Prajnan, Vol. XLIX, No. 4, 2020-21 © 2020-21, NIBM, Pune

Book Reviews

An Economist's Miscellany: From the Groves of Academe to the Slopes of Raisina Hill

Kaushik Basu

New Delhi, Oxford University Press, March 2020, pp. xxi + 332, Rs. 995

Reviewed by Prof Sanjay Basu, Faculty, National Institute of Bank Management, Pune.

In his introduction to Prof. Sukhamoy Chakravarty's Writings on Development, Rakshit (1997) outlines three necessary qualities for a front ranking development economist. These are: (1) An analytical ability of a very high order (2) A Deep Knowledge of Political, Economic and Social History of Nations and (3) A keen perception of problems pertaining to both formulation of policies and their successful implementation. In addition to all these traits, this delectable anthology contains a fourth attribute – Sense of Humour. For instance, the description of a tourist guide's speech as a public good (p. 50) reminds me of quiz competitions, at which I often picked up the right answers to esoteric questions from auditorium chatter – hall collection, in our parlance. A small joke simplifies a difficult concept and the discussion flows on like a stream. Indeed, on this substantive evidence, the author deserves the moniker Tusitala (teller of tales), a là Robert Louise Stevenson, whose burial ground he visited in Samoa.

An Economist's Miscellany: From the Groves of Academe to the Slopes of Raisina Hill is a collection of eighty essays in newspapers and magazines, by Prof. Kaushik Basu, between 2005 and 2019. It covers a wide range of topics – inequality, market reforms, authoritarianism, policy perspectives, travelogues, scepticism, personal reminiscences and hobbies. This is not the author's own subject classification. My categorisation is based on the common threads which bind various chapters scattered throughout the book. As a result, there are inevitable cross-references in the review.

I am grateful to the editor of the journal, Arindam Bandyopadhyay, for giving me enough time and space to reflect, refine and share my views on this delightful book. I thank Raibata Basu for drawing the diagrams in Appendix I. The usual disclaimer applies. 430 Prajnan

Section I: Inequality This theme is the focus of the book. It recurs in at least eight essays, with Section 10 dedicated to the subject. The author finds inequality odious, per se. In the article titled The Insecurity of Inequality, he points out that the eight richest people in the world possess as much wealth as the poorest 3.6 billion. The rich pay less for most goods and services (from airfares to taxes), enjoy free resources and much more political clout. Since most of these rewards are due to sheer luck (including lineage and upbringing), such differences are unethical. Indeed, his article titled The Ethics of Reducing Inequality narrates how Chris Hughes (the co-founder of Facebook) became rich, only because he was the roommate of Mark Zuckerberg at Harvard.

Over the years, there has been a sharp fall in the share of labour income-to- GDP across the globe, due to technological progress and economies of scale in industrial production. Prof. Basu argues, throughout Section 10, that the solution lies in sharing of profits with all residents of a country. Even as the share of wages declines, workers continue to feel a sense of ownership towards their firms as they earn higher equity income (Profit Sharing Now). This strategy is better than large-scale nationalisation that concentrates power in a few groups, which may misuse it for private benefits. A guaranteed basic minimum income may also be ineffective. At the same time, the tax system also needs to be much more progressive. The author states that the idea of profit-sharing with workers has already been welcomed by some eminent economists, wealthy individuals and nations (Inequality in the Twenty First Century). Finland has experimented with it, while India has proposed a detailed scheme (America's Dangerous Neo-Protectionism). However, he admits that the success of this scheme will depend on its design and implementation (Profit Sharing Now).

He also dispels the notion that rich individuals are less progressive. He cites the examples of Jack Bogle (founder of the Vanguard Group and a beneficiary of tax cuts for the rich), Paul Samuelson and Friedrich Engels, to buttress his case. In the chapters Friedrich Engels and the Quest for a Better World and Can you be Rich and Left-Wing, Prof. Basu informs us that Engels was not only a close friend, collaborator and patron of Karl Marx, but a rich industrialist as well. He shows that a strong aversion to inequality, among wealthy individuals, is neither paradoxical nor hypocritical.

The coverage of this important issue is vast, deep and incisive. However, I am not sure whether the benevolence of the rich, as assumed by the author, is a norm or an exception. For instance, the popularity of tax incentives and political donations, worldwide, perhaps reveals the preference of the majority. There is also some recent evidence that only economic elites and organized business groups dictate government policy decisions, not average citizens (Gilens and Page 2014, 2016). With such influence, the wealthy may hold up the execution of profit-sharing schemes. Selfish and myopic political parties may not be swayed by ethical arguments alone unless their electoral fortunes are hurt. Book Reviews 431

Hence, no matter how ugly extreme inequality looks, they need to be convinced that it also matters for economic growth and stability. The avenues are as follows:

1. Problem of effective demand: As the share of wage income worsens, the aggregate Marginal Propensity to Consume (MPC) falls, since the MPC of the wage-earners is more than that of the rich. Hence, given short-run aggregate investment, higher income inequality increases Marginal Propensity to Save (MPS) and reduces the rate of output growth. This is a simple, distribution-based, rationale for the paradox of thrift. Appendix I presents a toy model, to illustrate the point. For a long time, the effective demand constraint was not considered as the main reason for underdevelopment. Pioneers like Rosenstein-Rodan (Myint 1991) and Kalecki (1954) feel that these economies are governed by Say's Law, with productive capacity as the key bottleneck. The East Asian Miracle reinforced the primacy of high Savings and Investment rates, in the standard model of development. However, Chakravarty (1997) provides a lucid rejoinder to this line of argument, based on the Indian experience, which links output growth to income distribution and aggregate demand. Rakshit (1989) also posits the distribution-based demand deficiency hypothesis, to explain the savings-investment puzzle and low growth in India. 2. Financial Crises: As income distribution becomes more skewed, low- income groups borrow from richer ones and consume beyond their means. Such behaviour amplifies systemic leverage, creates asset bubbles and culminates in financial meltdown. This narrative is consistent with the boom-bust real estate cycle that preceded the global financial crisis of 2007 (Kumhof et. al. 2015). 3. Fall in labour productivity: Greater income disparity denies the poor high quality health and education, which erodes their skills (Dabla- Norris et.al. 2015). 4. Political instability: Lower income groups may guard their turf with greater zeal, as distribution worsens. This may trigger protectionism, conflict and xenophobia. Brexit is a clear case in point. In the wake of low productivity, stagnant real wages and the Eurozone crisis, British workers not only chose to leave EU in 2016, but vote the Conservative Party to power, in the recent elections, as well. Prof. Basu also discusses how a surge in wealth and income inequality can fuel widespread frustration and undermine democratic institutions (Why is Democracy Faltering?). In sum, the author does point out that a spike in global inequality may lead to a variety of economic and political crises [The World Economy's Labour Pains]. However, in this book, he chooses to focus on its inhuman face, perhaps as an appeal to the collective conscience of a non-technical audience. My simple point 432 Prajnan is that, since governments are made of sterner stuff, a combination of ethical arguments and cold economic logic could be more effective.

Section II: Market Reforms The coverage of this issue is magisterial and extensive. The author not only analyses the standard factor (e.g. land and labour) and product (e.g. financial derivatives) markets, but also more exotic segments like Education, Airlines and Art. He observes that the rigidity of Indian labour laws and cumbersome dispute resolution mechanisms (India Globalizing and Labour Market Reforms in India) have reduced labour demand, wages and employment. Hence, there is an urgent need for a menu of flexible contracts, to address the varied requirements for different skill sets. In addition, a robust safety net in the form of greater public investment in health, education, social security benefits and welfare systems should be created. The dispute resolution process should be simpler and quicker.

In a similar vein, the author shows that, without land acquisition by the government, many large-scale industrial projects may not take off (Acquiring Land for Industry). With a simple sequential bargaining model, he proves that an industrialist may not acquire land, on his own, for a project in which the social benefits are more than private benefits. In this context, through clever usage of initials (T, M and B) to represent the players in the game, Prof. Basu evokes memories of the Singur fiasco in West Bengal. He proposes the promulgation of stringent laws, to prevent peasant intimidation by the state or individuals, during the acquisition process. Such a framework should also ensure handsome compensation of farmers, well above market prices, for the land they surrender.

The same logic holds for the financial sector. Prof. Basu observes that the introduction of Debt Recovery Tribunals (DRTs) has not only hastened the loan recovery process, but also increased the quantum recovered (Bureaucratic Reforms in India). In this context, Acharya and Rajan (2020) note that the implementation of the Insolvency and Bankruptcy Code (IBC 2016) has improved results further. Likewise, in light of the global financial crisis of 2007, the author suggests that complex financial products (e.g. teaser loans) may be purchased by ordinary customers only after they are certified by Registered Finance Professionals (RFPs). Such a proposal strikes a balance between adverse selection (that chokes demand) and moral hazard (which distorts supply) problems. However, sophisticated or high net worth individuals and institutions, like hedge funds, may be exempted (Why Some Financial Products Should Be on Prescription). In short, the author argues that even structured products may be marketable. He also uses the case study on Satyam Computers, to emphasize the need for constant supervision and stringent laws. Such measures reduce the possibility of frauds and safeguard business reputation and financial market innovation in developing countries (Financial Scams and Ponzis). Book Reviews 433

Prof. Basu paints an abysmal picture of higher education in India, in terms of the gap between qualifications on record and expected ability (In the Name of Education). He feels that the entry of renowned global academic institutions, in collaboration with private local universities, should improve quality (A Higher Opportunity). Such organizations must have the freedom to design faculty compensation structure, student selection criteria and a bouquet of courses, at par with the best in the world. Regulations should be aimed to protect the consumers, i.e. the students. The revenue earned by the government, once India becomes a global education hub, should be used to subsidize the pursuit of Fine Arts and Mathematics, which have low, short-term, commercial value. In sum, an injection of imported quality, supported by appropriate regulations, will improve welfare in the domestic education market.

The author uses a number of hilarious anecdotes, in two consecutive chapters, to portray how sick the Maharaja is (The Maharaja Disappoints and Taking Off: Airports and Economics). As the brand ambassadors of a vibrant nation, to the outside world, Air India and state-run airports have a duty to put their best feet forward. However, it takes a lot of patriotism to ignore their poor infrastructure and service quality. Prof. Basu shows how better management, love of excellence and an appreciation of complementarities enable the GMR group to earn more revenue from the airports under its control and share it with the government. The good news is that most Indian airports have improved since, with Terminal III of Delhi Airport (to which he alludes) in the lead. Air India still has some way to go.

The best example, on the role of state intervention, is that of Art Galleries. The author avers that there is enough artistic genius in India (i.e. labour productivity is high), but it suffers from public indifference (Art and Commerce and Markets and Aesthetics). The poor infrastructure at Art Galleries (e.g. National Gallery of Modern Art, New Delhi) dampens viewer interest and global appreciation of Indian art. The government should set up innovative Art Museums, designed by the best architects (e.g. Museum of Contemporary Art from Developing Economies), to showcase Indian talent. The print and electronic media must also increase their coverage of Indian art and culture, under Media Cultural Responsibility (MCR), a variant of CSR. It is expected that large-scale government involvement will crowd in private investment as well. The long- term social dividends are in terms of higher tourist traffic to India and global esteem. Even private sector or media participation need not be altruistic. Friedman (1970) claims that firms undertake CSR activities to enhance future profits. Bénabou and Tirole (2010) suggest a number of channels through which this goal can be reached. Indeed, there is some evidence now that CSR has a positive impact on share prices (Pintekova and Kukacka 2019).

The entire discussion on market reforms highlights the important role of external markets in a capitalist economy. It takes us back to the Kaleckian synthesis of the debate between Tugan-Baranovski and Rosa Luxemburg 434 Prajnan

(Kalecki 1971, Ch. 13), on the subject. Prof. Basu reiterates that markets may not exist on their own – they have to be developed and regulated by the state. Otherwise, profit-oriented firms may take wrong investment decisions and misallocate scarce resources (Kalecki 1971, Ch.10 and Ch. 13).

Section III: Authoritarianism During the last decade, hardline leaders have been elected in many countries - US, UK, Brazil, Poland, Hungary, Sri Lanka and India, to name just a few. Not to miss out on the perennial constants, Israel and Russia. As a result, the author is worried about the contagion of authoritarianism across the democratic world. He is not alone – of late, this sensitive issue has occupied many brilliant minds. For instance, Sen (2020) dwells at length on the problem as well. This book devotes more than ten chapters to this topic.

He begins with the tale of his visit to Belur Math temple complex, under Ramkrishna Mission (RKM), near Calcutta. He is impressed not only with the clockwork precision, punctuality and efficiency of the organization, but the philosophical, tolerant and inclusive face of Hinduism that it portrays as well (A Hinduism More Tolerant). He also marvels at the modern Filix school (equipped with 3D printers, no less!), run by an NGO linked to RKM, on the border of Bengal and Jharkhand (In Good Faith: A Journey, an Education). The quest for universal love by Swami Vivekananda, when he founded the RKM, finds fruition in both places. The author's experience is in sharp contrast to the culture of hatred, peddled in the name of Hinduism.

Prof. Basu revisits the theme in his essay on the book An Argumentative Indian by Prof. Amartya Sen. In his opinion, through this book, Prof. Sen shows how liberal, multifaceted and gentle the spirit of Hinduism has been, over many centuries. It is incompatible with jingoism and parochialism (Amartya Sen: Re-Inventing Himself). He also criticizes the steady stream of aspersions cast on Prof. Sen, because of his political views, and the failure of the government to discipline the trolls. Such attacks undermine the free exchange of ideas on which intellectual progress and democracy are founded (The Anti- Argumentative Indian: Amartya Sen). The ability to aggregate diverse preferences, with the liberty to disagree, argue or bargain (the tatonnement process), distinguishes democracies and free markets from other systems (The Problem of Choice). Such an environment allows new ideas to flourish and bold reforms to be implemented.

The author recounts a conversation with Dr. Manmohan Singh, during his stint with GOI. The Prime Minister permitted the CEA to appear in a TV talk show, and explain his controversial paper on bribery, with which the economist in Dr. Singh did not agree. Prof. Basu feels that this willingness to encourage contrarian views made Dr. Singh the architect of economic reforms in India (Manmohan Singh: A Quiet Courage). He observes that democracy, openness Book Reviews 435

and free media, in India, create room for dissent, criticism and course correction, in matters of economic policy. In contrast, China may falter, in the long-run, as and when preservation of political power becomes more important than efficient resource allocation in the command-and-control economy. Its coercive nature will stifle early warning signals. The moral of the story is that economic growth in India may be slower, but will be steadier, than China. Provided we do not become rigid and unreceptive (Where India is Ahead of China).

The author points out that after independence, India had set very high moral standards for unity in diversity, for other nations to emulate. He fears that such thresholds have been lowered in the last few years. He feels that jingoism arises out of an inferiority complex and forces people to emulate those whom they are supposed to detest (Resisting the Moral Retreat). The Stackelberg leader becomes the follower, over time. In this context, I am reminded of a painful poem by the noted Pakistani poet and activist Fahmida Riaz: Tum Bilkul Hum Jaise Nikle (You Have Turned Out To Be Just Like Us). Our priorities should be very different – whither freedom of choice if IPC Section 377 still continues (Whither Social Progress and Same-Sex Preferences and Rights). It is a matter of relief that much of Section 377 (between consenting adults) was repealed in 2018 – this was long overdue.

The author appreciates that intolerance is not India's problem alone – it is a global pandemic, as already mentioned. His view is that the relative reduction in wage incomes and the insecurity of livelihood brought about by globalization frustrates large segments of the population and forces them to be insular. There is also a brand value – tribalism – associated with privileged groups like Team Trump. Both these factors conspire to make people follow authoritarian and flamboyant leaders (Why is Democracy Faltering?). The situation is worsened by the ubiquity of social media. The anonymity and limited accountability that it affords enable netizens to abuse others, if they wish. Often, with the aid of fake news. In particular, the urge to insult famous people appears to be irresistible. Language is no longer harsh – it is coarse. Democracy cannot thrive in such a toxic environment (The Language of Conflict).

While I agree with much of what the author says, let me play the Devil's Advocate and offer an alternative hypothesis for the prevalence of authoritarianism. Though I also feel that a sense of fear drives voters towards hardline leaders, I do not think that it is always due to economic insecurity. We should recall that the rise of right-wing ideology in India coincided with the high-growth phase. Conversely, even adverse economic shocks caused by demonetization and the NPA crisis could not arouse anti-incumbency sentiments. My moot point is that the tepid response of progressive political leadership and mainstream media, to adverse shocks, have also contributed to the popularity of authoritarianism. Let me explain, in brief. 436 Prajnan

At present, the two global security concerns are: (1) Terrorism and (2) Chinese (economic and military) aggression. However, liberal statesmen are often perceived to be soft on both these issues. Prof. Basu mentions how President Obama could not raise US concerns on human rights violations, during his visit to China (China's Power and Corbett's Gun). Reasons apart, such gestures may not go down well with the lay electorate. Just as the UPA government was alleged to be lax on terrorism. At the same time, the popular press (e.g. The Guardian or Washington Post) often downplay such concerns and advise the public to focus on the main issues. For instance, President Macron has expressed his shock and dismay at the reaction of the English-language press, to his recent social reform attempts in France. There is an impression that the majority voice often gets ignored. A controversial journalist-cum-news anchor has said as much: In India, if you do not shout, you are not heard.

Under such circumstances, the alienated and insecure majority will elect hardline messiahs everywhere. In the words of my favourite political analyst, Saba Naqvi, there will be reverse polarization. As a result, the opposition in many countries has been whittled down to such an extent, that there is no constitutional or parliamentary remedy to the genuine excesses of majoritarianism. By some accounts, the performance of the Conservative Party is the best since the early 1980s while Labour has fared the worst since the 1930s. This may lead to two problems. First, parties in power can get away with bad policies. Secondly, even good policies may not be implemented.

A glance at the two chapters, In India, Black Money Makes for Bad Policy and India and the Visible Hand of the Market is enough to realize how severe and widespread the damage caused by demonetization has been. The same story is retold, for the US, in the essays Trump's Gift to China and America's Dangerous Neo-Protectionism. The imposition of tariffs, restrictions on outsourced labour and withdrawal from strategic multilateral partnerships will not only erode America's cost competitiveness, but also allow debt-laden and less efficient China to occupy the space vacated by the US, through treaties with other countries.

In such countries, an acute trust deficit will emerge as well. Society will be divided into two disjoint sets: Us and Them. Without a modicum of trust, even the simplest of transactions, like issuance of library books, cannot be completed. It is essential for any contract enforcement (Trust and Development). The implication is that even good reforms may not go through. The recent controversy in India, on agricultural reforms, is a case in point. There is economic logic for such measures (Panagariya 2020, Gopinath 2020) and some evidence that these were on the anvil since the UPA regime. However, the impasse indicates that no side will cede an inch. Hence, though the farm bills have been passed in Parliament, due to the sheer majority of the NDA, there may be a long delay in implementation. Book Reviews 437

In Appendix II, I present a simple model, in a game theoretic framework, to make my point. I show that farsighted voters, who would otherwise choose a liberal government, may vote for a hardline party. If the fear factor is strong and enough people are perceived to share the same view. The resultant Subgame Perfect Nash Equilibrium (SPNE) is inferior to the one in which a liberal government is elected.

What is the solution to this serious problem? It is clear that basic human values which are also vital for economic development, e.g. altruism, compassion and humility (Social Norms and Prosperity), may not work in such a world. Hence, the author argues in favour of a global constitution, with minimum codes of conduct, to be enforced by an authorized third party. The civil society and religious leaders must put pressure on national policymakers for international collaboration. Such verifiable and enforceable initiatives may reduce the twin threats of global conflict and authoritarianism (The Case for a Global Constitution).

Section IV: Policy Perspectives The book has studied this aspect in detail and made invaluable suggestions on economic policy matters. The author makes it clear, at the very outset, that the government should be a facilitator for smooth exchange of goods and services, not the main provider. It should create an atmosphere that enables voluntary transactions between individuals (Life at the Heart of the Government). A good example is the legalization of the Harassment Bribe for the giver but not the taker. This is paid for a service which the giver has a right to get. Once it is legitimized, the dominant strategy of the giver is to confess. In anticipation of his admission, the Nash strategy of the taker (the government official) is not to bribe. Hence, asymmetric penalization elicits truthful revelation and deters bribery. There is already some evidence in support of this pragmatic hypothesis (Anger is Not Enough). It should not be judged on moral grounds.

India reaped the rewards of such an approach when its economy was liberalized in 1991. Gains from globalization translated not only into high and stable GDP growth rates, but a sharp decline in poverty and illiteracy as well (India Globalizing). The process was reinforced by the availability of skilled Anglophone engineers who ushered the IT revolution in the country. This was also the era of trustworthy entrepreneurs, with whom MNCs were happy to partner, despite a weak contract enforcement framework in India (India at 60). Prof. Basu proposes a number of reforms to smoothen business activities further, as already discussed (India Globalizing). He also suggests that if a nation focuses on the ten indicators in the World Bank's Doing Business index, there may be a dramatic improvement in its rank (The ABC of Doing Business). Between 2017 and 2020, India jumped from 100 to 63, among 190 countries.

The author does distinguish between good and bad state intervention. The investments in higher education, with emphasis on English, in the early years 438 Prajnan after independence, paid rich dividends in the 1990s (India at 60). Likewise, in light of a decline in the investment-GDP ratio over the last few years as also the economic slowdown, there is a dire need for a step-up in government expenditure and cheap money policy (Facing the Slowdown and Reviving India's Economy). In contrast, Demonetization was ill-advised. The currency reform that took 86 per cent of legal tender out of circulation, to suck out black money, stop flow of funds to terrorists and digitize the economy, was a failure. The first two goals were not achieved while the third could have been done in a less painful manner. Long queues, loss of lives and livelihood, crash in commodity prices and slump in GDP growth rate – the social cost is much higher than benefits (In India, Black Money Makes for Bad Policy and India and the Visible Hand of the Market).

Prof. Basu makes the important point that the strength of foreign or military policy depends on economic might. That is what should give India confidence to sign the 123 agreement with the US, for nuclear co-operation. Our economic strength implies that foreign policy cannot be dictated anymore. Moreover, once the agreement has been signed, the Nuclear Suppliers Group will trade so much that future sanctions are rendered improbable by its vested interests (The ABC of 123). The economic power and dollar reserves that China has accumulated, over many decades, through its export-led growth strategy, makes it ignore US advice today, on its human rights violations or currency undervaluation (China and the Power of Corbett's Gun and A Currency Crash Course for Politicians). Communist China has shown the rest of the world that, in the end, real power does not flow from the barrel of the gun.

The range of policy questions to which the author exposes us is remarkable. From poor infrastructure, high unemployment and lawlessness in the North- East to township problems in Pretoria and Johannesburg. From climate change risks – tsunamis and cyclones – in Samoa to industry concentration risks in Bhutan (hydroelectricity and tourism) and Malaysia (crude oil, palm oil, natural gas and rubber). Not to speak of the myriad issues with India's economic policies. My only question is: How does he discuss Economics in such exotic locales?

Section V: Travelogue From Manipur to Turin, the author has been a keen observer of the ebb and flow of everyday life in different societies. He proves the maxim that travel broadens the mind. From the mountains of Bhutan to the Pacific Ocean that surrounds Samoa, cultures may differ, people may not look the same and languages may vary but there is a shared sense of history. From the Zapotecs in Mexico to South Africa, Jerusalem and Manipur, he finds a quiet dignity and optimism amidst poverty and insecurity. His description of marginalized Arabs in Jerusalem reminds me of a potential oxymoron – poor Arabs – used by the Bengali author Nabaneeta Deb Sen in her essay Damascus Gate, based on her trip to the Holy City. Book Reviews 439

He finds a nightclub called M.N. Roy in Mexico City, named after the Bengali socialist who set up the Communist Party of Mexico. He uses game theory to catch pickpockets in Venice and chats with a Florentine vendor in Bengali. This similarity among peoples and the shared humanity makes him feel optimistic that universal brotherhood may not be a pipe dream after all.

His visits to Munich, Florence and Turin also make him relate excellence in fine arts and literature to economic progress. Against the backdrop of the best art galleries and sculptures in the world, he observes that the pursuit of literature, art and mathematics – the study of the abstract – may be of little immediate commercial value. But, in the long-run, it makes us creative and innovative. New ideas are born and the economy prospers.

Section VI: Scepticism The one message that echoes throughout the book is the value of scepticism. The author recounts how the parliament and policymakers wanted to know, within a week in his new role as CEA, whether futures trading in food crops could exert inflationary pressures on their spot prices. He was given a day to respond (Life in the Heart of Indian Government). Prof. Bhabatosh Datta, another renowned economist, had a similar experience at IMF, when he was asked to provide definite answers to policy questions. Prof. Basu cautions us against this urge to produce ready-made solutions to difficult problems, e.g. financial crises. It is better to accept the limits of our knowledge, in such matters, and probe further (Ambiguity, Equivocation and Economics). For instance, he warns us that the linkage between financial assets and real wealth is still not a settled one. Therefore, the impact of changes in money supply on GDP is not always clear. Likewise, stock market movements may not indicate economic growth prospects (Burning Cash: A Finance Conundrum).

He argues that whenever economic systems and policies have been based on gospel truths, they have failed. Whether we think of Soviet Union and Marxism- Leninism (Engels and the Quest for a Better World) or the collapse of far- right Argentina in the 1930s (Trump's Gift to China), neither the state nor markets are infallible (In Praise of Doubt). Even data or evidence-based policies may not be correct, because history does not always repeat itself. Data analysis alone may not be enough to capture Black Swan (i.e. unprecedented) events. Like the slaughter of chicken after they've been fed for many years. Hence, economic policy formulation needs to combine careful empiricism, with a healthy dose of reasoned intuition and common sense (Evidence-based Policy Mistakes). Otherwise, domain experts will not only be discredited, but also suspected of mala fide intent, when their predictions fail (Experts and Inequality).

Prof. Basu considers scepticism to be the mainspring of knowledge (Ambiguity, Equivocation and Economics). He argues that the peak of Greek enlightenment 440 Prajnan coincided with the zenith of scepticism, through the works of Pyrrho, Anaxarchus and Sextus Empiricus (In Praise of Doubt). He follows the same approach to justify his own atheism. He cannot reconcile the human suffering around the world with the presence of a powerful and merciful God. Hence, he remains doubtful despite several strange events. For instance, his spontaneous recovery, after a prayer, from a sickness in Japan (Praying in the foothills of Mt. Fuji). Or, the unexpected discovery of his misplaced green card, after another prayer, before his imminent trip to Turin (The Turin Miracle). However, the difference in outcomes (theft of wallet in Delhi but not London) for the same experiment (Coffee with free money) makes him question the consistency of divine responses. Hence, he recommends a philosophy of scepticism, for better decisions in life (Does God Exist? There are Several Possible Hypotheses).

Section VII: Reminiscences Prof. Basu captivates us with some beautiful personal anecdotes. The admiration for his Ph.D. supervisor and veritable guide, Prof. Amartya Sen, springs forth in numerous essays. A towering personality who combines moral philosophy, economic theory and scientific elegance with ease. A fount of wit and wisdom. The author marvels at the dedication, humility and generosity of Prof. Kenneth Arrow – who delivered a lecture at the World Bank when he was ninety four years old. He even apologized to Prof. Basu for his delay in the transmission of the related paper, because of his illness. The author is awed by the versatility, fecundity and encyclopaedic knowledge of Prof. Paul Samuelson. During their first meeting, Prof. Samuelson asked him whether he was related to the communist (Jyoti Basu), the scientist (Satyendranath Bose) or the nationalist freedom fighter (Subhash Chandra Bose). Such nuanced awareness of Bengali surnames, by a foreigner, is remarkable.

The author describes Prof. Prasanta Pattanaik as the economist's economist - the reticent abstract theorist from rural Orissa, who took Prof. Sen's breath away, as a student of DSE, with his ability to solve intractable problems. He explains the significance of contributions by Prof. Joseph Stiglitz which help us understand the reasons for factor price rigidity (i.e. interest rate and wage stickiness) in terms of asymmetric information (viz. credit rationing and efficiency wages). He is excited to meet the Shakespeare of Economics – Prof. John Nash – who drifts off into his own world from time to time. He misses the intellectual honesty and human warmth of the angry intellectual, Dr. Ashok Mitra, as much as the obituaries written by him. Anyone who has read Dr. Mitra's tribute to his teachers, Prof. Jan Tinbergen and Prof. Amiya Kr. Dasgupta, will concur with Prof. Basu.

The author touches a chord with essays on his mother, Mrs. Usha Basu, who passed away at the age of ninety one. With absolute belief in her son's ability to inspire children, she once arranged a lecture for him at a school for the poor. She was an eternal optimist, of sound health and mind, with enough confidence Book Reviews 441

to state that she had never felt guilty, because she had done nothing wrong. In her advanced years, she had also become less politically correct. The book is dedicated to her.

Prof. Basu also regales us with snippets of himself. His motivation to read, as a child, to catch up with the nerds in the class. Or, the rationality of acceptance of his paper by AER after its rejection from The Manchester School. His annoyance at needless safety announcements in an aeroplane, on ink cartridges, medicine bottles, packaged aerated drinks and snacks. His worst lectures, delivered at a kindergarten school in Princeton and a school for the underprivileged in Calcutta.

Section VIII: Hobbies This section is the last and, in my opinion, the best. It consists of translations of two short stories by the famous Bengali humourist, Shibram Chakrabarty, a drama and a variant of Sudoku. The first story is titled By Debt if Need Be (Rnam Krttva). The author (Shibram) needs 500 rupees to pay his rent, otherwise he will be evicted. He approaches a friend, Harshabardhan, on a Wednesday and borrows the sum from him. He promises to repay on Saturday. On the scheduled date, he borrows Rs. 500 from Harsha's brother Gobardhan, with an assurance to repay next Wednesday. The rest is easy. From Harsha to Gobar and Gobar to Harsha, he gets caught in an infinite loop of Wednesdays and Saturdays. Till he meets them both one day, in the middle of the street. He makes them a simple proposal: Every Wednesday, Harsha gives Rs. 500 to Gobar and every Saturday Gobar pays Harsha the same amount. He excuses himself from this deal between two brothers. This simple construct has been used by Prof. Basu elsewhere, to explain how sovereign debt can be juggled by countries, if there are multiple lenders, till liquidity is restored (Basu 1998).

I find the second story more scary than funny. It is titled The Birth of a New God (Debotar Jonmya). The author (Shibram) trips on a stone by the roadside, digs it out and forgets about it. Months later, when he revisits the place, he finds a temple there inside which the stone is worshipped as an idol. During the smallpox epidemic that ensues in Calcutta, he tries out Homeopathy, Ayurveda and vaccination, but continues to feel weak. Even a charmed amulet does not make him better. At last, he bows to the stone and prays. At one level, the tale reminds me of the short story Chikitsa Sankat (Crisis of Treatment), by Rajshekhar Basu, in which a middle-aged bachelor is treated by different doctors, for imaginary diseases. At another, I recall the short story Debi (The Goddess), by Prabhat Kumar Mukhopadhyay, which was made into a film by Satyajit Ray. A young bride, Doyamoyee, is deified as an incarnation of Goddess Kali by her father-in-law. Her husband, Umaprasad wants to escape with her. The scene in which Doyamoyee (Sharmila Tagore) refuses to flee with Umaprasad (Soumitra Chatterjee), lest he face divine wrath, shook me to the core. The belief that she is an incarnation has consumed her as well! Has a similar superstition possessed the protagonist in Debotar Janmya? 442 Prajnan

My only request to Prof. Basu, as a fellow admirer of Shibram Chakraborty, is for the translation of two more short stories. The first is Anka Sahityer Jogphol (Combination of Maths and Literature). The narrator finds the spoken language ambiguous. For instance, I'm fine means nothing to him. So, he attaches mathematical certainty to the spoken word, with 100 as the upper limit. Hence, I'm 90 fine means that the speaker is in an almost perfect state. Of course, others don't understand a bit and beat him up, in the end. In order to avoid being vaguely right, he is precisely wrong! The story is a remarkable commentary on the constant conflict between quants and poets, so to say.

The second story is Pig Maane Shuor Chhana (A pig is a young boar). A man goes to a railway counter, to take delivery of two baby guinea pigs. The official charges him the tariff applicable to pigs, while he wants to pay the price for rodents. After much argument, he returns home empty-handed, with the guinea pigs in the custody of the railways till the matter is resolved. As the official runs from pillar to post, to find out the lineage of the animals, the guinea pigs multiply at a GP rate and overwhelm the ticket counter. A fine case study on how red tape can strangle the government official who wields it.

The next item is a play titled Crossings at Benaras Junction. The introduction is Shavian – it explains the author's motivation for the play and his interest in the quotidian theatre – which focuses on matters of daily life. The protagonist is a middle-aged Professor of Philosophy at New Delhi University, Siddharth Chatterjee, who has won a prestigious award from the International Philosophy Association. The play starts with the arrival of his colleagues to congratulate him. A blunt and rustic admirer, Mr. Gupta, exposes their hypocrisy. At the other end of the spectrum is Mr. Sharma, a crook who has created Ganga Travel and Tours, GATT (after he failed to register the acronym WTO (World Travel Operators)), to swindle foreign tourists who swarm India in search of spirituality. He sends his wife, Kavita (an ex-student of Siddharth), and assistant Lachhu along with the tourists to Benaras. They travel on the same train which Siddharth has boarded for Calcutta. After an eventful journey, during which the foreigners are cheated, Siddharth and Kavita decide to stop at Benaras and live together.

The plot is fantastic and the play on words, e.g. GATT and WTO, is a treat. The confusion between soul and sole or sambar the deer and sambar the dish is crazy. The prism of spirituality through which India is still viewed from outside, or the pretence of civility by Siddharth's colleagues, are prime examples of hypocrisy. The manner in which Kavita retains her own identity, despite her marriage to Sharma, is admirable. The only point I do not appreciate is that Kavita is a cripple. It feels as if the playwright has tried to justify her marriage to a crook, through her handicap. The ardent fan of Simone de Beauvoir is too capable an individual, for such a decision. When she looks at the stars and feels peaceful, I hark back to Tagore's Hridoy Aamaar Prokash Holo Ananta Book Reviews 443

Aakashey (My soul finds expression in the infinite skies). I am also eager to know why Siddharth and Kavita chose Benaras to abort their journey.

The final piece, Duidoku and Ultimate Duidoku, is reminiscent of Prof. Binmore's famous book Fun and Games: A Text on Game Theory. Duidoku and Ultimate Duidoku (Dui means Two in Bengali) are two-person versions of Sudoku. Prof. Basu shows that, if perfect players play the game, Ultimate Duidoku will end in a draw. The outcome for Duidoku is not so clear.

Conclusion It has been a delight and a challenge for me to review this wonderful compendium. Its simplicity is deceptive - like the stories by Prof. Basu's favourite author, Shibram Charaborty. This labour of love took me back many years - to the books and papers that I read as a student of Economics. The anthology should be a compulsory textbook for all multidisciplinary postgraduate courses, on matters of economic policy, foreign affairs and philosophy. 444 Prajnan

Appendix I Distribution Based Paradox of Thrift

Let the Savings Function be (1) S(Y)  swY  (1)scY

Where c and w represent capitalist and worker respectively,  is the share of wage income in GDP and s (Capitalist MPS) > s (Worker MPS) c w

I From equation (1) and the familiar equilibrium condition, Y  (2) sw  (1)sc

dS From equation (1) ……  (s  s )Y  0 (3) d w c As the income distribution shifts against workers (i.e. as a falls), aggregate MPS rises at each level of income. This is captured by a steeper Savings schedule in panels A and B below.

dY I (s  s ) From equation (2) …… c w (4)  2  0 d sw  (1)sc 

dY Y (s  s ) From a little algebra, it follows that  c w (5) d (S /Y)

dS But, the numerator of equation (5) is:  d

dS  With rearrangement of terms, it follows that dY  d d (S /Y)

dY /Y dS / S Or,   (6) d d

Cet. par., with a shift in income distribution against workers (i.e. fall in ), the rate of output growth is inversely proportional to the percentage rise in MPS (Panel A). Only a big jump in autonomous investment can increase national income (Panel B).

Panel A Panel B Fall in Income with higher MPS Rise in Income with more Investment Book Reviews 445

Appendix II A Hardline Equilibrium in a Repeated Game Framework There are two groups of voters, A and B. They can elect either Liberal (L) or Hardline (H) parties. Let us begin with a static (one-period) model, in which it is a dominant strategy for both groups to choose H, though the payoffs are higher if they choose L. In this variant of the Prisoner's Dilemma, the payoff matrix looks as follows:

Table I Payoff Matrix for a Liberal-Hardline Game

B L H A L (a, a) (b, c) H (c, b) (d, d)

The conditions for (H, H) to be a dominant strategy equilibrium are: c > a, d > b and a > d. However, in an infinitely repeated game, (L, L) is an SPNE iff

a d  c  (1) 1 1  where d is the discount factor.

c  a Therefore, (L, L) will be an SPNE for all      . In other words, if voters are farsighted c  d enough, they will elect liberal parties. Now, let there be a fear factor f due to local/global events. The degree of fear increases if many others (captured by N) are also perceived (maybe through social media) to be scared by similar events. Together, they feel more secure if hardline parties are in power. Hence, in an infinitely repeated game, (H, H) is an SPNE iff

d a c   fN  (2) 1  1  

1 (a d)  Hence, (H, H) will be an SPNE for all f  f    c . In other words, if voters are too N  (1 )  scared, they will elect hardline parties. The comparative statics are simple.

f 1  (a  d)  (a) As people become more farsighted, the fear threshold (above which   2   0  N (1 )  hardline parties are chosen) rises. The implication is that it takes bigger shocks to tilt them towards hardliners. As a result, the chance of (L, L) increases. 446 Prajnan

f 1 (b)   ..... 0 As more people are perceived to be scared, the threshold falls. It takes N N 2 smaller shocks to choose hardliners. The chance of (H, H) increases.

References 1. Acharya, V V & R G Rajan (2020), “Indian Banks: A Time to Reform?”, Mimeo, University of Chicago Booth School of Business, 21st September. 2. Basu, K (1998), Analytical Development Economics: The Less Developed Economy Revisited, Oxford University Press, New Delhi. 3. Bénabou, R & J Tirole (2010), “Individual and Corporate Social Responsibility”, Economica, 77 (January), pp 1-19. 4. Chakravarty, S (1997), “On the Question of Home Market and Prospects for Indian Growth”, in Writings on Development: Sukhamoy Chakravarty, Oxford University Press, New Delhi. 5. Dabla-Norris, E; K Kochhar; N Suphaphiphat; F Ricka & E Tsounta (2015), “Causes and Consequences of Income Inequality: A Global Perspective”, IMF Staff Discussion Note, June. 6. Friedman, M (1970), “A Friedman Doctrine – The Social Responsibility of Business is to Increase its Profits”, The New York Times, 13th September. 7. Gilens, M & B I Page (2014), “Testing Theories of American Politics: Elites, Interest Groups and Average Citizens”, Perspectives on Politics, 12 (3), pp 564-581. 8. ______(2016), “Critics Argued with our Analysis of US Political Inequality: Here are 5 Ways They're Wrong”, The Washington Post, 23rd May. 9. Gopinath, G (2020), “Farm, Labour Bills are Steps in Right Direction”, Interview, Economic Times, 16th October. 10. Kalecki, M (1954), “The Development Factors (Chapter 15)”, in Theory of Economic Dynamics: An Essay on Cyclical and Long-Run Changes in Capitalist Economy, George Allen and Unwin, London and New York. 11. ______(1971), “Determinants of Investment (Chapter 10) and The Problem of Effective Demand with Tugan-Baranovski and Rosa Luxemburg (Chapter 13)”, in Selected Essays on the Dynamics of the Capitalist Economy, Cambridge University Press, Cambridge, UK. 12. Kumhof, M; R Rancière & P Winant (2015), “Inequality, Leverage and Crises”, American Economic Review, 105 (3), pp 1217-1245.

13. Myint, H (1991), The Economics of the Developing Countries, 4th (Revised) Edition, B I Publications, New Delhi. 14. Panagariya, A (2020), “The APMC Conundrum: Rolling Back This Reform Will Encourage Vested Interests To Strike Down All Reforms”, Times of India, 9th December. 15. Pintekova, A & J Kukacka (2019), “Corporate Social Responsibility and Stock Prices after the Financial Crisis: The Role of Primary Strategic CSR Activities”, SSRN Working Paper no. 3380881. Book Reviews 447

16. Rakshit, M (1989), “Effective Demand in a Developing Country: Approaches and Issues”, in M Rakshit (ed.) Studies in the Macroeconomics of Developing Countries, Oxford University Press, New Delhi. 17. ______(1997), “Development Economics: A Synoptic View”, Introduction to Writings on Development, Sukhamoy Chakravarty, Oxford University Press, New Delhi. 18. Sen, A (2020), “Books and Freedom”, Acceptance Speech, Winner of Peace Prize 2020, German Book Trade.

Six Lenses – Vignettes of Success, Career and Relationships

R Gopalakrishanan

Delhi, Rupa Publication, December, 2015, pg. 194, Rs. 395.

Reviewed by Dr Rakesh Gupta, Faculty, National Institute of Bank Management, Pune.

Genre-Non-Fiction R Gopalkrishanan, Author of the Book has brought together several lessons learnt through ideas, values and emotional energy, by narrating the story of people like us. The author elucidates the extraordinary lessons that can be learnt from everybody experience and shows how, by altering perception one can better overcome the challenges one faces at work and at family. There are six lenses that shape our perceptions. The author has crystalised, how the six lenses of life (Purpose, Authenticity, Courage, Trust, Luck, and Success and Fulfilment) can make one understand the purpose of life, and what matter most is Success, Career, and Relationship. The Book has a Chapter that correspond to each of the Six Lenses.

The Book is based on the obvious idea i.e. we judge people and events through assumptions which we have adopted consciously or unconsciously. Our feeling of success and fulfillment are influenced by our perceptions and perceptions 448 Prajnan are influenced by the lenses through which we see the world. By rotating lenses through which we view the world, we change our perceptions and by changing our perceptions we can reconsider what success and fulfillment mean to us.

In Chapters One to Four, the author has beautifully described the need he felt for writing this Book, the idea came out of his struggle to reconcile many aspects of work and family life. Chapter 2 elucidate that how feeling of success and fulfillment are influenced by our perceptions. A person who is beautiful tends to judge the world in terms of attention and attraction. A hugely wealthy person may judge other people through their display of wealth. The way you measure yourself is usually how you measure others, and how you assume others measure you. That is why we have such different measures of what constitute success and fulfillment.

Chapter Three and Four nicely explains the two phases of life "Gathering Phase and Scattering Phase" The former is first phase of life of each individual where one is focused on improving financial status, power, wealth and things that are acquisitive in nature, while in second phase one seeks and want to share experience, time and even wealth with others, in other words individual seeks meaning to life. The narration of "Nikhal Kwatra" described the journey from Gathering Phase to Scattering Phase. Narrative demonstrate how a common place and small looking episodes shape a person and his life view.

Chapter Five elaborates "How we judge events and people" all the time even though we are not conscious about all this and what influences our Judgements? In reality what we observe is reconstruction of our brain through the chisel of our own experience. The Author has explained it by exemplifying the use of support frame of Optician, where lenses can be rotated to improve vision during testing. The rotation of each lens changes the clarity and view. There are zillions of perspective that the viewer can get. Our perception of life is bit like these two eyes watching and judging things through the lenses on each eye.

Chapter Six narrates about "Purpose: The First Lens". The important feature of individual purpose is that it is designed by that individual from conscious choices that he or she exercises. Purpose is not something that just happens to a person; it is what the individual design (albeit unconsciously) to represent who he or she is and what that person want to achieve in life. It can be to change the world with intellectual contribution. It can be to influence the world through humanities and art. It can be to create wealth. It may be to uplift society. It can be to achieve harmony within self. The individual purpose as being self-designed is a blend of five things:

Humanistic, Honorific, Historic, Hedonistic and Holistic To substantiate its point, the author beautifully related it with Father Victor Courtois-uniting Muslims and Christians which score high on "Humanistic" Book Reviews 449

purpose on five pentagon points, similarly William Shockley narration is an example of pursuit of "Honorific" Purpose, Bob Kearns is an example who pursued a "Historic” purpose and so on, Purpose is a personal odyssey and for large part of humanity. The search for purpose is incessant. The search must be within oneself.

Chapter Seven throws light on "Authenticity: The Second Lens". Authenticity is connected with deep personal and professional relationship. Authentic people do what they have to because that is what they simply have to do. Given the difficult circumstances, people will act in a way which truly represent who they are. They are not influenced by the after effects of their actions or their image of authenticity. Authenticity has no Mantra, as exemplified and substantiated by leadership skill of Ratan Tata.

Chapter Eight talks about "Courage: Fourth Lens”

Courage is like beauty – one cannot quite describe it, but we recognize it when it appears. Courage is about display of ambition, boldness, standing up for the weak, taking risk and facing up to one's vulnerabilities. Courage is a very wide term. It can be applied to act as of valour and heroism, like to captain of a ship who gives up his life to save his passengers. It can be applied to war when a solider sacrifices his life in defense of the country. It can be applied to a pedestrian who goes out of his or her way to save a road accident victim. the list is endless, but substantiating its point by narration of stories of demonstrating courage though having different opinion like – General Butcher and Vallabhbhai Patel on Hyderabad action, Vibhashana and Ravana – A Case of non-financial principals, Archer Blood and Richard Nixon – a matter of principal, R K Talwar and Sanjay Gandhian ethical principal demonstrated the intent behind their courageous action.

Chapter Nine – "Trust – the Fourth Lens". In this Chapter among other things the author talks about three trust vectors: feeling, attitude, and relationship. Feelings: a person feels no insecurity to speak or act. Secondly, it is an attitude: an expectation about a person or institution that is taken for granted; for example one expect that the pilot will land the plane safely or water will emerge from tap when you turn it on. Third and last, it is relationship between two people or groups of people for example a family or community will hang together or that marriage will imply fidelity. The story and mission of advertising professional Gaeta for fund raising for trust is substantiating the three Trust vectors. The Chapter concluded with statement like– "Trust is like Ceramic". If it is made and if it stays strong, it serves its master for long. Once broken, it does not mend.

Chapter Ten– "Luck – the Fifth Lens". In this chapter, the author discusses various aspects of luck – Luck as a belief, psychologist view, experts faith, luck as a coincidence, luck as superstition, earned and unearned luck and so on. 450 Prajnan

Chapter Eleven – "Success and Fulfilment – the Sixth Lens". This Chapter narrated how a meeting of John D Rockefeller with Swami Vivekananda changed a successful person to a fulfilled person who later on created a Rockefeller Foundation which has done enormous amount of good work in society for last several decades.

To die as successful person is different than to die embracing as successful and fulfilled person. All successful person are not always fulfilled, but all fulfilled people are always successful because they define success in their terms like Mother Teresa, Swami Vivekananda and Baba Amte have guided us. The characteristic of fulfilled person is that he or she is at peace with self and always aim for a goal outside of themselves.

All the stories of book suggest that each person has to live his or her life in his or her own way. The choice of that way is determined by the view he or she takes through six lenses. When all that has been done and life has been lived out, to feel fulfilled is a privileged gift.