Amit Varma, writing at promising new The Indian Economy blog, points to a much needed takedown of an anti-market, left-wing OpEd by a Dr. Utsa Patnaik. As with many ideas of this sort, Dr. Patnaik starts with a rather broad, well-intentioned need / desire to save the poor –
THE ARGUMENTS for a universal, not targeted, National Rural Employment Guarantee Act as well as for a universal Public Distribution System (PDS) are far stronger than most people realise. Rural India is in deep and continuing distress.
National Employment Gaurantee? Universal Public Distribution? Eek. Someone’s been lifting lines from Orwell, Marx, and Rand . The fisking, authored by Aadisht Khanna, summarizes Dr Patnaik’s argument thusly –
* Rural India is facing an employment crisis
* This is because of the economic policies pursued in the past fifteen years.
* The proof of this is that people are eating much less grain.
* The assertion that people are eating less grain is borne out by data from the National Sample Survey, which measures consumption and expenditure across India.
Aadisht’s response? An important lesson in economics & statistics – not all products rise monotonically in consumption or production given increasing incomes & productivity –
There is a decline in rice and wheat consumption, and also in the consumption of dal… But at the same time, the consumption of other stuff has risen- milk, vegetables of all sorts, meat of all sorts (though fish has shown the most dramatic rise), and most notably eggs- the consumption of those has doubled.
And this suggests something that you would expect a Professor of Economics to know- the consumption pattern looks suspiciously like that of Giffen goods.
… What’s the classical example of Giffen goods used in economics textbooks? That when your income rises, you buy less bread and more meat- exactly what we see happening in rural India from 1988 to 2000.
Then again, I suppose that if your goal is to make the case for a “new deal for the rural poor” replete with a messianic role for left-wing econ professors, then perhaps statistical anomalies like Giffen goods are a bit of a godsend. Too bad for the poor – the bureaucracy and tax burden will have to grow until they go back to the past & eat more dal.
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