?) They are future-blind, without any vision for tomorrow. Their strategies are non-existent or flawed. They therefore contribute very little to the advance of humanity. Under their control, the society stagnates and remains where it was even after hundreds of years. In most cases it deteriorates with each passing generation.

Teachers

The next level of leaders are the true thinkers and teachers. They invariably aim to spread their word through 'followers' by engaging in one-on-one conversations with individuals, teaching them their ideas.

Examples include the founders of religions (e.g Christ, Buddha), or the more active think-tanks (e.g. Liberty Institute). These leaders perhaps do some good for society through their teachings, but unless they've mastered the art of creating doers, they will produce merely preachers and clerks who will never take the society any further.

In general, the contributions of teachers are very faint, barely distinguishable from background noise. It is hard to trace a revolution to a particular teacher since doers are self-driven and influenced by many "teachers", and no teacher on his or her own can take any credit for the change.

Even outstanding original teachers like Hayek never directly influence change. Change only occurs if doers like Thatcher admit to their influence. Even the great Hayek is impotent when it comes to changing the world.

Doers

Finally are the doers! These people have the characteristics both of the preacher and teacher, AND the ability to lead and implement change. They are the only true leaders.

Within these are five types (cf. Jim Collins) or more (using my typology in BFN which allows for negative scores as well). 

Thus people like Mayavati – who are both incompetent and horribly corrupt are still FAR superior leaders compared with ordinary middle-class academics or think-tanks who may preach or even teach but are totally impotent when it comes to achieving ANYTHING. Mayavati qualifies as a -3 (minus! 3) category leader on my scale. 

At the top of the ladder of leadership are people like Lincoln and  Gandhi – the level 5 leaders. They are preachers, teachers, and the most outstanding doers, all combined into one. They SHIFT AND CHANGE ENTIRE SOCIETIES! They are the citizen-leaders – the highest form of human being.

No society can change for the better if it produces only copycat preachers (who are basically clerks without any strategic capacity) or teachers (no matter how meritorious). A society MUST produce doers, and within the doers, the ethical (level 4 and 5) doers. That is the great challenge for Mother India, which has unfortunately specialised only in producing clerks and low quality 'doers' for the past 60 years.

Continue Reading

The Keynesians will bury the West

I normally don't comment on Australian policy, particularly where it is somewhat related to my official work. But in areas where my official role is not directly involved, I am able to comment without violating Conduct Rules. And so this post deals with Australian policy. I would like to remind everyone that my views are purely my own and do not represent the official entity that I work for.

Remember that I have commented adversely against the bailouts and stimulus packages in the USA (here). The so-called "stimulus" package in Australia has proved the same point point closer to home: that  Keynesians are the greatest enemies of the West, along with Rawlsian social "liberals" or social democrats.

With NOT THE SLIGHTEST CLUE about how governments actually work (never having worked in the 'trenches' perhaps, inside government), these economists rush in where angels fear to tread, borrowing money in the billions and then throwing it into the ditch. 

I had read a lot of Stiglitz's work as a doctoral student and to an extent he talks sense, but I soon realised that he is among the economists best avoided. I am now very clear that Keynesians of all sorts are dangerous ignoramuses, with absolutely no clue about human incentives and capacities. If only they had the slightest idea of how governments actually work. But they also have an ego the size of the dung on top of the dung beetle: always confident about their reckless "plans" for the economy. Socialists at heart, they are not bothered about things like individual freedom and the limits of a government's role. The whole society is theirs to experiment with, it would appear, with taxpayers' money. If money doesn't exist, they'll print it. 

The following article in The Age today is a breath of fresh air, putting out the key arguments against the reckless destruction of wealth and damage to incentives caused by Keynesians (and he has left out: the welfare socialists) to Australia.

Have a read: "ALP's knight is a thief in rusty armour" by Niall Ferguson

(I just visited Ferguson's website (here) and found a bunch of interesting articles such as "End of the Euro" – the end of which seems inevitable unless strong enforcement mechanisms are devised. The monetary union is turning out to be a cartel where penalties can't be enforced. Ferguson is an economic historian at Harvard – definitely worth reading more of his work.)

Key point from his article:

"Joseph Stiglitz … praised the government's debt splurge as "one of the best-designed Keynesian stimulus packages of any country"." "But is Stiglitz sure — I mean graduate-seminar sure, as opposed to Fairfax-press sure — that this was really due to the government's $52 billion cash splash?" 

(Clearly Stiglitz is imagining things, of that one can have not the slightest doubt).

The "more plausible explanations for Australia's relative outperformance" include: "1. Lady Luck 2. The Howard government 3. The RBA 4. China 5. The mining industry".

Indeed, I have argued at length on internal forums on FTI that Australia's financial system, reformed after the Wallis Review of 1997 (during the Howard government) significantly reformed the financial system and created checks and balances. There remain a few gaps which I believe can be eliminated without significant additional regulation but by better focusing of attention by the regulators.

There does exist a significant further phase of financial reform (for India but equally applicable to Australia – see DOF) which will include dissolution of the central bank and splitting its function into the private sector or independent regulators – as appropriate. Once that happens, all major risks to the financial system will be eliminated.

The government must ONLY regulate. It must NOT directly manage the financial system. And (in relation to the 'stimulus') while infrastructure funding is valid, reckless burning of tax-payer funds is not. 

ADDENDUM: 

Must read this related article: http://www.nytimes.com/2010/08/12/opinion/12poole.html?_r=1

Continue Reading

Misplaced environmentalism

I came across "The Economics of Ecosystems and Biodiversity Interim Report" by The Economics of Ecosystems and Biodiversity (TEEB) here, being highly recommended by some, and which apparently raises some fundamental questions.

However, as soon as I opened the report and came to the Preface (page 5) I found such absurd claims that I've shut the report and decided not to waste time on it further. 

1) "we find poverty and the loss of ecosystems and biodiversity to be inextricably intertwined."

False. Poverty is related to socialist governance everywhere in the world including absence of well-defined property rights. The loot of forests in India by the corrupt bureaucrats and ministers is related to poverty not directly but through the mechanism of bad governance. Lack of freedom is the ONLY perfect correlate of poverty. Societies without the rule of law and freedom suffer environmental degradation AND poverty. That is an iron law that can't be violated.

2) "The second issue is of ethics – risks, uncertainty, and discounting the future, issues which have also been raised in the Stern Review."

This is quite nonsensical. It is like asking the cave man to worry for our needs. We get wealthier over time. That rules out the idea of caring disproportionately for our future generations. If we take care of ourselves well enough, the future will look after itself. Ramsay was wrong. We must always focus on ourselves.

This is another form of the invisible hand: the more you look after your own self-interest the better the society becomes. 

Yes, by all means price externalities and care for the environment, but for that the Coase theorem, along with Pigovian taxes, should do us perfectly well. Standard economics is PERFECTLY capable of dealing with all environmental issues. 

I refer the writers of this report to Steven Landsburg's book, The Armchair Economist who points out numerous fundamental errors of environmentalists. I also refer the writers of this report to Julian Simon's The Ulimate Resource. And to my books.

ADDENDUM 14 August 2010
Comments from a fellow economist in red below) so I thought I'd deal with them in the main blog

On (1) – I reckon you're right, but the existence of one explanatory variable for poverty (bad governance) doesn't negate the existence of other explanatory variables. I highly doubt the correlation (beta coefficient) on the variable for environmental damage/depletion of natural capital would be zero. You might question causation – e.g. bad governance leads to excessive or premature depletion of natural capital.

My response: The most basic flaw with the econometric way of thinking is to start modelling without a theory. Science is a theory-based exercise, not an exercise of fitting the curve. There is no theory that leads directly from environmental damage to poverty. But there is a very strong theory that leads from lack of freedom, through bad governance, to BOTH environmental damage and poverty. Explanatory variables must be independent to rule out multicollinearity. In this case I can't see how the environmental damage variable is independent. Why is there environmental damage? That is the cause. And that is bad governance which, in turn, is predicted by the lack of freedom in society.

General comment: Economists are good at maximising the size of the cake and poor at splitting the cake (an equity issue – which we leave to politics). The same argument might extend to notions of 'sustainability' or 'inter-generation equity'. That said, we also understand that there is a difference between dynamic and static models – e.g. the idea of 'investment'. This suggests that economists can probably help define the amorphous concept of 'sustainability' (e.g. optimisation of consumption/investment over time). I imagine that even the cave man put a few morsels of mammoth meat aside for a rainy day (so to speak)… to last through winter…  or maybe even to feed its (unborn?) offspring. Another idea: future generations can not express their preferences in any present market (even where they exist). Is this a type of (inter-termporal) market failure which will mean society will more often than not get the inter-temporal optimisation 'wrong'? 

My response: I disagree that there is any equity issue in society. The ONLY equity issue is that of deep poverty. And that means a social minimum provided for through the social insurance program. The need for such insurance has dropped significantly in the West but these societies are now on a ruinous path because they want a welfare state (semi-socialist), thus destroying all incentives to work and to gain skills. Equity is a productivity demolishing concept, if used in any sense beyond the social minimum.

Let me explain the inter-generational issue thus: If I care for the environment, it is incumbent on me to take care of it during my lifetime, so I gain its benefits. That is why the economist insists on resolving negative externalities TODAY, for the current generation. If I am able to ensure a good clean environment today for myself, then would it not be tautological that a good clean environment would be passed on to my kids? So by taking care of MYSELF I take care of my kids. That is how the Ramsay problem is solved. By becoming rich I provide better for my kids. By ensuring a clean environment today, I ensure a clean environment for my kids. Let us take care of OURSELVES and our kids will find it easier to take care of themselves. Let us generate knowledge, let us generate wealth, let us do the right thing for the environment. That's all that is needed – or expected of us. Any other conception is misguided. In DOF I explain this at length. It is called enlightened self-interest.

In any event, the best way to conserve the environment is to apply classical economic theories and either ensure that the offender internalises the externality, or where possible, property rights enable the relevant parties to negotiate an outcome (Coase solution). I'm not arguing against regulatory standards in this area, but I'm arguing for restraint and good cost-benefit analyses.   

Continue Reading

An economist after my heart: Steve Landsburg

As I noted here I don't know what led me to my earlier accidental ignorance of Steve Landsburg's outstanding books. But fortunately I'm now actively working to restore my hitherto unknown loss!

After reading two of them: More Sex is Safer Sex and The Armchair Economist I find that both are outstanding, but perhaps The Armchair Economist  is the best layman's economics book so far (or close to the best)

I now keenly await the publication of The Big Questions – an advance copy of which has been received by the American Economic Review which annotated it in its recent journal, but which the Book Depository tracking system tells me is still not published. When I receive it (in the next few weeks surely) I'll talk about it as well – time permitting (I don't review all the books I read!).

In the meanwhile, here's a very brief review of The Armchair Economist.

Review

A fabulous book that takes you across a good number of foundational economic concepts, but more importantly, provides a deep insight into the way a good economist should think. 

In particular I liked his exposition of the Coase theorem and the benefits of using cost-benefit analysis (CBA) to assess the value of a policy. Chapter 10 is absolutely fantastic ("Choosing sides in the drug war: how the Atlantic Monthly got it wrong"). Simple principles with far-reaching implications are discussed, such as: Only individuals matter and All individuals matter equally. Also:

Principle 1: Tax revenues are not a net benefit, and a reduction in tax revenues is not a net cost.

Principle 2: A cost is a cost, no matter who bears it.

Principle 3: A good is a good, no matter who owns it.

Principle 4: Voluntary consumption is a good thing.

Principle 5: Don't double count.

It is true that CBA has philosophical and practical implications that are hard to fully reconcile (and I talk about some of these briefly in DOF in relation to the limits of utilitatrianism, but without doubt it remains the clearest and most objective principle for policy making; almost "scientific". 

In a couple of areas his views challenge concepts that I currently hold – such as in occupational health and safety where he suggests (at p.91) that miners should bear the costs of accidents so that every cost-justified method of preventing accidents can be undertaken. A similar unexepected approach is offered for the justice system, to ensure that judges reduce their tendency to lock up people for minor offences (or in some cases, depending on the design of the system, to let most people free). It will take me at least another round of reading the book carefully, and asking questions, before I can start owning some of Landsburg's redical ideas. But his points are deep and well-argued. It is a hard ask to find counter-arguments.

Another area where I am unable to follow his argument is in relation to dollar-cost averaging which he believes is bad financial advice. I'm not convinced because I find it sensible to diversify risk by investing in an index-based fund through a monthly drip-feed. In my view this is sensible given one's ignorance about details of the millions of thing that impact an economy, but with broad knowledge of the overall long-term trend of economic growth. The alternative to dollar-cost averaging through a drip-feed is to pick shares (like Warren Buffet does) and time the market which is too time-expensive and likely to be a fool's errand in most cases. But maybe I've misunderstood what he is trying to say, and perhaps I need to read his ideas again.

If you want to expand your critical thinking abilities, then read this book and re-read it. I plan to re-read it at least once. That is a privileged status I have accorded to less than two per cent of the books I've read in my life. So this is definitely a top-end book. Well worth having in your libray, and reading it at least twice.

Continue Reading

Good work but not good enough (Lok Satta)

I received an impressive update on JP's work over the past year in his constituency (see below).

Nice. Good work.

My only issue: This doesn't change policy at any level, only implements existing policies possibly (not necessarily) a little better. It is not a systemic reform of any sort. If transforming India was simply a matter of implementing existing policies better both JP and I not only could have done far more than a mere MLA, but have actually delivered far, far more in our roles as Secretaries to Government, Directors of Rural Development etc. For instance, I can't even begin to list things like the hundreds of school buildings I got built, the kilometers of roads constructed, in rural areas, the massive irrigation programmes implemented, etc., etc.

This kind of 'achievement' will simply not do. We need a radical shift in major policies and that needs a clear majority in parliament. 

The problems of India requires not implementation of existing policies as a solution, but a total change in most policies. That is where JP needs to show leadership. Unfortunately, I'm not aware of any clear policy leadership that LS has, nor can any single MLA deliver it in any case. I therefore oppose the current LS strategy and have made it abundantly clear on my blog. LS must change its strategy if it is not to remain a bit player on the political scene. 

A report on work by JP in the Kukatpally constituency 

For last few months lot of developments happening at high pace in Kukatpally constituency and below few are worth to highlight:

Schools:

1. Dr. JP's proposal of 23 new class rooms in 8 schools in Kukatpally has been approved and another 30 new class rooms for 5 high schools is under approval process. All in all, 53 new class rooms for total 13 schools will be ready by next year.

2. Total 17 Primary schools are identified which are being run in community halls. Loksatta has proposed lands in kukatpally for constructing brand new buildings for these  schools and submitted to GHMC for approval.

3. Loksatta requested Govt. 1 acre of land for construction of High Schools in Babbu Guda and amlost in the final approval to sanction land.

4. Total 23 new Toilets in 5 High Schools will be ready by this year.

5. Loksatta requested Govt. to outsource Mid day Meal preparation to Naandi Foundation for all 46 govt. schools in Kukatpally. It is on the minister table for final approval.

6. One of the Loksatta members donated Rs. 10 Lakhs for adoption of a High School. An Italian company and a team of volunteers from American Bank  came  forward to work with Loksatta to improve the quality of education in one of the schools.

7. A two month professional English Language course for all 10th Class students in Kukatpally High Schools will start this week in a phased fashion. 

8. Loksatta is also working hard to improve the academic standards in all these schools and strategies are being planned for the same.

9. Proposed 2 Acres of land for construction of Govt. Degree College, in Kukatpally which is presently running in shifts, in the premises of Govt. Jr. College, Kukatpally

Roads & Drainage:

1. An undergroung Railway Bridge is constructed at Safdhar Nagar in Mothinagar division with project cost of Rs.1.69 Crores. It is the shortest root to Moosapet and Mothinagar.

2. Street lights are arranged through out Vasanthnagar, Dilsukhnagar colony and Satyanarayana Swamy Colony total worth of Rs. 14 Lakhs 

3. After Dr. JP  elected, works on 37 BT roads & 66 CC roads were completed in the whole constituency and works on 8 BT roads & 25 CC roads are in progress. Apart from these there are several other roads that are in the pipeline.

4. All the 14 lakes present in Kukatpally are surveyed and FTL (Full Tank Level) stones are laid for 3 lakes. To avoid encroachments, efforts are in progress with different  government departments to make sure that the registrations of the lands with in the boundaries of these 14 lakes are not being done.

5. Construction of 3 SULABH Complexes at busy public places is proposed.

6. A proposal is sent to the govt. for shifting the Kukatpally Truck Parking area and to develop the same place for community use, construction of an auditorium and a shopping complex.

7. Rain Water drainage pipe line from Vasanthnagar to Bagath Singh Nagar is completed in KPHB Division (Worth 50 Lakhs).

8. The long pending issue of Under Ground Drainage system which affects 2 lakh people across 11 colonies/slums is laid in the constituency.

Traffic & Transport :

1. Total 5 foot over bridges on proposal are sanctioned to be set up at 5 different locations in Kukatpally Assembly Constituency.

     a. JNTU Junction

     b. Kukatpally Village Bus Stop

     c. Moosapet Junction

     d. Balanagar area

     e. Begumpet.

2. Road from Moosapet ‘Y’ Junction to Miyapur on NH-9 is proposed for widening and providing the service roads from both left & right sides to control heavy traffic on this route.

3. To ease traffic in JNTU junction, two alternate roads to Hi-Tech city were sanctioned. First one through IDL factory and the second one through Moosapet

Health :

1. Urban Health Centre(UHC) and Primary Health Centre(PHC) in Kukatpally are not functioning because of no salaries paid to employees. The issue has been taken to concerned officials and work is under way to get their salaries paid regularly and re-instate the hospitals.

2. A free health checkup center is set up in Balanagar area; everyday a doctor voluntarily checks up the patients and occasionally provides medicines for free.

3. Free Eye, Thyroid & other Health checkup camps are conducted several times in the constituency.

Others :

1. KPHB Division 6th Phase Swimming Pool & Indoor Stadium construction work is in progress.

 

Continue Reading