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An Economist’s Miscellany

Kaushik Basu

Oxford University Press

Pages: 200 Rs. 395

Economics for the layman, with a dash of theatre

Cheif Economic Adviser Kaushik Basu reveals the many strings on his bow with his new book. The collection is an elegant survey of his passions.

MADHAV RAGHAVAN  1st May 2011

Kaushik Basu

he economist John Kenneth Galbraith is reputed to have once said that economics has only one use: as a form of employment for economists. But what purpose do economists themselves serve?

In his current position as the Chief Economic Advisor to the Finance Ministry, Kaushik Basu cannot write as much for newspapers anymore. But in the past he has been prolific, writing about a wide variety of subjects and themes. And in this collection of essays, articles (and plays!), Dr Basu doesn't quite give us a use for economists as much as demonstrate just how the power of economic thinking may be extended to everything around us.

Typically, this involves pointing out what is obvious, but only becomes so when it has been pointed out. For example, in an article praising doubt, he says that we often consider as virtuous the quality in our leaders of being steadfast in their beliefs. We value the refusal to allow doubts to detract them from the path of their faith. But the inability to entertain doubts, he says, may actually lead to all kinds of fundamentalisms. But "even our faith in a great person or book ought to be tempered by having an eye open to the possibility that the person or the book may be wrong." And the same is true of political and ideological doctrines of every hue.

Many of the articles in this collection touch upon recent and relevant issues. Again, it may seem obvious that economic development involves things other than simply economics. But the clarity of argument is rarely seen elsewhere. The worry, he says, is that our growth is not inclusive enough, leaving vast segments of the population poor. But this may be precisely because we don't consider non-economic factors.

But the clarity of argument is rarely seen elsewhere. The worry, he says, is that our growth is not inclusive enough, leaving vast segments of the population poor. But this may be precisely because we don’t consider non-economic factors.

That is, merely bringing such segments of society into the market framework may not be enough. It will not work unless it is backed up by "giving these people basic education, a sense of their fundamental rights, a modicum of understanding of how the modern economy functions, and also some basic health facilities." He draws the parallel between the Native American experience at the hands of European settlers, who exploited the generosity of the locals, often conning them into giving up their lands for a pittance. Simply put, their norms were different, and they lost out as a result.

lsewhere, one of his more radical (and timely) suggestions is that of prescription financial products, essentially arguing that we treat the derivatives market in finance similar to the pharmaceutical market. Some products may be sold over-the-counter, while others would need prescriptions before purchase. He encourages the development of a class of professionals called registered finance professionals (RFPs) who serve the same purpose as physicians who diagnose and provide prescriptions. Some people, after all, may benefit from the 'medicine'.

In a series of articles on social norms, he says that trust is crucial for the proper functioning of an economy. In practice, this amounts to having faith in contracts, and the faith that they will be enforced by an authority. He notes that India's mortgage market developed only after we developed a mechanism for enforcing long-term mortgage contracts. But since not everything can be enforced, especially by the government or law agencies, it is important that notions of trust embed themselves into society itself. While there is no easy way to do this, the benefits of such a society are numerous and obvious. He offers some interesting ways out.

While a fair number of the essays are on economics, there is plenty of variety too. By his own admission, Professor Basu is a keen follower of art, and spends as much time as he can in art galleries, particularly those displaying works by lesser known artists. In a couple of pieces on the art market, he argues that India doesn't do enough to promote its arts and crafts. Having a vibrant art market is not only desirable in itself, but also may have great positive consequences on the larger economy, and especially on India's international reputation.

Never shy of proposing an alternative, he says that the Indian government should encourage the establishment of a "Museum of Contemporary Art from Developing Economies." Instead of concentrating on works from artists from the US or Britain, such a museum would aim to build a collection of works of artists from Brazil, South Africa, Vietnam and so on. Not only would such works be cheaper, but they would also establish a niche museum, promoting the arts in such countries and, by extension, in India.

And for those who seek a complete diversion from the humdrum and often dismal world of economics, Basu obliges. The collection includes the translation from Bengali of two plays, as well as an original play. The last is an excellent insight into the foibles and small day-to-day concerns of people around us, with characters that resemble those whom we might meet every day. In many ways, it is characteristic of Basu's everyday approach to economics itself.

 
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