Monday, 5 August 2013

Partha Dasgupta making Sen his bitch

Economic Growth does not harm Welfare but, Statistically, it must appear to do so because we don't know the future and have to assume that past preferences are the best guide to what people actually want- this is called a Laspeyres bias.
Another source of bias arises from demographic changes. If people, genetically or otherwise more likely to have healthy, high birth weight, kids start having smaller families because they've become 'middle class', and if the sort of people who starved to death before having any babies are not now starving to death but having babies like crazy and if better medicines are keeping those babies alive, then figures for child malnourishment can worsen though everybody is actually better off.
Thus, a good way for senile Economists, who never made a good policy recommendation or verified prediction in their lives, to show they weren't actually a waste of space all along, is to construct Welfare or other indices which show that the guys who did something useful and good were actually stupid and bad because they unknowingly unleashed the Hounds of Humanitarian Hell.
Since Amartya Sen has cornered this particular market, the question arises whether other, no less senile, Economists can still compete in an increasingly crowded market-place?
Sen-ile Economics is sustainable but can it grow more Sen-tentious yet? 
A recent article by Sir Partha Dasgupta gives us grounds for hope.
Criticizing his older colleagues, Sen & Bhagwati, Sir Partha Dasgupta writes, 'India’s continued inequities in health and education have been much written about. As the World Bank noted recently, 45 per cent of Indian children under five are underweight and 25 per cent of women remain illiterate, figures that are worse than those in a number of countries that are poorer in terms of GDP per head. So, if you look at how figures measuring the quality of life in India have changed since the early 1980s, the country would appear to be a winner. On the other hand if you compare the current figures for the same quality of life indicators to those in some countries where GDP per head is lower, India would seem to be a loser. Depending on your perspective, the proverbial glass would appear to be either half full or half empty.'

Narendra Modi, also speaking of a half empty glass, says that he has a new way of looking at things- the glass is half full of water and half full of 'air' (hot air, coz India phery hot).
Rahul Gandhi, on the other hand, says 'the water lifts all boats, but women in the villages don't have boats. They are making our boats. Also they are the WAVES.'
Meanwhile, some corrupt bureaucrat or politician has added some Bourbon to that branch-water and drunk it up.

Micawber Economics

Suppose you give your employee, Mr. Micawber, a raise of ten percent so he can get married. Instead of getting hitched to the elderly typist you earmarked for him, Micawber chooses a young widow with ten children and an invalid mother and five unemployed siblings all widows with children of their own. Micawber is now their sole breadwinner. His income has gone up but is he really wealthier? Another question- would we expect to see Micawber's productivity go up or down?
What is true of an individual is true of a Nation. Income may rise by ten percent. But if the Nation takes on the responsibility to provide for a bunch of people such that they will no longer be available for work then the Nation is going to be poorer, not richer, in the long run.
People represent both a potential type of Capital formation as well as an actual source of Human and Social Capital Depreciation and increased Resource Depletion and Environmental Degradation. For a country like India, whose optimal population (i.e. one where an extra person adds as much as he subtracts from National Income) is some fraction of what obtains- it is imperative to ask questions about what sort of incentives are being internalized through investment in 'Education', what sort of Habitus is being valorized and broadcast through a commitment to 'Welfare'.
In the short-run, the welfare of Mr. Micawber's dependents increases, as may their education level (Dicken's father- the prototype of Micawber- sent his daughter to an expensive school while consigning his son to a blacking factory- a misallocation of resources, because, back then, sons could earn, daughters couldn't. )  However, longer term, Micawber and his dependents face a harsh future. Soon, he won't be able to service his debts.  Someone else's future consumption will be lower because of this, but so will his own because, sooner or later, no one will lend to him.
Now, it may be the case that the widow's children and siblings can get jobs. However, if Mr. Micawber has taken them to a place where there are no jobs then this won't happen. Even if jobs are available, there is a problem with becoming a wage-earner in a Micawberian household- you go from being a free-rider to providing a free ride.
Micawber himself will find it pays more to be a professional cadger. He gives up his job, claiming back pain or migraine- both probably genuine enough- and parades his indigent family around to extract cash from sympathetic individuals.
This won't stop his extended family from trying to earn a little extra on the sly- the kids will steal anything they can lay their hands on, the adults will seek to engross a larger share of Hardship funds and the things the Community owns in common. The landlord unlucky enough to rent to the Micawbers will find his furniture and fittings have been stripped and sold and that the value of his property has experienced more rapid depreciation.
So too with a Nation. It can increase dependency by spending money on keeping people in places where there are no jobs and there is  no entrepreneurial culture and, in the short run, this may raise 'Human Development'. But, this Development comes at a price. In the short run, it may register as Growth- spending has gone up- but, longer term, the productive capacity of the country, its ability to sustain a level of spending, has gone down.
Can Dasgupta Depletion enhance Sen-ile Sen-tentiousness?
In this context, the question that naturally arises is how Sir Partha Dasgupta- an optimal depletion maven- can add to the hot air in the glass or help its boatless village women, who are building our boats, become WAVES, by beating up on Sen & Bhagwati for ignoring wealth effects- in particular the impact of environmental degradation on marginal subsistence agriculture.
The answer, of course, is to add a Green component to National Income and Human Development Statistics.
Resource depletion, if adjusted for in National Income and Welfare indices, gives rise to a bias because we don't know how, when and why those Resources might cease to matter as Technology develops.
Income Growth, in Econ, is defined as how much more you can spend without eating into your Wealth. the problem is that Consumption can itself be a form of Investment if it changes your Habitus, your motivation, what you want to want. There is no cognitive reason why time preference must be fixed- it is bound to change depending on preferred Habitus. Essentially, any prescriptive statistical work in this area is bound to be garbage in garbage out.
Dasgupta writes-' It is still early days in the empirical study of the wealth of nations. But in a recent paper, Kenneth Arrow, Lawrence Goulder, Kevin Mumford, Kirsten Oleson and I arrived at the very tentative estimate that during 1995-2000 wealth per head in India increased at an average annual rate of under 0.2 per cent, a far cry from the high rates of growth in GDP per head during that same period. Even that low figure is, in all likelihood, an overestimate. Among natural capital assets we were able to include only forests (as sources of timber but not for the many ecological services they provide), carbon in the atmosphere, land and sub-soil resources. A great swath of ecosystems and sources of water, which many studies show have degraded in recent years, were left unaccounted for because national data are simply not there. We should conclude that wealth per head in India may well have declined in recent decades.'

In other words, whatever Sen is up to- it is Micawber Economics and unsustainable. 
Now, Bhagwati style growth, on the other hand, needn't be so because his schtick is- vest property rights in individuals and corporations and create markets for everything- it is Govt. rent seeking (enabled by vesting property rights and decision making in the State) which creates the 'tragedy of the Commons'.
But can a Bengali economist, like Dasgupta, really attack a fellow Bong while ceding victory to a non-Bong?
No, because Bengali Economists- at least haut bhadralok ones residing abroad these many years- are dedicated to wrecking the Economy.
The Tam-bram nigger in the woodpile.
Dasgupta's work is exemplary but, though mindless, best left to Bongs. What about us Tambrams? Have we nothing to contribute? The answer I'm afraid is that we're as black as shite and not 'noble' Aryans at all.
There has only been one Tambram Economist- Visvesvaraya, who saw India needed to grow at 10 per cent, nothing less was sustainable- but only because the guy was an engineer, not an Economist at all.
Though trained in Economics, still, speaking as a caste-fellow of that nigger in the woodpile, I feel I must highlight a broader point which is being missed.
Essentially, Wealth isn't a stock but a present value dependent on the unknowable future fitness landscape. This present value obtains in a manner similar to Credit- i.e. it becomes inter-subjective and fungible based on things like perceived ownership clarity, number of dependents, Sociological status, smartness, and so on. Thus, the perceived ability of a household to become Wealthy- its chrematistic potential- is itself what shapes its golden path preferences (i.e. the preferences it would want itself to have with hindsight).
When people become responsive to global price signals- chances are their behavior is going to be more self-seeking- hence plastic and productive- thus altering their Credit which is a pretty good proxy for their Wealth.
Thus, Wealth changes when you move out of a subsistence slum, it changes even more when you develop a salutary indifference to the plight of your starving relatives, and really takes off when you quit punching Mother Theresa in the face and concentrate on hacking her Swiss Bank accounts.

Dasgupta, addressing the problem of estimating per captia Wealth with changing population, suggests that difficulty in finding the relevant 'shadow price' can be bypassed if sustainable development is interpreted not as an increase over time in intergenerational wellbeing, but as an increase over time of the potential well-being of the average person across the generations. Unfortunately, this approach- though probably very good for sheep or camels- throws away all the information relevant to Human Societies well placed for catch up growth. Why? Potential can only be realized through something like a Market Economy- or else a competitively consociational regime- otherwise it is constrained by Habitus, by Conatus, with Boulding type 'learned failure' and negative Psychic Capital formation.

The true tipping points, for releasing Potential, are Aspirational and Informational, not Environmental or Entitlement based because Population growth erodes the latter two anyway.
The problem with Sen type Human Development Indices is that the notion of human potential they pay lip service to is utterly empty. An undernourished guy with an MSc in Physics who finally manages to land a job as a bus conductor in Kerala scores equal to a chubby Cambridge graduate starting work in the City of London because the former's Life Expectancy and Education are better and this outweighs the difference in purchasing power parity adjusted income. Add in a Dasgupta measure for Environmental degradation, and the bus conductor scores higher yet. But he isn't really better off, is he? The Cambridge grad can always sell his pied a terre in Kensington and emigrate to Kerala and live off the interest on the proceeds which would be equal to the bus conductor's salary, but the reverse is not the case. Countries with high dollar income may have very low education and life expectancy but they can use their money to buy those things if they want to.  In fact, the return on education and medical spending is likely to be much higher there.
Environmental degradation only affects those who are locked in geographically or occupationally. The moment a person or a community has an opportunity to respond to global price signals something changes. The limits of growth are removed because growth is no longer tied to finite resources- it is chrematistic, positional, virtual- not governed by diminishing returns and entropic processes.
Education is a red herring. A shepherd with a PhD is still a shepherd. A barely literate guy who has learnt to respond to global price signals makes superior decisions on a day to day basis. The shepherd's knowledge base is eroding. The inner city immigrant cab driver's information set is expanding.
Life expectancy is a red herring. I read that certain sections of the male African American population experienced a spurt in life expectancy as a result of higher incarceration rates under the '3 strikes and you're out' rule. But, is a corrupt privatized penal system really a good thing? Is that what Sen actually supports?

Environment too is a red herring. We don't know what the future fitness landscape will look like. That means we don't know which types of Wealth will hold their value and which are mere dross. We may know what we like to eat and drink. We don't know what we ought to like eating and drinking so as to be happy in the future.
The truth is, both at a micro and macro level, the unpredictability of the future fitness landscape makes a generational conflict of values a natural and salutary thing. But, this means that senile Professors groping towards some yardstick of Welfare that squares with their childhood memories are bound to get things wrong.
To see why, take the case of that son of yours who is lounging around on the sofa  watching TV while Mum waits on the little shit hand and foot.
Currently, his contribution to GNP is pitifully small but his Welfare is high because he is mooching off the fixed Consumption good capital and Social Capital you and your community have built up over many years.
The moment he moves somewhere there are plenty of jobs and drugs and sexual opportunities for young people, his Welfare goes down- his Housing situation is likely to be pretty dire (don't use the toilet when you visit him) and he probably can't afford some of the luxuries- like porn- he got used to buying for himself when he was staying with you.
But, his income has gone up a lot, his contribution not just to GNP but also Capital formation, broadly considered, has shot up hugely. Why? Because he is changing his life-style. He is caught up in a new type of Tardean mimetics. Only the sort of Growth that his new preferences reflect, could possibly be sustainable.

Still, for the Statistician, the fact is, his Welfare has gone down. Economics of the Amartya Sen type, says- Boo Hoo! We must help this vulnerable section of the population- already marginalized and subjected to paternal rants of being a good for nothing Mamma's boy who is like probably totally gay and BTW & FYI, I was married at your age, not just married but the father of numerous sons all married and the fathers of equally fecund grandkids. Mind it kindly.
The truth is, that great big gay-boy of a son of yours, ignoring Sen type Welfare measurement, WILL fucking move out and you'll be the one crying in the night while his Mum will be perfectly happy- not even turning a hair on discovering the toilet situation at his new digs in the Big City.
Why would your son leave the comforts of your house? Did you drive him out? Was he ashamed of you in front of his cool College friends whom you insisted he invite to stay over the Holidays? Will investing in a toupee and a truss, win your little darling back?
No. He is behaving rationally. He accepts a fall in Welfare for the sake of higher future Tardean 'fitting in' and hence higher future Welfare.
National Income Stats don't capture this. Sen-tentious Entitlement theory doesn't capture this. Yet, the essence of Economic Growth is deciding, contra Gandhi, that true Wealth isn't Health but Silver and Gold. True riches aint about living in harmony with Nature but playing your boombox extra loud while jizzing in its face. Growth is never Humanistic, nor really Economic- it is Chrematistic & Ontologically dysphoric.

Back in the Sixties, there was a notion that it was the State which wanted Econ Growth for its own purposes and that the people wanted something else which tied up with Popular Sovereignty and Ecological Awareness and everybody just braiding each other's hairs and kvetching about their periods. Instead of Permanent Revolution, this was the Utopia of Permanent Menstruation- still bloody but, in another sense, bloodless.
What about India now? Does the State want Econ Growth? No. Not really. Growth means more tax revenue which means more spending which means more oversight and admin and due process. Who needs the headache, yaar? Old fashioned politics was about speaking out against the Ashke-Nazis in Israel and Apartheid in South Africa. It wasn't about making sure money earmarked for Education actually got spent on Education. Why? Because there was no money and, anyway, Education only meant learning to say "India is very very poor. Yet there are people in India who live like they are Californian millionaires! This is the paradox of India. What is needed more than ever today is more frequent repetition of this same mantra because there's nothing in the rules which says a righteous Bengali dude can't get a second Nobel just for saying the same stuff that stupid people were saying a hundred years before he was born.'
As Prof. Dasgupta points out, proper Economics should be about paying lip service to the Environment- not Entitlements- because the Maths is just so much better. This does not mean a revival of Kenneth Boulding type Econ. Developing 'psychic capital' is about getting people to not keep having babies before they've got an inside loo and a reliable broadband connection for porn. But screwing up the Environment too is important. Otherwise you'll get hippies moving in. No one wants that. You can always feed a Yuppy to the dobermans but hippies just make them flatulent and lethargic.

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