(I make most of my comments on Shantanu's blog. However, I get links passed on to me by others and therefore at times comment on other blogs as well. I propose to use this blog post as a sporadically record of my comments on non-Shantanu blogs. Not all, but a few of them will be recorded here. Please note that due to the extremely short time spent on drafting these comments, the language used is often very clumsy. For my articles I would normally spend at least 50 times more time, revising the language, etc. I hope the meaning somehow comes through in these comments made in great haste.)
The partyless wonders
Comment 6 May 2009: I totally support (in principle) what you've said, leaving aside minor details. Contesting elections as independents or a small party, and hoping to get elected and change things is like Don Quixote's tilting at windmills. The Indian voter will shift allegiance from existing corrupt formations only when a major national party is available as an option at the hustings, with hundreds of outstanding leaders speaking from the same song sheet, communicating their message over the course of a few years.If our new breed politicians are serious they must unite into one or two major groups based on their policy preference, and work strategically and systematically over the next few years. Indeed, Shekhar, aware of such basic matters, a group (Freedom Team of India) has started about a year ago to work through this slower but surer option. I encourage you to drop by at http://freedomteam.in and provide us with your common sense and strategic thinking.
Comment – 7 May 2009: So did the Austrian school (ie. predict the GFC) – well before others. Stiglitz (if I'm not mistaken) came in much later. Do read the numerous articles at: http://mises.org/story/3128
I don't quite understand what sits behind the claim, "Austrian business cycle theorists also claim they can account for every historical business cycle, but in practice, many Austrian economists have turned their theory into little more than a fundamentalist cult."
I agree that some Austrians are more like fundamentalists than scientists, but that is a personal problem of personality, not of the underlying plain common sense science.
The more I look at the Austrian trade cycle the more sense it makes. And to the best of my knowledge I'm not a fundamentalist but a sceptic (of course it is hard to tell once one thinks that a theory makes sense whether one has 'converted' into a fundamentalist… you be the judge).
The Austrian school makes sense for a very simple and obvious reason: If you force interest rates down (a natural central bank bias, to paternalistically help people can buy houses), then savings will plummet, and capital investment (over production of cars, for instance) and long term investments (houses) will boom. Low savings and excess investment in long term assets is the typical cause of a market correction which is then very painful (as we can see through the GFC).
Is that being fundamentalist? I thought that is Economics 101 unless I learnt my basics of economics wrong. What bothers me is that some senior economists seem to have ignored the most fundamental issue: they are not God.
Yes. Economists aren't God. A surprise to some?
A sensible economist will NEVER interfere in the price mechanism (price of money). But, instead, we act like socialist dictators, fiddling with the price of money each month, so called 'fine tuning' interest rates, and expect we can control the economy!
Pardon me, but people are actually rational, and it makes sense to ONLY splurge and overinvest when interest rates are lower than they would have been in the free market. Show me one reason to save when bank deposit rates are 0.1 per cent and inflation is 3 per cent? What's irrational about humans who over-invest in car factories hoping that they will skim off profits well before the inevitable decline sets in? A Ponzi game established on the backs of central bank charity is quite rational, if you were to ask me.
PS If anyone has time, happy to get comments on both my books (one published, one under way), linked at:http://www.sanjeev.sabhlokcity.com/breakingfree.html