J.M. Keynes, in his publication "The General theory on Employment, Interest & Money" in 1936, advocated public sector participation in Economic activities of nations thus giving rise to the need for active public sector role in regulating the Economics of nations. According to Keynes, pure Private capitalism results in undesirable macroeconomic results. He suggested 2 types of Government roles:
1. Monetary Policy measures wherein regulation & influence was done upon the cost of capital, availability of capital & its supply.
2. Fiscal Policy measures wherein the Government shall directly interfere & participate in economic affairs of the nations mainly to gather revenue(in form of progressive taxation), borrow money(debt raising) to raise capital if needed & to spend the money in form of Public expenditure(i.e. creating public utilities & services).
If we observe the above measures as suggested by Keynes, we can see that this theory has become universally acceptable & applicable, hasn't it? Keynesian Economics thus stresses the need to have active Government role but with enough space for Private participation. This gives rise to a mixed economy.
Various heterodox school of thoughts(the school of thoughts in Economics that are against the mainstream economics) have criticized Keynesian economics. They have their valid points that role of Government has actually created an artificial economy which is regulated not by market mechanisms but by coercive participation. Agree to it. They also criticize Keynesian Economics that since 1970s, this school of Economics hasn't been able to serve its purpose of a harmonious, growing & satisfying economy rather has created may problems such as the latest Recession of 2008. Again agree.
Now, what I don't agree to is, if Keynesian Economics is so much unsuccessful, how come it could help in overcoming the Great Depression of 1930s & so many others after that? How are we still growing & are able to develop while satisfying the needs of our people(keeping aside the case of some undeveloped nations)? How have the economies of U.K., U.S., E.U. & such developed economies been able to sustain their Economic models with so much of consistency? Why crores of Economists still support Keynesian thoughts & have hope in it? Only the readers can answer this as they have to decide the ultimate outcome of my discussion.
Agree, that present Economic principles have created a lot many problems some of them which threaten the very sustainability of Economies, but these are short-term of medium-term fluctuations that "call for further active research & upgradation" of Keynesian school of thought. This is a sign of need for adding and/or modifying the underlying principles while keeping the core laws & philosophy constant.
While further highly active & rigorous research is required in this School of thought, I urge the readers, especially those who belong to the fraternity of Economics & have passion for it to go for research in this filed & develop newer & much more applicable models. This will ensure that the ideas given by Keynes do not go in vain even after serving its purpose for so many years. Do express your views.
Bhagirath Baria
- Bhagirath Baria
- The Author of this blog has keen interest in understanding Economics and its implications on the Individual and the Economy as a whole. Has been writing articles and analysis of issues that may skip general observation, but exert deep influence on people's lives and their decisions. Discussions and Debates related to conventional as well as non-conventional Economics is done here. The author of this blog doesn't classify himself to any particular School of thought in Economics. He is tilted toward Mainstream Economics, though has keen interest in a few Heterodox schools too. Wishing all the readers a truly enriching experience.
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Based on a work at www.rathandeconomics.blogspot.com.
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Saturday, April 30, 2011
Monday, February 28, 2011
Union Budget 2011-2012: Crucial Highlights
Dear readers, the budget is out. This year, it was expected that the Finance Minister would announce some populist measures so as to tackle the tumbling image of the current Government on account of ineffective Governance. The picture's a bit different. We find that the Budget is very much Growth-oriented & is trying to tackle the I word(read Inflation. On a still deeper look, we can attest that the Budget is a calm & composed one with its core aims very clear. Let us look at some of the most important announcements by the Finance Minster.
1. Electronic filing of TDS returns at source stabilised; simplified forms to be introduced for small taxpayers. These will be called 'Sugam'.
2. Standard rate of excise duty held at 10 percent
3. New Senior Citizen catagory- Very Senior Citizen of above 80 years of age; exemption limit Rs. 5 Lakh.
4. Reduction of 2.5% on Corporate Surcharge to 5% from previous 7.5%; a good move
5. Air fares dearer; Rs. 50 & Rs. 250 increment on Domestic & International flight in Economy class. On higher classes- flat 10% Service tax.
6. Service tax widened to cover hotel accommodation above Rs 1,000 per day, A/C restaurants serving liquor, some category of hospitals, diagnostic tests
7. Fiscal deficit seen at 4.6 percent of GDP in 2011-12; in current year it has come down to 5.1% from previous 5.5%.
8. Disinvestment in 2011-12 seen at 400 billion rupees; Government clear on retaining 51% share in PSEs
9. Constitution Amendment Bill for introduction of GST regime in this session; a laudable move as it is the need of the hour.
10. To create infrastructure debt funds; very clearly expressing Governments keen desire to boost up & develop the Infrastructure sector.
11. Cold Storage chain given Infrastructure status; a very good move as a huge portion of our national produce gets destroyed due to inefficient & inadequate cold storage facilities. A +ive move for Agro-sector.
12. A comprehensive Manufacturing Policy soon; Every country that aims to grow at huge numbers has seen its Manufacturing sector give highest share in GDP which India still lacks; its just 15% of GDP whereas its around 40% in China.
13. NREGA wages to be linked with CPI(Consumer Price Index. i.e. Inflation rates); a very practical move & was expected as we are in a state of Financial Inclusion wherein the Poor too needs resistance base agaisnt high inflation rates.
14. Direct transfer of Cash subsidy for Kerosene, LPG & Fertilizers; the logic of this move lies in the fact that most of the Subsidy given through PDS & other means is being eaten away by the middle entities involved in the transfer process.
15. Infusion of Rs. 30,000 crores in NABARD for boosting financial assistance to country's Agro-sector
16. Comprehensive policy on further developing PPP (public-private-partnership) model
17. Education sector's allocation up by 24%.
These are completely based on my own research of today's Budget. This is a highlight of some of the most important announcements of the Union Budget, knowing these shall help all the readers understand what the Government aims to do & how it shall affect us. Further sectoral analysis & analysis of its effects shall be posted soon. Do express your views by commenting upon these words.
1. Electronic filing of TDS returns at source stabilised; simplified forms to be introduced for small taxpayers. These will be called 'Sugam'.
2. Standard rate of excise duty held at 10 percent
3. New Senior Citizen catagory- Very Senior Citizen of above 80 years of age; exemption limit Rs. 5 Lakh.
4. Reduction of 2.5% on Corporate Surcharge to 5% from previous 7.5%; a good move
5. Air fares dearer; Rs. 50 & Rs. 250 increment on Domestic & International flight in Economy class. On higher classes- flat 10% Service tax.
6. Service tax widened to cover hotel accommodation above Rs 1,000 per day, A/C restaurants serving liquor, some category of hospitals, diagnostic tests
7. Fiscal deficit seen at 4.6 percent of GDP in 2011-12; in current year it has come down to 5.1% from previous 5.5%.
8. Disinvestment in 2011-12 seen at 400 billion rupees; Government clear on retaining 51% share in PSEs
9. Constitution Amendment Bill for introduction of GST regime in this session; a laudable move as it is the need of the hour.
10. To create infrastructure debt funds; very clearly expressing Governments keen desire to boost up & develop the Infrastructure sector.
11. Cold Storage chain given Infrastructure status; a very good move as a huge portion of our national produce gets destroyed due to inefficient & inadequate cold storage facilities. A +ive move for Agro-sector.
12. A comprehensive Manufacturing Policy soon; Every country that aims to grow at huge numbers has seen its Manufacturing sector give highest share in GDP which India still lacks; its just 15% of GDP whereas its around 40% in China.
13. NREGA wages to be linked with CPI(Consumer Price Index. i.e. Inflation rates); a very practical move & was expected as we are in a state of Financial Inclusion wherein the Poor too needs resistance base agaisnt high inflation rates.
14. Direct transfer of Cash subsidy for Kerosene, LPG & Fertilizers; the logic of this move lies in the fact that most of the Subsidy given through PDS & other means is being eaten away by the middle entities involved in the transfer process.
15. Infusion of Rs. 30,000 crores in NABARD for boosting financial assistance to country's Agro-sector
16. Comprehensive policy on further developing PPP (public-private-partnership) model
17. Education sector's allocation up by 24%.
These are completely based on my own research of today's Budget. This is a highlight of some of the most important announcements of the Union Budget, knowing these shall help all the readers understand what the Government aims to do & how it shall affect us. Further sectoral analysis & analysis of its effects shall be posted soon. Do express your views by commenting upon these words.
Friday, February 25, 2011
Budget Analysis to come soon
Dear readers, as a part of Tradition of this blog, R&E shall be presenting a detailed analysis of the Union Budget 2011-2012, as usual in the Simplest possible language. The goal will be to make aware as many people as possible, about the implications of the Union Budget on our day-to-day lives. By tomorrow there will be an article explaining and expressing the wishes & needs of some of the most important sectors of our Economy. Many important events have had happened since the last post. I assure you that all of them shall be covered very soon as the blog is under a revival & re-designing mode. Have a great day.
Sunday, December 26, 2010
Trainomy- Economics on Wheels!
The crux of Economics is the Demand & Supply equation. Since decades, classrooms have been imparting Economics with the concepts of Demand & Supply being at the crux of it. After going through few really wonderful writings in Economics namely by Stephen Dubner & Steven Levitt, one will reach the stage of Economic self-actualization. With a fresh look at Economics & how it can be seen anywhere, anytime, lets explore its existence in our very own trains, The India Railway Trains.
Ask a regular traveler of any train, especially of the General class, you’ll know what it means to be in a train in India especially in those coming from or going on long journeys. The Station needs no criticism as enough has been told & expressed on it, same applies to our railway tracks & in macro-economic terms to the overall aggregate of the entire Indian Railway system.
Just then, something strikes the mind & an out-of-the box observation is done. The Indian train is a big-bazaar on wheel! All sorts of things, from a safety pin to delicious food items to toys & so much more are sold & purchased in this economy called “Trainomy”. With this, one important thing to point out is that all these economic transactions occur on the basis of the Law of Demand & the Law of Supply . An example of this is when a “paani ke pouch wala” sells a pouch for Re. 1 & the same is sold for Rs. 2 or even 3 when the Demand is high & supply limited, a clear cut 200% to 300% rise in price! If you wish to look at this event, go grab a ticket for “Memu passenger” train.
Now a days , due to inflation or to be precise “artificial inflation” of the onions, the quantity of bhel or chane ki dal with onion in a coach has reduced, prices remaining constant. One can illuminate upon so many such instances. Every choice, decision or activity has what Economists call negative externalities. The low-cost model of the General class coach attracts the daily travellers & those who wish to save few bucks. But it has its own negative effects such as increased risk of accidents, higher probability of conflicts as people travel in a congested manner & many more such effects. Maybe an HR Manager may enjoy here as he/she can use the HR skills of Conflict resolution.
Incentives are very important while talking on & about Economics. Especially the monetary incentives. In Freakonomics by Stephen & Steven, this fact is explained quite beautifully wherein the parents of children started coming much later than before when a nominal penalty was put on them for being late to pick up their children from school. With a minimal monetary amount as penalty they got an incentive of being relaxed, finish all the work & leisurely come to pick their children!
A running train exerts a few types of Markets. Some coaches are the Monopoly centres, some maybe Perfect markets. When we talk about the “chai”, it is generally a perfect market where an individual doesn’t exert any individual influence on the prices, so these are generally fixed & don’t change much, ever heard of chai being more than Rs. 5 per cup? Maybe once in a blue moon! The toy sellers are the most haphazard price-makers. Sometimes you’ll find a toy of a lesser amount & sometimes the same maybe of higher amount. It depends quite cleverly on the Class of the coach too, for eg. something maybe costlier in the First class & the same thing may be lower in the General or the Second class as its called. Sellers are very good in observing the monetary capacities of the prospective buyers.
All sort of Marketing gimmicks can be seen too. An ice-cream wala may constantly bet his product to be of the “best” quality, on looking at the cover one may never be able to locate the name of the producer of that ice-cream! Still people buy them up & enjoy every bit of it. When it comes to those who get money by singing, they have a lot of understanding for each other & exert mutual agreement. One will never go or interfere in the coach in which the other is earning his living. Maybe these are the business ethics they follow.
The coolies are the smartest Economists on the Railway stations. They have a 2nd career running along with their traditional “weight-lifting” job. They sell tickets! And you might have purchased from them too! No, we aren’t talking about the tickets they sell when you’re on counter in a long que & your train is about to leave. This is the case in General coaches where a coolie has his people sitting on seats in the coach. While on station, they offer the travelers a seat for around Rs. 20 or Rs. 30, here one ought to have a ticket issued from the ticket counter, the Men-in-Red know very well who’ll pay them 20 bucks & who 40 bucks. So they fluctuate the prices accordingly.
Many a times bargaining occurs too, where a buyer emphasizes lesser price than the quoted one, there are counter-quotes of price from the sellers & finally when an Equilibrium price is reached upon, both the parties agree & the buyer has the pleasure of sitting & traveling in an unreserved coach.
One can have many such examples based on his/her experience. The Indian trains are very good for someone & a hell for other. But it surely is a memory for everyone. Being quite a regular traveler especially of the General coaches, I’ve got to see the Raw India. People become friends very quickly, chat with each other, share so many “personal talks” with them just to realize that they are strangers who have met for some temporary moments & will move towards their own ways.
Our Railways may have been criticized on several thousand grounds but it definitely adds to ones experience. Good or Bad, memories are memories & they add value to us anyway. Being a novice Economist, I’ve tried to recollect some thoughts & observation from my limited experience in our trains. A more seasoned traveler would like to join the club of Trainomists & add to our understanding. Do express your views.
Ask a regular traveler of any train, especially of the General class, you’ll know what it means to be in a train in India especially in those coming from or going on long journeys. The Station needs no criticism as enough has been told & expressed on it, same applies to our railway tracks & in macro-economic terms to the overall aggregate of the entire Indian Railway system.
Just then, something strikes the mind & an out-of-the box observation is done. The Indian train is a big-bazaar on wheel! All sorts of things, from a safety pin to delicious food items to toys & so much more are sold & purchased in this economy called “Trainomy”. With this, one important thing to point out is that all these economic transactions occur on the basis of the Law of Demand & the Law of Supply . An example of this is when a “paani ke pouch wala” sells a pouch for Re. 1 & the same is sold for Rs. 2 or even 3 when the Demand is high & supply limited, a clear cut 200% to 300% rise in price! If you wish to look at this event, go grab a ticket for “Memu passenger” train.
Now a days , due to inflation or to be precise “artificial inflation” of the onions, the quantity of bhel or chane ki dal with onion in a coach has reduced, prices remaining constant. One can illuminate upon so many such instances. Every choice, decision or activity has what Economists call negative externalities. The low-cost model of the General class coach attracts the daily travellers & those who wish to save few bucks. But it has its own negative effects such as increased risk of accidents, higher probability of conflicts as people travel in a congested manner & many more such effects. Maybe an HR Manager may enjoy here as he/she can use the HR skills of Conflict resolution.
Incentives are very important while talking on & about Economics. Especially the monetary incentives. In Freakonomics by Stephen & Steven, this fact is explained quite beautifully wherein the parents of children started coming much later than before when a nominal penalty was put on them for being late to pick up their children from school. With a minimal monetary amount as penalty they got an incentive of being relaxed, finish all the work & leisurely come to pick their children!
A running train exerts a few types of Markets. Some coaches are the Monopoly centres, some maybe Perfect markets. When we talk about the “chai”, it is generally a perfect market where an individual doesn’t exert any individual influence on the prices, so these are generally fixed & don’t change much, ever heard of chai being more than Rs. 5 per cup? Maybe once in a blue moon! The toy sellers are the most haphazard price-makers. Sometimes you’ll find a toy of a lesser amount & sometimes the same maybe of higher amount. It depends quite cleverly on the Class of the coach too, for eg. something maybe costlier in the First class & the same thing may be lower in the General or the Second class as its called. Sellers are very good in observing the monetary capacities of the prospective buyers.
All sort of Marketing gimmicks can be seen too. An ice-cream wala may constantly bet his product to be of the “best” quality, on looking at the cover one may never be able to locate the name of the producer of that ice-cream! Still people buy them up & enjoy every bit of it. When it comes to those who get money by singing, they have a lot of understanding for each other & exert mutual agreement. One will never go or interfere in the coach in which the other is earning his living. Maybe these are the business ethics they follow.
The coolies are the smartest Economists on the Railway stations. They have a 2nd career running along with their traditional “weight-lifting” job. They sell tickets! And you might have purchased from them too! No, we aren’t talking about the tickets they sell when you’re on counter in a long que & your train is about to leave. This is the case in General coaches where a coolie has his people sitting on seats in the coach. While on station, they offer the travelers a seat for around Rs. 20 or Rs. 30, here one ought to have a ticket issued from the ticket counter, the Men-in-Red know very well who’ll pay them 20 bucks & who 40 bucks. So they fluctuate the prices accordingly.
Many a times bargaining occurs too, where a buyer emphasizes lesser price than the quoted one, there are counter-quotes of price from the sellers & finally when an Equilibrium price is reached upon, both the parties agree & the buyer has the pleasure of sitting & traveling in an unreserved coach.
One can have many such examples based on his/her experience. The Indian trains are very good for someone & a hell for other. But it surely is a memory for everyone. Being quite a regular traveler especially of the General coaches, I’ve got to see the Raw India. People become friends very quickly, chat with each other, share so many “personal talks” with them just to realize that they are strangers who have met for some temporary moments & will move towards their own ways.
Our Railways may have been criticized on several thousand grounds but it definitely adds to ones experience. Good or Bad, memories are memories & they add value to us anyway. Being a novice Economist, I’ve tried to recollect some thoughts & observation from my limited experience in our trains. A more seasoned traveler would like to join the club of Trainomists & add to our understanding. Do express your views.
Concluding Employment-de-Entrepreneurship
Dear readers, On a detailed analysis of past data & trends I've found that Entrepreneurship will increase Employment for time being. This is more suitable for developing nations as vast amount of Resources i.e. Land, Labor & Capital are under-utilized. When these resources will become scarce(which will take many many years as such), alternate technologies would have to be developed. If that doesn't happen ,definitely, having more entrepreneurs will mean more demand for these resources as they are the ones to utilize it & create value-added products, thus increasing this scarcity further & finally we'll have higher prices of these resources. This shall de-moralize the new or even the existing entrepreneurs. Hope by that time we develop alternatives for meeting the ever increasing demands for Goods & Services.
Friday, December 10, 2010
Entrepreneurship-de-Unemployment
Dear readers, after reading few very refreshing books of some creative writers in Economics especially the Micro-writers, my creative side of brain gave some viewpoint & a non-conventional one indeed. Friends, there's always a strong thinking & belief that Entrepreneurship expands employment i.e. increases no. of people having jobs. This fundamental viewpoint seems correct in short-run but I believe its validity is questionable in long-run. Resources are scarce & Economics is a science of scarcity as Robbins has very beautifully expressed. Keeping the fact that resources i.e. Land, Labor, Capital & Entrepreneur are scarce, an increase in number of Entrepreneurs would:
1. Increase the demand for these resources namely Land, Labor & Capital.
2. Expand the existing scarcity
3. Due to scarcity i.e. Demand being greater than Supply, Prices shall increase in Long run & may be even in short run...
4. Thus demotivating future entrepreneurs to begin a business.
5. Thereby reducing Job creations
6. Unemployment shall occur as People searching for jobs will keep on expanding as Greaduates & PGs will keep on entering the industry in search of jobs.
Thus IN MY VIEW, increase in Entrepreneurship increases UNEMPLOYMENT in long run though not maybe in short run. Feel free to express your views.
1. Increase the demand for these resources namely Land, Labor & Capital.
2. Expand the existing scarcity
3. Due to scarcity i.e. Demand being greater than Supply, Prices shall increase in Long run & may be even in short run...
4. Thus demotivating future entrepreneurs to begin a business.
5. Thereby reducing Job creations
6. Unemployment shall occur as People searching for jobs will keep on expanding as Greaduates & PGs will keep on entering the industry in search of jobs.
Thus IN MY VIEW, increase in Entrepreneurship increases UNEMPLOYMENT in long run though not maybe in short run. Feel free to express your views.
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