Thoughts on economics and liberty

Category: Economics

Why Mr Devasahayam’s arguments against farm liberalisation in India are untenable

Mr Devasahayam is a brilliant officer who has unceasingly worked for the poor of India all his life. But he does have a socialist inclination, which prevents him from seeing the defects within the government, and the impossibility of socialist calculation.

He recently pointed out that farmers are still agitating outside Delhi. He then shared his article, “Can triple pricing fix the blunder of the new agrarian laws?“.

Here’s the summary of the farmer’s demand (in Panjabi):

My response:

I have called for the abolition of these farm laws and making them again – with extensive public consultation with better checks and balances. But the arguments made in the article are, in my view, not tenable.

1. High risk due to exposure to natural elements

That risk is the function of crop insurance and social insurance. Our party’s manifesto details both, with particular emphasis on social insurance, so no one is ever faced with deep poverty for causes outside their control. On the other hand, farmers in a free market will gain (and must gain) the benefit of unfettered pricing on the up side when there are shortages created by bad weather. The idea of “intervention price” is draconian communism, and is designed to guarantee that farmers will be enslaved, and kept in poverty for ever. Why can’t they benefit from high prices? Because we think consumers will suffer? But open markets (exports/ imports) will minimise any such risk

2. Adverse terms of trade

Terms of trade are stacked against most agricultural products and this has been going on all over the world ever since the industrial revolution. This won’t change anytime in the future, either. This is the shift to productivity which is leading to a change in economic structure and wealth creation by the more productive sectors. In the end all food in the world might be possible to produce by less than 2% of the world’s population, even as 98% do more productive things with their time. This inevitable consequence of human innovation can’t be made an argument for the government to become a businessman in perpetuity

3. Non-remunerative prices

This requires facilitation of strong futures markets. Farmers can then choose the mix of produce they sell via advance contracting or market sales in the future. Let the market deal with this. Governments are hopeless at everything. Do you expect any bureaucrat to understand anything in any level of detail? That is impossible. Market specialise at a level that no government can even remotely mimic.

Risk of predatory corporates

You refer to the risk of a few companies cornering the market. That’s not happened anywhere in the world where agriculture is genuinely free. It can happen under the Modi dispensation, though, with his crony capitalism. In genuinely free markets, the most productive companies, in competition with each other and with the entire world, have developed more and more efficient means of cold storage/ transportation so there is no wastage of food. India’s socialist system (commanding heights in agriculture) means that a huge portion of the food we produce is wasted. That’s criminal but such large scale crime against the poor is part of the DNA of socialism. Socialists fear corporates irrationally even as they use the product of corporates all the time (computers, mobile phones, cars, almost everything they buy). Socialists do not understand markets and competition because they do not put in the effort to do so, and in the process strangle the poor. That’s always the outcome of their actions. No exception.

MSP: These laws do not remove MSP – that remains an option for farmers. But I believe in the long run MSP must go. There are many superior ways to subsidise farmers if the government wishes to do so (during calamities, etc.). And the idea of working out the cost of production (as your 1990 committee did) is simply impossible. There are efficient farmers and there are inefficient farmers. There are good soils and there are bad soils. Such micromanagement of the price system is not feasible and even the contemplation of that should be stopped.

Most ICS officers were taught Adam Smith at the Academy before being let loose on the people of India. So almost all of them understood basic economics. Since independence, Smith has been consigned to the bin and IAS officers have no clue about the economy. They have therefore, with few exceptions, failed to advise our illiterate politicians sensibly – and, instead, participated in the destruction of India.

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The fundamental problem with monopoly health regulation

Why are monopolies bad?

For one, they displace all competition and alternatives. Second, they are expensive.

These defects are most pronounced in the field of health regulation.

I’ll be explaining this in more detail in a book I’ve been working on for the past few years in my spare time. But some notes I had made recently:

13 September 2020

Economics teaches that the biggest danger to society is a belief in one’s perfect knowledge – or even the capacity to collate and understand all relevant knowledge.
It is this belief in perfect knowledge that creates Oracles like a Chief Health Officer or regulators like TGA or FDA. Doctors occupying these hallowed roles are miraculously supposed to know more than ALL other equally (or more) qualified doctors just because an ignorant politician appoints them to such a role.
Since no brain is privy to perfect knowledge (that’s the socialist calculation problem of Mises for those familiar with it), we must design a FREE society where markets (individuals) decide for themselves based on their own information.
In a free society, private bodies will compete for certification. Some of them might certify ivermectin, others might say it is not good enough. In the end the truth will emerge as doctors and their patients adopt one or other of these certifications – based on their proven success (or failure).
When we centralise information in the brain of a single individual (CHO, TGA) we end up destroying the prospect of the emergence of the truth.
The reason I don’t extoll ivermectin like Kelly does is because I don’t have perfect knowledge of the matter and I know Kelly doesn’t, either.
I believe in creating competition and systems that allow independent actions and debates in the medical system. Unlike Kelly who merely castigates TGA (which implies he would appoint a “better” regulator – an impossibility), I would abolish all health regulators and replace them with multiple self-regulating bodies. And ensure that doctors are at ALL times entirely free to prescribe whatever they think is right.
And I would stop the licensing of doctors. Let there be competition in the provision of health advice and services.
(Guess who would oppose this? The bad doctors whose days to exploit patients and taxpayers for monopoly profits will then be over.)

14 September 2021

There is no doubt that the TGA, a captured regulator, has grossly over-reached its remit. In addition, AusReps is fundamentally opposed to the government “anointing” some doctors (often less qualified and experienced) as superior to others. Every medical professional must have the full right of independent determination to an appropriate medical treatment. We will review the entire health regulatory system through a Royal Commission.

A Sad and Shameful Day for Australian Medicine

Also see:



My email  so someone who’s upset with TGA’s banning the use of ivermectin:

That’s a good letter but the behaviour of governments and health regulators is EMBEDDED into the system – it is the logical inevitability of the incentives embedded into these “regulatory” systems (which are essentially a protection racket for the pharma industry). Ref: public choice theory and the theory of regulatory capture. I’ve made some notes on this recently.

We need to completely change the health regulatory and occupational licensing system. We need competitive and free market methods of regulation, else the deep-seated intellectual and financial corruption in our health system cannot be stopped.

Your letter will be thrown in the waste bin by these people – who care most for their own welfare, not for the welfare of Australians. We reward them for such behaviour. Let’s fix that first.

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Thomas Szasz’s argument against licensing doctors

I mentioned Friedman’s argument against licensing doctors here. And two of Adam Smith’s arguments here and here. Here is Thomas Szasz’s argument:


KURTZ: Your point, then, is that the state should not license doctors.
SzAsz: Certainly not. The licensing of doctors is the symbol of what I am talking about. It’s as if the state would license Catholic priests for the ministry—and would prohibit all other clergymen to practice religion because they are quacks.
KURTZ: But then who should do the licensing?
SZASZ: There should be no licensing.
KURTZ: No licensing? Anyone could practice medicine?
SZASZ: Of course.
KURTZ: But how would you protect the public? What about the quacks?
SZASZ: Professor Kurtz, the idea that licensing doctors protects the public is one of the most uncritically accepted falsehoods of our day.
KURTZ: What do you mean?
SZASZ: Well, suppose a professor of medicine or surgery at the University of London were to come to New York; could he practice medicine? Or suppose a professor of medicine or surgery at Har¬vard—or the State University of New York—were to move to Miami because it’s warmer there; could he practice there?
KURTZ: No, not without first passing the state medical-board examinations.
SZASZ: Exactly. And that is to protect the public? Hardly. I grant, of course, that licensure examinations may, inter alia, also protect the public. But I insist that their first and foremost function is to protect physicians, the medical profession, from too much competi¬tion. In short, medical licensure is a method for preserving a closed union shop for physicians—for maintaining an artificial shortage of doctors. And the whole thing has been successfully palmed off on the American public as something done for its protection.
Kuwrz: So how should the public be protected? Doesn’t it need protection from incompetent medical practitioners?
SZASZ: Oh, I agree that people need protection—but not only from bad, stupid, inept, greedy, evil doctors; they need protection also from bad parents and children, husbands and wives, mothers-in-law, bureaucrats, teachers, politicians—the list is endless. And then of course, they’ll need protection from the protectors! So the question of how people should be protected from incompetent medical prac-titioners is really a part of the larger question of how they should be protected from the countless hazards of life. That is a vastly com-plicated problem for which there are no simple solutions. The first line of protection for the public lies, I would say, in self-protection. People must grow up and learn to protect themselves—or suffer the consequences. There can be no freedom without risk and re-sponsibility. More specifically, the public could look to what school the doctor graduated from and could set up all sorts of unofficial testing mechanisms—sort of consumers’ bureaus. The possibilities of nongovernmental checks on competence are immense. The trouble is no one is interested in even thinking along those lines nowadays.
KURTZ: Many people know very little about medicine. They may go to a man who claims to know what he is doing but doesn’t.
SZASZ: That’s true. But what I am talking about now is a long-range view. It’s a view that couldn’t be implemented overnight. To
make it meaningful, practical, we would have to envision correspond-ing changes in education, in people’s interest in, and knowledge about, their own bodies, about drugs, and so forth.
KuRTz: Why do you think that people don’t know more about medicine?
SzAsz: There are many reasons. One is because they aren’t taught anything about it. You know, most professions thrive on mystification, on keeping the public in the dark—despite all the protestations about popularizing medical knowledge. I have always thought that twelve-year-olds and thirteen-year-olds could be taught a great deal about how the body works—really works; it’s no more difficult either to teach or to learn that than is algebra or French grammar.
KURTZ: You would teach medicine in high school?
SZASZ: Certainly. Not how to take out an appendix, but how the body works, what doctors do—the basic principles and facts of phsysiology, pharmacology, the major diseases that affect man and the treatments for them. Real information—what’s in medical text¬books—not the lies children are now taught in the name of sex education, drug education, health education. None of that is pos¬sible, however, so long as education is a state monopoly.
KURTZ: Why not?
SzAsz: Because the doctor is a priest who teaches only his reli¬gion, and only to a select few. As a priest protected by the state, the doctor becomes the keeper of all kinds of secrets. Remember the Latin prescriptions and the diagnostic mumbo jumbo to keep from patients the knowledge of what ails them. Even today, physicians seriously contemplate when patients should and should not be told they have cancer. The whole thing is really quite absurd once one stands back and looks at it as an anthropologist might at another culture. Magic used to be used as medicine. Now medicine is used as magic.
KURTZ: But that is not all the doctors’ fault?
SzAsz: Certainly not. I wouldn’t want to give the impression that I think it is. It takes two to tango. Freud was quite right in emphasizing that one of the greatest passions men have is the passion not to know—to repress, to mystify—the obvious. Thus, there is a sort of conspiracy between people who do not want to
know, who want to remain stupid, and experts who will lie to them, who will make a profession out of stupefying them. The priests used to do a good job of that. Now the physicians do it. And, above all, the politicians are in there pitching to make sure people hear all the lies they want to hear.

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The problem of groupthink and the madness of crowds

A placeholder post. Some recent tweets:

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