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Re:Efficiency of the markets

Sorry, if I am putting the clock back in the debate. But it is important
that we face this issue of efficiency vs.equity squarely if for the reason
that it would acquire a momentum now that a dissenter of the mainstream
economics has been awarded a Nobel Prize.
We are evolving public policy and, hence, what is required is not
sophistication of the theory but its basic soundness.
First, what the fall of the Second World has established is that centrally
planned systems operating in closed societies have failed. Free market
systems in closed or partly closed societies have also failed to an extent.
Witness the collapse of financial systems in Asian countries operated
without transparency and accountability. Centrally planned systems have not
yet been tried in open societies.
Second,  a genuinely free market system has also not been tried. I make a
distinction here between a free market system and a capitalist system. The
latter have been successful when/ where (1) they had a head start in
industrial revolution, (2) fortuitously large capital to start with, (3)
virgin territories to explore and expand, and (4) expanding markets
facilitated by (a) colonisation, (b) share of the market, or (c)
technological superiority. Absent these factors, free market system is yet
to prove itself. Hence, we really have no role model to go by.
However, we can start with two beliefs. One, apart from ethical
considerations and our geo-cultural roots, a democratic and open society
a better chance of achieving our fundamental objective of tripling the per
capita income within ten years. Two, a free market system, again, has a
better chance of succeeding for the reason that centrally planned systems
have palpably failed.
But, on the latter, we must immediately take cognisance of the fact that
liberalisation in the sense of moving in the direction of a completely free
market system has invariably led to greater inequalities and immerisation
the poor. This has been demonstrated time and again, not the least in the
U.S. and U.K. in the 80's. Hence, our objective must have a conditionality
that it should be achieved without worsening the inequilities and making
poor poorer.
We must, therefore, go back to the drawing board and take a close look at
the theory itself as Amartya Sen has done. Meanwhile, we should avoid
statements like "human rights and

Note from Moderator to K S Sastry:

Despite this mail  being incomplete, it  had enough merits to be posted at
IPI.  We'll however appreciate if  can complete the message and resend it. 

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