Wednesday, 16 October 2013

Kaushik Basu's latest idiocy

Kaushik Basu is not content, as most Bengali Economists usually are, with uttering policy prescriptions based on logical fallacies; he goes the extra mile by imputing the logical fallacy in his own argument to imaginary economists who existed in the past so as to expatiate on their stupidity.
'... suppose that in 1930 an economist conducted an empirical study of what cured infectious diseases, and, analyzing masses of data from previous years, concluded that 98% of all treatable illnesses were cured by non-antibiotic medicines – “tradicines,” which include all traditional medicines of various schools. This conclusion would most likely be valid, because the use of antibiotics before 1930 – just two years after Alexander Fleming discovered penicillin and years before it was fully workable as a cure – was rare and mostly inadvertent.'

Basu actually wrote the shit quoted above. How is an economist in 1930 supposed to know about antibiotics? Few Doctors did. An Economist might say 'Science based medicine is responsible for curing most illness. Let's invest more in Scientific pharma and tell Mahatma Gandhi to go fuck himself.' What he can't say is 'tradicines are better than penicillin.' Penicillin didn't exist.

Basu's years with the Govt. of India have rotted his brain.

He writes'.. suppose that the economist goes on to argue that, therefore, it would be silly to give patients penicillin, because we know that 98% of all treatable diseases were cured by tradicines, and penicillin is not a tradicine. That is a wrong deduction, based on evidence that does not exist. What the economist’s study in 1930 showed is that tradicines accounted for 98% of the cases that were successfully treated. It does not show that penicillin does not work.'
Actually, the economist would have no concept of the 'tradicine'/antibiotic dichotomy and in any case the notion of 'treatable disease' is a movable feast. A new method of treatment changes the data set. Contra, Basu, no Economist in 1930 would have thought 'this conclusion is most likely valid' because back then even Bengali Economists weren't utter fuckwits because Tamils, like Kumarappa, held that monopoly.
Basu continues-
'This is a common mistake. We often hear assertions like, “We must rely on the private sector to create jobs, because studies show that 90% of past jobs were created by the private sector.” If we accepted this reasoning, we would have to accept a Soviet researcher’s assertion in the late 1980’s that we must rely on the state to create jobs, because 90% of past jobs were created by the state.'

So, according to Basu, up till now some dangerously high percentage of arguments in Economics have had the form 'Till now x has happened. Therefore x will happen.' But, this is just induction pure and simple. It assumes the ceteris paribus condition- viz. that nothing else changes. In the case of a Soviet researcher who assumes that Communism is going to continue to rule the land, it is reasonable to say 'since 90 per cent of jobs have been created by the State since the Bolshevik Revolution, we must rely on the State to create jobs because, experience tells us, if the private sector tries to do it, they'll get shot.'
'On job creation, there is both theory and evidence to support the conclusion that the private sector is the main driver of sustainable expansion (which is not to deny that there may be scope for tweaking public policies to make the private sector more employment-friendly). But on poverty eradication, theory and evidence show that policy interventions, when skillfully designed, can play a significant role. Some of these policies already exist; some have to be crafted – the antibiotics of our time.'
Basu is wrong. There is no theory and no evidence that could possibly show that anything is sustainable except ceteris paribus. But ceteris paribus means 'with the current information set'. When Sir Alexander Fleming discovered penicillin, ceteris stopped being paribus. The information set changed. The category 'treatable diseases' stopped being (if it ever was) well defined. To make it well defined, experiments had to be carried out- i.e. new evidence was needed. Theorists needed to make a paradigm shift in their thinking, to evolve wholly new models before they could start to make useful predictions as to what was treatable with the new methods.
Similarly, if the Govt. makes an experiment- or by happenstance the thing occurs by default- and gains new information, then it is possible that 'tweaking public policy will make the private-sector more employment friendly'. But, it is also possible that the new type of information makes Govt. employment more productive and a better driver for growth. Suppose, the Govt. finds a method of breaking Information asymmetry such that things like Adverse Selection and Agent/Principal hazard cease to arise. At the margin, this can 'tweak' Manpower policy- e.g. more efficient Labor Exchanges giving a boost to the Private Sector. But, assuming the Govt. has a permanent advantage in this respect, the corollary is that the Govt. should become the main employer because it has better information or mechanism design. Suppose I will work harder and more conscientiously if I know my employment will save the country from the invaders. I don't know if private sector employers are patriots or traitors so I either refuse employment or work sub-optimally in the private sector. Here, the Govt. Labor exchange can 'tweak' things by assuring me that such and such employer is a good guy and that's an efficiency gain. However, if everybody was like me, then what would be even more efficient is if the Govt. takes control of industry.
The same holds true of anti-poverty measures. Whoever has lower information cost relative to an efficiency gain (i.e. Hicks Kaldor type improvement for the Poor) by reason of a new discovery should be given the resources to get on with the job. 'Skillfully designed policy intervention' is the same thing as Penicillin. It's a new discovery. It's a change in the information set. If there's an associated asymmetry such that a particular set of agents have lower cost for acquiring this information, then it should be they who are put in charge. Having chicken soup is good for some illnesses. Everyone knows Mums are better at making chicken soup than doctors- so Mums should make chicken soup. However Doctors are better at prescribing antibiotics because they have lower cost of acquiring the relevant information to make a prescription. So Doctors should be in charge of deciding how to allocate that type of medicine.
Basu seems to believe that Govts. already possess an information advantage because they already have 'cures'. But, why haven't they implemented them already? Are they too stupid or lazy or callous to do so? If so, sack the fuckers. If it is a question of Incentive Compatibility then fix it. Tell these fuckers they will be fucking sacked if they don't get their act together and then start sacking them with vim and vigor pour encourager les autres.
Basu, who hasn't been sacked, more's the pity, continues-
'In India, the government has tried for decades to get cheap food to the poor. Cost-benefit analysis has led many to declare it a failed policy. But the fault lies with the program’s method, which is to rely on the state both to collect the food from farmers and to deliver it to the poor. Around 45% of food grain leaks out and disappears in this process. This means that the program’s leaks need to be repaired, not that the entire scheme should be abandoned. A carefully designed public-private partnership – in which the state gives a subsidy directly to the poor, who then buy food from private farmers and traders – would benefit all.'
No, you worthless fuckwit, the fault lies with not sacking worthless fuckwits like you when they are proven to be worthless fuckwits. What is the point of giving money to 'the poor' if that money isn't given to the poor at all because worthless fuckwits like you won't sack corrupt cunts? Yes, I know you were hired by corrupt cunts precisely because you are a worthless fuckwit but couldn't you stretch your venal fuckwittery to getting yourself infected with AIDS and then fucking all them guys in the ass till they all get sick and just fucking die?
No. You won't do that. Instead, you'll write this-
'Obviously, when the poor have more (and healthier) food, their nutrition improves; when better-nourished people go to school, they become more productive; the same is true of health services. Overall economic growth is important, but the poor should not have to wait until its benefits trickle down to them; with the right anti-poverty policies, governments can encourage trickle-up growth as well.'
The malnourished have low leisure preference. They are willing to trade labor for grub. Labor means more goods and services- that's growth. Call it trickle up growth if some of the fruits of that labor ends up enriching the already rich but what's undeniable is that growth is growth.
Why not remove legal and other barriers to this type of growth?
Cui bono?
Oh! Only the poor, not the anti-poverty industry.
Fuck it. Let's not.

Basu says if kids are better fed they'll do well in School. This assumes that Schools will teach properly. Why should they do so? Basu and Co. are giving State Schools a monopoly by making most private schools illegal because they don't have playing fields and pay low salaries. Amartya Sen wants to ban private tuition altogether. Govt. teachers count the votes in elections. They are overpaid and over protected. What's their incentive to actually teach? As for the Politicians, the shite they want taught is fucking hagiographies of their Party's founder or ruling dynasty.
Basu speaks of Cash transfers as if it were not the case that the manufacture of bogus identities were not a major industry vital to the functioning of Political parties.
How is it that a stint working with the Indian Govt. has left him more, not less, deluded as to the reality on the ground?
Is the same going to happen to Raghuram Rajan?

Returning to Basu, what got him talking about penicillin was not anything he'd contracted while working on contract for the Indian Govt, but this ' new paper, by David Dollar, Tatjana Kleineberg, and Aart Kraay analyzing empirically the relationship between growth and poverty. Their comprehensive study draws on high-quality survey data from 118 countries and reaches a clear conclusion: the bulk of poverty eradication that took place in recent decades was driven by economies’ overall income growth. More specifically, 77% of the cross-country variation in the income growth of the poorest 40% of the population reflects differences in average income growth.
Findings like these lead many people to conclude that eradicating poverty requires us to rely on overall growth, and that direct government policy interventions have little merit. But this is a wrong conclusion, which illustrates a lapse of logic.
So there you have it. Kaushik Basu's lapse in logic arose from his anxiety to correct a FUCKING TAUTOLOGY.
Sir Partha Das Gupta has critiqued existing N.I accounts for not accurately reflecting depreciation of Environmental and other intangible types of Assets. Suppose this were to be done- i.e. suppose Growth really meant the rise in Income with Wealth (including what Tauger calls Environmental Production Entitlements and non-Sen-tentious Capabilities) also rising sufficiently to make that Income level sustainable- then it would be indeed be true that Growth alone could lift countries out of poverty , though Income distribution might have to change in an adverse way so as to get resources out of the hands of the stupid.
But this isn't what Basu is saying.
He is praising a crazy Speenhamland type system which gives food to below subsistence farmers so that they can't even migrate but must stay in place to vote like sheep for whichever Party has the most appealing or appalling gangsters.
The ability to migrate is itself an Entitlement. It is itself a type of Wealth. This now depreciates because of 'Anti Poverty' policies whose true aim is to freeze up the Social Geography so as to perpetuate vote banks. What is the point of keeping below subsistence farmers in agriculture? How does this release land for Manufacturing? If land is not released for manufacturing, what is going to power demographic change?
Basu assumes that the resources exist to stop leakages from Govt. programs. Suppose we could import an infinite quantity of incorruptible Swedish bureaucrats, protected by indefatigable American Secret Service agents, then, sure, we can ensure that Govt. programs work the way they are supposed to. But India can't do that. Officers may now be quite well paid but they don't want to be transferred every couple of months, if not simply butchered in broad daylight. What incentive do they have to stop leakages?
The Indian Criminal Justice System works in a perverse way. Gangsters bring false charges against honest people to get them to part with their property. To do the reverse is actually illegal because of a presumption that the owner of the property is a nasty Capitalist while the squatter is an innocent Proletarian.
Basu's analogy with 'tradicines' in the 1930 is simply mad. Growth, properly defined, is technology independent. It is a different matter that N.I statistics are hopelessly flawed.
In any case, what will really determine how many poor people there are is whether poor people can and want to have more poor babies in situ.
The World Bank may be silly- it's got the word World in its title, so it's bound to be foolish- but that's no excuse for screwing up India's Economy, Professor Basu.

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