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Re: Can anyone plan this? Reply to Douglas Quinby.

Of course, money is the great equalizer. And there is no better example of
that than the Indian urban upper-middle classes, which are at once so
varied in their cultural, religious and even ethnic makeup and yet so
strikingly free of the social tension and conflict which plagues the much
larger and less well-off classes.  But what I am very concerned about is
the notion  that "The purpose of economics is to mitigate social tension
created by disparity." i.e. economic policy should be formed with the
explicit intent of creating social equality and harmony. 

That is simply not economics. That is politics, perhaps religion. Economics
is about resource allocation and wealth creation and distribution, with the
implied objective of creating more wealth for more people. 

The kind of economic policy implied by your statement I associate with
policy such as heavy subsidies on key staples that, while easing near-term
social tension, imperil near- and long-term fiscal health and merely delay
and deepen the final impact of market realties, or politicians who run on
platforms of providing to farmers free electricity from a power system
overworked and already swimming in fiscal sea of red. 

Such policy does not generate wealth, foster more equitable distribution,
nor allocate resources effectively. 

You wrote:  "Keynes believed in State spending during
depressions/downturns. This puts money in the hands of people which
reduces social tension. So his economic ideas were guided by needed
social objectives."

Well, I don't know whether Keynes was in fact "guided by social
objectives," but the implications of large-scale gov't intervention extends
well beyond "putting money in people's hands."  That is certainly part of
it, but just a small part. The much more far-reaching implications are job
creation, improved business and consumer confidence, which theoretically
could lift an economy out of a recession and create growth. The most
important implication is broad opportunity creation and dynamism across
entire economies. 

Are these not the key concerns of economists and finance ministers? This is
not to say that finance ministers should ignore social concerns -- far from
it. (Ending power subsidies cold turkey would indeed aggravate some pretty
serious social tension.)  But macroeconomic policy cannot be subject to
micro-social policy. 

And I wonder whether Keynes would entertain the "social" component of your
definition of economics.

>>> "Vinay Chandekar" <vinay@asiaaccess.net.th> - 11/11/98 10:19 PM >>>
>>>>>>>>>Douglas Quinby    >>>>>>>>>>

"I think Keynes, among others, would strongly disagree with Vinay. In
fact, has not one of the great follies of Indian leadership in the last
quarter century been to confuse economic policy with social policy? "

The difference is in Perspective, Douglas !


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This is a posting to India_Policy Discussion list:  debate@indiapolicy.org
Rules, Procedures, Archives:            http://www.indiapolicy.org/debate/