The transcendental economist

The stunning theoretical contributions of Kenneth Arrow, who died last week, both built and undermined all of politics and all of market economics

Almost everything that has to be said about the recently deceased Professor Kenneth Arrow has been: Gifted economist, the youngest recipient of the Nobel Prize for economics, extraordinarily generous human being, mentor of several subsequent Nobel laureates, and polymath. So what is left to say, apart from the overlooked facial resemblance to another Nobelist, the author Saul Bellow?

At the risk of over-claiming and over-simplifying, it is probably fair to say that amongst 20th century economists there were (with apologies to Sir John Hicks) John Maynard Keynes, Paul Samuelson, Kenneth Arrow, and then everyone else. These were the three gods of the economics pantheon, all theorists, each dazzling in his own way, each creating and/or shaping a whole discipline or disciplines both in content but also in basic framework and methodology.

Keynes created the discipline of short-run macroeconomics with profound implications for the conduct of macro-economic policy. And unlike the other two, who confined themselves to the academy (mostly), Keynes flitted between the ivory tower and the corridors of power frequently and formidably to show that economists could shape and influence economic policy and economic institutions directly. He was the exemplar of economist-as-policy-practitioner.

When Samuelson, also a Nobelist, died, Paul Krugman famously wrote (drawing upon Isaiah Berlin) that there are foxes (who know many things), hedgehogs (who know one big thing), and then there is Paul Samuelson; meaning that he knew many things and many big things, a true intellectual colossus. Krugman then went on to list Samuelson’s eight seminal contributions to economics.

Comparisons are, of course, silly and dicey, but one can hazard that Arrow’s achievements were in some ways arguably greater than Samuelson’s. Samuelson’s many contributions helped us think through the first principles of many issues in economics — public goods, taxation, savings, trade, consumer preference, pensions, and finance. Arrow’s two stunning contributions (both theoretical) in some ways both built and undermined all of politics and all of (market) economics. Samuelson made mega-contributions, Arrow made meta-contributions. Samuleson’s related to one discipline, Arrow’s transcended two.

Arrow’s Impossibility Theorem — the first contribution — questioned whether democratic politics itself was possible in any meaningful sense. If you start with individual preferences, it is very difficult (or impossible) to come up with a rule (say majority voting) that aggregates these preferences and produces a societal preference that can satisfy some basic conditions. The only rule that satisfies these conditions, it turns out, is a dictatorship, or rule by one person which would be abhorrent to all, Arrow included.

His work (along with Gerard Debreu’s) on General Competitive Equilibrium established the possibility of the market economy as a coherent, inter-connected system. Adam Smith famously said, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” The work of Arrow and many others showed how such self-interested individual behaviour could produce outcomes that had broadly desirable social virtues; prices and the information that they conveyed were at the heart of the mechanism for the transmission from individual selfishness to social good.

But this work showed how demanding were the conditions for the market system: For the price mechanism to work, undistorted markets needed to exist for all goods and services, for all future times, and for all contingencies (“state-of-nature”) with full information available to all agents in the economy. And one of the major implications of his work, was followed up by Arrow himself. He showed how asymmetric information between the provider and consumer of health services made the market for health fragile, requiring extensive government intervention to fix. Obamacare, coming several decades later, could be seen as inspired by Arrow’s work.

Stepping back one might say that Arrow’s two contributions showed the inherent limits to, even the existential difficulties of, all politics and economics which starts from atomistic decision-makers — voters in politics, and firms and consumers in economics. So, when Francis Fukuyama proclaimed the triumph of democratic politics and market economics as an empirical matter in 1989, Arrow — affirming the famous joke about the economist — could well have said, “Sorry Frank, they may work in practice but I showed 40 years ago that they do not work in theory.” Post-Brexit and Trump, we are now discovering that perhaps they don’t work in practice either.

Another contribution of Arrow’s is worth mentioning. In the early 1960s, the two Cambridges (the one on the River Charles in the US and the other on the River Cam in England) were bickering viciously over the definition, description and measurement of capital as an input in production (the famous “Capital Controversy”). Arrow (then very much in Cambridge, US) chose to stay above the fray, and in the very issue of the Review of Economic Studies (1962) that featured the controversy, wrote a piece on learning-by-doing which influenced the theory of endogenous growth developed decades later by Paul Romer, now the chief economist at the World Bank. The key insight of Arrow’s being that average costs of production decline with scale so that increasing returns was more likely to characterise most production technologies, leading to uncompetitive markets dominated by a few large firms rather than the competitive world of many small firms.

The Arrow-Samuelson comparison is interesting for another reason: Family connections. Arrow’s sister, Anita Summers, a well-known academic herself, was married to Robert Summers, an economist, whose brother was Samuelson. Larry Summers is thus the nephew of both Arrow and Samuelson, and the lineage shows. The world needs reminding that in this stellar family, Robert Summers himself was deserving of the Nobel Prize. He, along with Larry Heston and Irving Kravis, created the famous Penn World Tables (PWT), which allowed incomes and consumption — and hence standards of living — to be compared across countries using the concept of purchasing power parities. Without these PWT data, what is now the rich and exciting field of empirical development economics may have not bloomed at all. Robert Summers, alas, is no more, but the Nobel committee — which does not grant the award posthumously — can still honour his work by awarding the Nobel to Heston.

It is surprising that Sylvia Nasar has not already mined this rich material for a family biography that might be titled, “Two Brothers and A Brother-in-Law”. And, that brother-in-law, Kenneth Joseph Arrow, may possibly have been the best and most impactful of them all.

Written by Arvind Subramanian

The writer is chief economic advisor to the government of India

Source: Indianexpress, 28-02-2017

Child Rights and You - CRY receives support from Sourav Ganguly for the Girl Child

Kolkata: Stepping out of the popping crease with the right foot forward and effortlessly steering the red cherry beyond the boundary – that’s what the legendary leftie was always known for, in his illustrious career with the willow. His engagements changed as he moved on from cricket to cricket administration, but his personal priorities clearly haven’t. An idealist as ever, the flamboyant southpaw goes out in the middle once again, to step out with his ‘Right’ foot forward to bat for a cause – this time, rights of the girl child.

 

‘The Prince of Kolkata’, as christened by Sir Geoff Boycott, and yet better known as the very own ‘Dada’ to the cricket-loving Indians, Sourav Ganguly takes up the cause of girl-child education, as he supports ‘Right To School’, a campaign initiated by a leading child rights organization CRY – Child Rights and You.

 

Through this campaign CRY aims to create a world where the girl child is celebrated for what she is – where she has access to equal opportunities to study, to grow and to prosper as her male counterpart. The pan-India campaign would aim to help 1,21,000 girl children across CRY-supported projects getting back to school. “Among the numerous hurdles girls face on their road to education, the most difficult is the mindset that a girl child is not a 'worthy-enough' investment. When people like Sourav make an effort to try and change this thought process, it makes a huge difference. Proper education can bring about a cycle of positive change. It helps ultimately to create a whole pool of more aware, educated and empowered girls and women capable of influencing the community they live in for the better. This first step of attitude change is critical to achieve this outcome,” said Vatsala Mamgain, Director, Resource Mobilisation, CRY – Child Rights and You.

Pledging his support to the campaign, Sourav said, “For me a girl, in whichever form she is, whether it’s a mother or a child or a friend’s daughter, is one of the most beautiful things in the modern world. I am a proud father of a very pretty and clever young girl in Sana, so I understand what it is to have a girl as a child. But, it is also true that majority of our girl children stay in villages, they stay in areas on the outskirts of the city and they don’t get the best facilities in school and I have seen it with my own eyes. So it’s our duty, whether it’s a school or public life, to provide facilities to the girl child so that they don’t drop out of school and fade away from education. And I do hope, we’ll treat them in a much better way because they are very important.”

 

He also urged his followers to help bring the girl child back to school.

That in many parts of India, the birth of a girl child is not welcomed is a known fact. It is a known fact too, that discrimination starts from even before the girl child is born and sometimes she killed as a foetus, and if she manages to see the light of day, she is killed as an infant makes up the highly skewed child sex ratio where for every 1000 boys in India, there are only 908 girls. In such a scenario, it is but obvious that for myriad reasons, many girls across the country are forced to drop out of school.

Source: Indiaeducationadiary, 23-02-2017

Protecting the rights of tribals

Even as bilateral investment treaties are strengthened, domestic legislation must be implemented

Recently, Ras Al Khaimah Investment Authority (RAKIA), an Emirati investor, initiated an investment treaty arbitration (ITA) claim against India under the India-UAE Bilateral Investment Treaty (BIT), seeking compensation of $44.71 million. This claim arose after a memorandum of understanding (MoU) between Andhra Pradesh and RAKIA to supply bauxite to Anrak Aluminum Limited, in which RAKIA has 13% shareholding, was cancelled, allegedly due to the concerns of the tribal population in those areas.

Similarly, in 2014, Bear Creek Mining Corporation initiated an ITA against Peru under the investment chapter of the Canada-Peru Free Trade Agreement, claiming violation of the investment obligations due to the withdrawal of mining concessions, allegedly as a result of the protests by indigenous peoples. These cases present an opportunity to evaluate the impact of the obligations of the host states under BITs on the rights of the tribal people.

Protection under law

The United Nations Declaration on the Rights of Indigenous People (UNDRIP), adopted in 2007, for which India voted, recognises among other things indigenous peoples’ rights to self-determination, autonomy or self-governance, and their right against forcible displacement and relocation from their lands or territories without free, prior and informed consent. In addition to the UNDRIP, there is the International Labour Organisation (ILO) Convention concerning Indigenous and Tribal Peoples, 1989 which is based on the “respect for the cultures and ways of life of indigenous peoples” and recognises their “right to land and natural resources and to define their own priorities for development.” India is not a party to this, but it is a party to the ILO Convention concerning the Protection and Integration of Indigenous and Other Tribal and Semi-Tribal Populations in Independent Countries, 1957 which is outdated and closed for ratification.

At the domestic level, the Constitution provides autonomy to tribal areas in matters of governance under the Fifth and Sixth Schedules, which is further fortified by the Samatha v. State of Andhra Pradesh & Ors (1997) judgment where the Supreme Court declared that the transfer of tribal land to private parties for mining was null and void under the Fifth Schedule. The framework for protection of the rights of tribal and indigenous people is further strengthened by the Recognition of Forest Rights Act, 2006 which protects the individual and community rights of tribal people in forest areas and their right to free and prior informed consent in event of their displacement and resettlement.

Investment promotion

While the legislation for the protection of the rights of tribal people are in place, they are regularly flouted as has been highlighted by the Xaxa Committee report of 2014. Instead of ensuring that tribals are not ousted from the land to which they are historically and culturally connected, the state becomes more concerned about fulfilling contractual obligations towards the private investor. This means that constitutional and legal principles are discarded. This is evidenced by the increasing number of MoUs being signed by natural resources-endowed states with investors for facilitation of developmental projects. For instance, Chhattisgarh and Jharkhand have reportedly entered into 121 and 74 such MoUs, respectively, with various private players as of 2014. All this materially alters the role of the state vis-à-vis the tribal people as the state prefers economic expediency at the cost of the rights of tribal people.

For economic development, states invite investments not only from domestic investors but also from foreign players whose interests are not only protected under domestic laws but also under the BITs. The purpose of BITs is to give protection to foreign investors while imposing certain obligations on the host state. For instance, if a development project involving a foreign investor in tribal areas leading to acquisition of tribal land is met with protest, there may be two possible scenarios. One, the State government due to socio-legal and political pressures may yield to the demand of the tribal people to the detriment of the foreign investor, which is what has happened in the case of RAKIA. Two, assuming that the government continues with the project, the judiciary may order the cancellation of permits given to the foreign investor, which is what happened in the case of Vedanta in 2013 (Orrisa Mining Corporation Ltd v. MoEF and Ors). In both cases, foreign investors may drag India to ITA claiming violation of obligations under the BIT, such as fair and equitable treatment or indirect expropriation. This perceived threat of ITA against the state may compel the latter to refrain from implementing tribal rights in the development project area.

Conflicting interests

A recent report of the UN Special Rapporteur on the Rights of Indigenous Peoples recognises three main reasons for the serious impact that foreign investments have on the rights of indigenous people: failure to adequately address human rights issues of tribal people in BITs; the perceived threat of ITA for enforcement of investor protection; and exclusion of indigenous people from the policymaking process.

What then are the possible options available to India to tackle these issues? First, none of the 80-plus BITs signed by India contains even a single provision on the rights of tribals. Even the 2015 model Indian BIT does not contain any such provision. Thus, to avoid ITA cases by foreign investors, the government’s approach should be to include provisions relating to the protection of indigenous people in BITs. There are many examples from around the world: Canada, in many of its BITs, has several exceptions to protect the rights of indigenous people. The Trans-Pacific Partnership agreement also incorporates the rights of the Maoris from New Zealand. Since India is going to renegotiate its existing BITs, it should create a special exception for taking regulatory measures for protecting the rights of tribal people, in which case it should have a textual basis in the BITs to derogate from investment protection obligations under BITs.

Second, the strengthening of BITs must go hand in hand with the implementation of domestic legislations for the protection of the rights of tribals, where the state does not consider tribals as impediments in the development process. Third, as far as possible, tribal people should be given representation even in investment policymaking.

Pushkar Anand and Amit Kumar Sinha are Assistant Professors at the College of Legal Studies, University of Petroleum and Energy Studies, Dehradun

Source: The Hindu, 27-02-2017

Critical pedagogy/ Philosophy

A child in the classroom should not be treated as a “piggy bank” that a teacher fills with knowledge, said Brazilian philosopher Paulo Freire. Instead, she should be an active participant who, along with the teacher, creates knowledge based on her own experiences. Teaching and learning then assume a more political character, where the student and teacher together challenge oppressive ideas in society. This is what Freire called ‘critical pedagogy’, an idea that he expanded in Pedagogy of the Oppressed.

Source: The Hindu, 28-02-2017

Depression on the rise but India does not have a policy for the mentally ill

The World Health Organization (WHO) in its global health estimates on depression for 2015 has said over five crore Indians suffered from depression and over three crore others from anxiety disorders that year. But sadly in this country, this medical and social challenge has always been brushed under the carpet, though things are changing, albeit slowly. Last year, actor Deepika Padukone came clean on her struggle with depression. Among non-celebrities, however, any sign of deviating from the expected and usual, emotionally and behaviourally, is viewed with a sense of horror. And so the condition festers unheeded till it spirals out of control. Depression is the leading cause of disability worldwide, and is a major contributor to the overall global burden of disease, WHO has said, asserting that more women are affected by depression than men and at its worst, depression can lead to suicide.

Is India equipped to tackle such a burgeoning crisis? No. There is no insurance coverage for a person with a mental disorder. The WHO Mental Health Atlas 2011 states that the government’s expenditure on mental health was only 0.06% of the total health budget. The country has only 0.301 psychiatrists per 100,000 people. Treatment at the hospitals too leaves much to be desired. The focus is excessively on medication. There are only 3,000 psychiatrists when the estimated requirement is for 11,500. The number of clinical psychologists is just 500 when the estimated requirement is 17,250. Then there are just 400 social workers who can tackle psychiatric patients when 23,000 is the minimum requirement.

Even when it comes to legislation, we are slow. The Mental Healthcare Bill 2013 has been passed in the Rajya Sabha but is awaiting the Lok Sabha’s nod though the bill is progressive in many ways: The definition of mental illness is no more “any mental disorder other than mental retardation.” It is broader and more inclusive. Mental illness is now defined as “a substantial disorder of thinking, mood, perception, orientation or memory that grossly impairs judgment, behaviour, capacity to recognise reality or ability to meet the ordinary demands of life, mental conditions associated with the abuse of alcohol and drugs, but does not include mental retardation which is a condition of arrested or incomplete development of mind of a person, specially characterised by subnormality of intelligence.” Needless to say, along with the passage of the bill, the government needs to invest more money in tackling this challenge.

Source: Hindustan Times, 27-02-2017

Death & the Hereafter

MAULANA WAHIDUDDIN KHAN





Those huge masses of ice, which we know as icebergs, found floating in the seas of the North and South Poles are amongst the most deceptive and, therefore, most dangerous phenomena of nature. Their deceptiveness lies in the fact that no matter how huge or wonderful in configuration, what we see of them amounts to only a tenth of their enormous bulk.What lies below the surface of the ocean, spreading far and beyond the visible perimeter, poses tremendous hazards to the unwary . In some ways, our lives are similar to those floating mountains of ice. The part we spend in this world -about a hundred years or less -is like the part of the iceberg that is visible above the surface. We can see it, touch it and feel it.We can take its measure and deal with it effectively .
But the part that comes after death is like the submerged one: vast, unfathomable and fraught with peril. It defies the imagination but must nevertheless be understood, for that is the part of human life that God has decreed should be eternal and, as such, ineluctable.
We are familiar with the facts of our origin and the course that life takes from womb until death. But at the end of our lifespan, whether it terminates in youth or in old age, our familiarity with the nature of things comes to an end. It has been surmised that death means total and final annihilation. But this is not so. Death is simply a means of consigning us to a new womb, to the womb of the universe itself. From that point, we are ushered into another world: the Hereafter.

Life without social media

A satirical take on how much our personality, politics and relationships are being dictated by the rules of the Internet

It was on a highly political afternoon in the not-so-distant future that the social media of the world collapsed into a pile of moral dilemmas, personal problems and ideological conundrums. All of Mark Zuckerberg’s servers and Sundar Pichai’s men couldn’t put social media together again, but they did find that the last straw that broke the camel’s back was a passing “Presstitute” comment on a mainstream media news item.

Suddenly the youth of the nation could no longer depend on picture captions for political or social context. They had to take stands and decisions unendorsed by likes and shares, and many found they lacked conviction. Without pop-culture reference and film scenes to provide context, ideas had to be communicated in full sentences, which many found boring.

Chaos everywhere

The vast Online Defenders of National Pride regiment was disbanded, since their terrain of operation no longer existed. Liberal crusaders of various causes failed miserably when asked to go beyond change.org petitions and sharing foreign media articles. Without peer pressure, left-wing thinkers found themselves thinking right-wing thoughts and right-wing dreamers found themselves in left-wing dreams. Trolls of various hues, of course, remained trolls. Some things don’t change in real life.

Certain Prime Ministers and Presidents could no longer jump the queue on facts or public opinion. They had to wait for the facts to emerge along with voters. What they had to say had to pass through filters, and some things did not go through. Without the direct feed, their supporters had to look around them to see the truth and felt profoundly moved.

What to report?

Many journalists could no longer RT without endorsement their unstated belief. Since they could no longer include in their stories the lines “Many are of the view that…” or “There was general opposition to…”, most felt jittery putting facts to paper. And without “How Twitter reacted to…” articles to file, energetic young reporters found themselves in corporation council meetings and learning how the country is run, to their utter disbelief.

There was a sudden epiphany among 20-somethings that liking posts did not translate to liking those who posted, and many wrote poems about it — which they couldn’t post, and felt extremely disappointed. Also now that they couldn’t share pictures, they realised what looked good didn’t really taste good.

Back to the real world

The big positive, however, was that relatives were easier to love and cherish now that they were no longer sharing misogynist or racist comments on family groups.

Source: The Hindu, 23-02-2017