From Facebook today
Independent India’s Finance Ministers have never in 62 years referred to economic theory or the history of economic thought until Mr Mukherjee delivered the 4th Kadirgamar Memorial Lecture in Colombo yesterday, making the following academic claim:
“As students of economics would understand, economic theory is an evolutionary process and undergoes change with every major crisis. The classical theory gave way to Keynesian economics after the Great Depression of 1930s. Thereafter, there were post-Keynesian and monetarist approaches to economic problems during 1960s to 90s. The present crisis, which has also been called Great Recession, would be another watershed in the evolution of economics and is expected to bring about radical retooling of the theory. The crisis has, in the first place, conclusively established that the pursuit of individual goals do not necessarily lead to public good. Adam Smith’s ‘invisible hand’ cannot guarantee allocation of resources efficiently.”
I might rather count this as intellectual progress to the extent that it at least allows the Government of India’s economists the possibility of moving away from politically-induced dissimulation and instead begin to connect with where I was 25 years ago in my May 1984 monograph published by London’s Institute of Economic Affairs (leave aside my 1976-82 doctoral thesis under Professor Frank Hahn at Cambridge “On liberty and economic growth: preface to a philosophy for India”). As for the Finance Minister saying “The Indian economy has shown remarkable resilience to the crisis because the financial system had no exposure to the toxic assets”, I am afraid he has left unsaid that this is because (a) the rupee is not a hard currency; and (b) India’s banks hold plenty of domestic assets that are “toxic”.