“Oh, Renford? He’s a genius!”: A post-War Cambridge story

“Oh, Renford? He’s a genius!” That is what the late Dharma Kumar (1928-2001) said to me in the summer of 1998 at her Delhi home in what would be our last meeting.

I was taken aback.  She and I had met after a long decade.  Discussing what I had been up to, I had mentioned my application of the work of Renford Bambrough to economic theory in my 1989 book Philosophy of Economics.

“Oh, Renford? He’s a genius!” —  Dharma repeated blandly, seeming surprised that I did not get it.

“Oh, Renford? He’s a genius!” — she said a third time more slowly, and then, seeing my uncomprehending stare,  explained to me that that was the common saying at Cambridge about the young Renford Bambrough back in the post-War years when she had herself arrived there as an undergraduate.

Now, finally, I got it.  “Oh, Renford? He’s a genius!”

In “Conflict and the Scope of Reason”, Renford Bambrough recounted that he had, around 1948, crossed the great Bertrand Russell himself at a meeting of the Labour Club.  Russell had made a proposal (which he apparently denied later ever having made) of preventive atomic war against the USSR.  Sooner or later there would be conflict between the USSR and the West, the argument went, on balance it would be worse  to live under pax Sovietica than pax Americana; therefore, Russell had argued, the West’s existing power should be used to ensure the Soviets never acquired the same.   At question-time, young Renford, aged 22, asked Russell why, from a purely philosophical point of view, it mattered  “if the human race did destroy itself rather than die of natural causes later”.  There was laughter among the audience, and then Russell said he had enormously liked the question, and wished he could “achieve the degree of detachment here displayed by one so young.  But I confess that I, for my part, have never been able to overcome my feelings of concern for the welfare of the species of which I am a member”.  Russell had misunderstood the question or deftly avoided it, but even so he had noticed in his young interlocutor the calm detachment that would mark all his later thought.

John Renford Bambrough was born on April 29 1926 and died on January 17th 1999.  I have written a little about him here and shall write more fully about him anon.

Subroto Roy

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Parliament’s sovereignty has been diminished by the Executive: A record for future generations to know

Sad to say, Parliament’s sovereignty has been diminished, indeed usurped, by the new Executive Government.

Here is a brief record for future generations to know.

India’s people completed their voting in the 15th General Elections on Wednesday May 13 2009.

The results of how they had spoken, what was their will, were known and declared by Saturday May 16 2009.

There was no legal or logical reason why the 543 members of the 15th Lok Sabha could not have been sworn in as new MPs by the close-of-business on Monday May 18 at the latest.

On Tuesday May 19 the 15th Lok Sabha could have and should have met to elect itself a pro tem or even a permanent Speaker.

The Speaker would have divided the new House into its Government Party and its Opposition.

There would have been a vote of confidence on the floor of the House, which in the circumstances would have been in favour of the Government Party.

Observing this to have taken place, the Hon’ble President of India as the Head of State would have sent for the leader of the Government Party and invited her to form the new Government.

In this particular case, the leader of the largest political party, namely Sonia Gandhi, would have been accompanied perhaps by the Leader of the Lok Sabha, Pranab Mukherjee, as well as her personal nominee for the position of PM, namely, Manmohan Singh.

Sonia Gandhi would have respectfully declined the invitation of the President to be the new Prime Minister, and she would have also explained that she wanted Manmohan Singh to have the position instead.

The President would have said “Very well, Dr Singh, can you please form the Government?”

He would have said, “Yes Madame President it shall be a privilege and an honour to do so”.

The President would have added, “Thank you, and I notice you are not a member of the Lok Sabha at the moment but I am sure you are taking steps towards becoming one.”

End of visit.

Manmohan Singh would have been sworn in as PM and would have gone about adding Ministers at a measured pace.   Later, he would have resigned his Rajya Sabha seat and sought election to the Lok Sabha on the parliamentary precedent set by Alec Douglas-Home.

What has happened instead?

On May 18 2009, instead of 543 members of the 15th Lok Sabha taking their oaths as required by parliamentary law and custom, Dr Singh held a purported “Cabinet”  meeting of the 14th Lok Sabha — a long-since dead institution!

Some of the persons attending this  meeting as purported “Cabinet ministers” had even lost their seats in the elections decided a few days earlier and so had absolutely zero democratically legitimate status left. All these persons then submitted their purported resignations which Dr Singh carried to the President, stating his Government had resigned. The President then appointed him a caretaker PM and he, along with Sonia Gandhi, then went about “staking claim” to form the next Government — turning up at the President’s again with “letters of support” signed by some 322 persons  who were MP-elects but were yet to become MPs formally by not having been sworn in.

The President appeared satisfied the party Sonia Gandhi and Manmohan Singh belonged to would command a majority in prospect in the Lok Sabha and invited him to be PM.   Some major public wrangling then took place with at least one of his allies about cabinet berths — and that is the situation as of the present moment except that Dr Singh and several others have been sworn in as the Council of Ministers even though the  new 15th Lok Sabha of 543 members has still not convened!  It has been all rather sloppy and hardly uplifting.

Parliament is supposed to be sovereign in India.

Not the Executive Government or the largest political party or its leader.

The sovereignty of Parliament required Sonia Gandhi and Dr Singh to have realised

first, that the 14th Lok Sabha stood automatically dissolved when elections were announced;

secondly, that the 15th Lok Sabha could have and should have been sworn in by Monday May 18;

thirdly, that there should have been a vote of confidence in the Lok Sabha immediately which would have gone in favour of the Government Party;

fourthly, that only then should the Executive Government have been sought to be formed;

and of course fifthly, that if that Executive Government was to be led by someone who happened to be a member of the Rajya Sabha and not the Lok Sabha, parliamenary law and custom required him to follow the Douglas-Home precedent of resigning from the former and seeking election to the latter at the earliest opportunity.

Let future generations know that as of today, May 25, the 543 persons whom the people of India voted to constitute the 15th Lok Sabha still remain in limbo without having been sworn in though we already have an Executive Government appointed!

The sovereignty of Parliament, specifically that of the Lok Sabha, has come to be diminished, indeed usurped, by the Executive.   It is the Executive that receives its political legitimacy from Parliament, not vice versa.  Nehru and his generation knew all this intimately well and would have been appalled at where we in the present have been taking it.

Subroto Roy, Kolkata

India’s 2009 General Elections: the advice of the late “George Eliot” (Mary Ann Evans, 1819-1880) to India’s voting public

It is constantly the task of practical wisdom not to say

“This is good, and I will have it,”

but to say

“This is the less of two unavoidable evils, and I will bear it.”

——— “Address to Working-Men by Felix Holt”,

George Eliot, Blackwood’s Magazine 1868

On the general theory of expertise in democracy: reflections on what emerges from the American “torture memos” today

Twenty years ago, I wrote in Philosophy of Economics (Routledge, London & New York, 1989) quoting from Solzhenitsyn’s experience:

“….the received theory of economic policy… must be silent about the appropriate role of the expert not only under conditions of tyranny (Solzhenitsyn: “The prison doctor was the interrogator’s and executioner’s right-hand man. The beaten prisoner would come to on the floor only to hear the doctor’s voice: ‘You can continue, the pulse is normal’” ); but also where the duly elected government of an open and democratic society proceeded to do things patently wrong or tyrannical (the imprisonment of the Japanese Americans). Hence Popper’s “paradox of democracy” and “tyranny of the majority”..… A theory of economic policy which both assumes a free and open society and bases itself upon a moral scepticism cannot have anything to say ultimately about the objective reasons why a free and open society may be preferred to an unfree or closed society, or about the good or bad outcomes that may be produced by the working of democratic processes…”

Today’s Washington Post reports:

“When the CIA began what it called an “increased pressure phase” with captured terrorism suspect Abu Zubaida in the summer of 2002, its first step was to limit the detainee’s human contact to just two people. One was the CIA interrogator, the other a psychologist. During the extraordinary weeks that followed, it was the psychologist who apparently played the more critical role. According to newly released Justice Department documents, the psychologist provided ideas, practical advice and even legal justification for interrogation methods that would break Abu Zubaida, physically and mentally. Extreme sleep deprivation, waterboarding, the use of insects to provoke fear — all were deemed acceptable, in part because the psychologist said so. “No severe mental pain or suffering would have been inflicted,” a Justice Department lawyer said in a 2002 memo explaining why waterboarding, or simulated drowning, should not be considered torture. The role of health professionals as described in the documents has prompted a renewed outcry from ethicists who say the conduct of psychologists and supervising physicians violated basic standards of their professions. Their names are among the few details censored in the long-concealed Bush administration memos released Thursday, but the documents show a steady stream of psychologists, physicians and other health officials who both kept detainees alive and actively participated in designing the interrogation program and monitoring its implementation. Their presence also enabled the government to argue that the interrogations did not include torture. Most of the psychologists were contract employees of the CIA, according to intelligence officials familiar with the program. “The health professionals involved in the CIA program broke the law and shame the bedrock ethical traditions of medicine and psychology,” said Frank Donaghue, chief executive of Physicians for Human Rights, an international advocacy group made up of physicians opposed to torture. “All psychologists and physicians found to be involved in the torture of detainees must lose their license and never be allowed to practice again.” The CIA declined to comment yesterday on the role played by health professionals in the agency’s self-described “enhanced interrogation program,” which operated from 2002 to 2006 in various secret prisons overseas. “The fact remains that CIA’s detention and interrogation effort was authorized and approved by our government,” CIA Director Leon Panetta said Thursday in a statement to employees. The Obama administration and its top intelligence leaders have banned harsh interrogations while also strongly opposing investigations or penalties for employees who were following their government’s orders. The CIA dispatched personnel from its office of medical services to each secret prison and evaluated medical professionals involved in interrogations “to make sure they could stand up, psychologically handle it,” according to a former CIA official. The alleged actions of medical professionals in the secret prisons are viewed as particularly troubling by an array of groups, including the American Medical Association and the International Committee of the Red Cross. AMA policies state that physicians “must not be present when torture is used or threatened.” The guidelines allow doctors to treat detainees only “if doing so is in their [detainees’] best interest” and not merely to monitor their health “so that torture can begin or continue.” The American Psychological Association has condemned any participation by its members in interrogations involving torture, but critics of the organization faulted it for failing to censure members involved in harsh interrogations. The ICRC, which conducted the first independent interviews of CIA detainees in 2006, said the prisoners were told they would not be killed during interrogations, though one was warned that he would be brought to “the verge of death and back again,” according to a confidential ICRC report leaked to the New York Review of Books last month. “The interrogation process is contrary to international law and the participation of health personnel in such a process is contrary to international standards of medical ethics,” the ICRC report concluded….” (emphasis added)

Twenty-five years ago, the draft-manuscript that became the book Philosophy of Economics got me into much trouble in American academia. As I have said elsewhere, a gang of “inert game theorists”, similar to many (often unemployable ex-mathematicians) who had come to and still dominate what passes for academic economics in many American and European universities, did not like at all what I was saying. A handful of eminent senior economists – Frank Hahn, T W Schultz, Milton Friedman, James M Buchanan, Sidney Alexander – defended my work and but for their support over the decade 1979-1989, my book would not have seen light of day.  Eventually, I have had to battle over years in the US federal courts over it – only to find myself having to battle bribery of court officers and the suborning of perjury by government legal officers  too! (And speaking of government-paid psychologists, I was even required at one point by my corrupt opponent to undergo tests for having had the temerity of being in court at all! Fortunately for me that particular psychologist declined to participate in the nefariousness of his employer!).

I find all this poignant today as Philosophy of Economics may have, among other things, described the general theoretical problem that has been brought to light today.  I was delighted to hear from a friend in 1993 that my book had been prescribed for a course at Yale Law School and was strewn all over an alley in the bookshop.

Separately, I am also delighted to find that a person pioneering the current work is a daughter of our present PM. I have been sharply critical of Dr Singh’s economics and politics, but I have also said I have had high personal regard for him ever since 1973 when he, as a friend of my father’s, visited our then-home in Paris to advise me before I embarked on my study of economics. My salute to the ACLU’s work in this – may it be an example in defeating cases of State-tyranny in India too.

Subroto Roy,

Kolkata

Is “Vicky, Cristina, Barcelona” referring to an emasculation of (elite) American society?

In Vicky, Cristina, Barcelona the three American men, and especially the seemingly insufferable Doug, are drawn in stark contrast to the two or three Spaniards. Woody Allen often writes his movies too and has apparently written this one, so the lengthy monologues that might be emerging from a character and seem to be spoken by a Johannson or Hall here might just as easily have been spoken by Allen himself in an appearance in one of his previous movies.

But not in case of the WASP-men.  What  is Doug  made to talk about throughout?  Domestic nesting behaviour, shopping, how to please parents and society: all conventionally, stereotypically, feminine,  not masculine, subjects of conversation.  His fellow male WASPs are no better.  The most that comes out by way of masculinity is talk of a little sports or a little gadgetry.  That’s it.  On balance, the WASP-men in Vicky, Cristina, Barcelona are made to come across as effete hedonistic characters – though ones holding elite expensive jobs.

Contrast that with Juan Antonio and his father who can talk about or enact nothing but creative deeds whether painting in case of the son or poetry in case of the father or making love to women in case of both.

Of course this is fantasy and there is dramatic license being taken here because creative artists possessing the kind of masculine integrity these two men portray tend in reality to be hungry and impecunious and angry and unkempt, not living in marvelous clean mansions that attract the Marie-Elenas of the world to their beds.  If they had inherited wealth they might have tended to squander it rather than find artistic genius and good taste, not merely in one generation but over two.

Furthermore, the integrity is all a bit far-fetched – Antonio is uncouth enough to propose to Vicky she jeopardize her engagement by making love in a threesome as a last fling in a bachelor-party before getting married, yet the same character later proclaims he is not someone to come between husband and wife (having already been with the wife).  The threesome he instantly proposes to Vicky and Cristina, who are strangers to him, is entirely vacuous in comparison to the threesome he ends up being in with Cristina and Marie-Elena; in the former, he is almost a cheap tour-guide who wants to get paid in kind for an interesting day of tourism, something Vicky naturally resists.  Besides, his paintings do look unexceptional, which allows an alternative interpretation that perhaps father and son are merely two rich lonely wasteful men imagining themselves to be leading the artistic life.

The four American women also come off as pallid in comparison to the central dominating character of Marie-Elena – a point made most bluntly when Cristina fetches the aspirin for Antonio only to find Marie-Elena administering him a neck-massage instead.  Cristina has at most a talent at photography, Marie-Elena is a genius at whatever she touches.

Even the silent Spaniard kissing Judy is portrayed doing more by way of masculinity than any of the WASP-men.  Doug with his laptop and his well-gymed body in shorts epitomizes Ivy League undergraduate success while remaining clueless about  human nature or the outside  world.  He is a modern American Karenin, and the theme we are left with of Vicky being besotted with her dashing Spaniard even while starting the dullest and most tedious married life with Doug, would, as it were, become Anna Karenina except she has yet to dutifully bear Doug and his family a child.

In fact it is the absence of such a child that makes the movie possible – if Vicky had instead visited Barcelona after she and Doug were married and had a child or two with them, would she have spared a second glance at the dashing Spaniard, no matter how boring and tedious Doug turned out to be? The great lacuna in Woody Allen’s great oeuvre thus far may be his inability to depict anything but adult conversations – has he ever managed to describe families with children seriously?

FR Leavis once suggested that DH Lawrence may have failed to grasp Anna Karenina, perhaps the greatest novel ever written,  for supposing Anna and Vronsky could survive on love alone.  Woody Allen may have failed similarly in his much smaller-scale characterization of the Antonio-Vicky-Doug triangle.  Does he have the patience to read Leavis’s masterly essay,  I wonder, besides the novel itself?  A Woody Allen production of Anna Karenina – now wouldn’t that be something else?

Subroto Roy,

Kolkata, India

My American years Part One 1980-90: battles for academic integrity & freedom

On the Blacksburg campus February 1982, my second year in America.

I had come to Blacksburg in August 1980 thanks to a letter Professor Frank Hahn had written on my behalf to Professor James M Buchanan in January 1980.

I was in an “All But Dissertation” stage at Cambridge when I got to Blacksburg; I completed the thesis while teaching in Blacksburg, sent it from there in September 1981, and went back to Cambridge for the viva voce examination in January 1982.

Professor Buchanan and his colleagues were welcoming and I came to learn much from them about the realities of public finance and democratic politics, which I very soon applied to my work on India.

Jim Buchanan had a reputation for running very tough conferences of scholars. He invited me to one such in the Spring of 1981. We were made to work very hard indeed. One of the books prescribed is still with me, In Search of a Monetary Constitution, ed. Leland Yeager, Harvard 1962, and something I still recommend to anyone wishing to understand the classical liberal position on monetary policy. The week-long 1981 conference had one rest-day; it was spent in part at an excellent theatre in a small rural town outside Blacksburg. This photo is of Jim Buchanan on the left and Gordon Tullock on the right; in between them is Ken Minogue of the London School of Economics — who, as it happened, had been Tutor for Admissions when I became a freshman there seven years earlier.

(I must have learnt something from Jim Buchanan about running conferences because nine years later in May-June 1989 at the University of Hawaii, I made the participants of the India-perestroika and Pakistan-perestroika conferences work very hard too.)

My first rooms in America in 1980 were in the attic of 703 Gracelyn Court, where I paid $160 or $170 per month to my marvellous landlady Betty Tillman. There were many family occasions I enjoyed with her family downstairs, and her cakes, bakes and puddings all remain with me today.

A borrowed electric typewriter may be seen in the photo: the age of the personal computer was still a few years away. The Department had a stand-alone “AB-Dic” word-processor which we considered a marvel of technology; the Internet did not exist but there was some kind of Intranet between geeks in computer science and engineering departments at different universities.

It was at Gracelyn Court that this letter reached me addressed by FA Hayek himself.

Professor Buchanan had moved to Blacksburg from Charlottesville some years earlier with the Centre for Study of Public Choice that he had founded. The Centre came to be housed at the President’s House of Virginia Tech (presumably the University President himself had another residence).

I was initially a Visiting Research Associate at the Centre and at the same time a Visiting Assistant Professor in the Economics Department. I was very kindly given a magnificent office at the Centre, on the upper floor, perhaps the one on the upper right hand side in the picture. It was undoubtedly the finest room I have ever had as an office. I may have had it for a whole year, either 1980-81 or 1981-82. When Professor Buchanan and the Centre left for George Mason University in 1983, the mansion returned to being the University President’s House and my old office presumably became a fine bedroom again.

I spent the summer of 1983 at a long libertarian conference in the Palo Alto/Menlo Park area in California. This is a photo from a barbecue during the conference with Professor Jean Baechler from France on the left; Leonard Liggio, who (along with Walter Grinder) had organised the conference, is at the right.

The first draft of the book that became Philosophy of Economics was written (in long hand) during that summer of 1983 in Palo Alto/Menlo Park. The initial title was “Principia Economica”, and the initial contracted publisher, the University of Chicago Press, had that title on the contract.

My principal supporter at the University of Chicago was that great American Theodore W. Schultz, then aged 81,

to whom the Press had initially sent the manuscript for review and who had recommended its prompt publication. Professor Schultz later told me to my face better what my book was about than I had realised myself, namely, it was about economics as knowledge, the epistemology of economics.

My parents came from India to visit me in California, and here we are at Yosemite.

.

Also to visit were Mr and Mrs Willis C Armstrong, our family friends who had known me from infancy. This is a photo of Bill and my mother on the left, and Louise and myself on the right, taken perhaps by my father. In the third week of January 1991, during the first Gulf War, Bill and I (acting on behalf of Rajiv Gandhi) came to form an extremely tenuous bridge between the US Administration and Saddam Hussain for about 24 hours, in an attempt to get a withdrawal of Iraq from Kuwait without further loss of life. In December 1991 I gave the widow of Rajiv Gandhi a small tape containing my long-distance phone conversations from America with Rajiv during that episode.

I had driven with my sheltie puppy from Blacksburg to Palo Alto  — through Tennessee, Arkansas, Oklahoma, Texas, New Mexico and Arizona; my parents and I now drove with him back to Blacksburg from California, through Nevada, Arizona, Colorado, Kansas, Missouri, Illinois, Indiana, Kentucky, West Virginia.  It may be a necessary though not sufficient condition to drive across America (or any other country) in order to understand it.

After a few days, we drove to New York via Pennsylvania where I became Visiting Assistant Professor in the Cornell Economics Department (on leave from being Assistant Professor at Virginia Tech). The few months at Cornell were noteworthy for the many long sessions I spent with Max Black. I shall add more about that here in due course. My parents returned to India (via Greece where my sister was) in the Autumn of 1983.

In May 1984, Indira Gandhi ruled in Delhi, and the ghost of Brezhnev was still fresh in Moscow. The era of Margaret Thatcher in Britain and Ronald Reagan in America was at its height. Pricing, Planning & Politics: A Study of Economic Distortions in India emerging from my doctoral thesis though written in Blacksburg and Ithaca in 1982-1983, came to be published by London’s Institute of Economic Affairs on May 29 as Occasional Paper No. 69, ISBN: 0-255 36169-6; its text is reproduced elsewhere here.

ppp1984

It was the first critique after BR Shenoy of India’s Sovietesque economics since Jawaharlal Nehru’s time. The Times, London’s most eminent paper at the time, wrote its lead editorial comment about it on the day it was published, May 29 1984.

londonti

It used to take several days for the library at Virginia Tech in Blacksburg to receive its copy of The Times of London and other British newspapers. I had not been told of the date of publication and did not know of what had happened in London on May 29 until perhaps June 2 — when a friend, Vasant Dave of a children’s charity, who was on campus, phoned me and congratulated me for being featured in The Times which he had just read in the University Library. “You mean they’ve reviewed it?” I asked him, “No, it’s the lead editorial.” “What?” I exclaimed. There was worse. Vasant was very soft-spoken and said “Yes, it’s titled ‘India’s Bad Example’” — which I misheard on the phone as “India’s Mad Example” 😀 Drat! I thought (or words to that effect), they must have lambasted me, as I rushed down to the Library to take a look.

The Times had said

“When Mr. Dennis Healey in the Commons recently stated that Hongkong, with one per cent of the population of India has twice India’s trade, he was making an important point about Hongkong but an equally important point about India. If Hongkong with one per cent of its population and less than 0.03 per cert of India’s land area (without even water as a natural resource) can so outpace India, there must be something terribly wrong with the way Indian governments have managed their affairs, and there is. A paper by an Indian economist published today (Pricing, Planning and Politics: A Study of Economic Distortions in India by Subroto Roy, IEA £1.80) shows how Asia’s largest democracy is gradually being stifled by the imposition of economic policies whose woeful effect and rhetorical unreality find their echo all over the Third World. As with many of Britain’s former imperial possessions, the rot set in long before independence. But as with most of the other former dependencies, the instrument of economic regulation and bureaucratic control set up by the British has been used decisively and expansively to consolidate a statist regime which inhibits free enterprise, minimizes economic success and consolidates the power of government in all spheres of the economy. We hear little of this side of things when India rattles the borrowing bowl or denigrates her creditors for want of further munificence. How could Indian officials explain their poor performance relative to Hongkong? Dr Roy has the answers for them. He lists the causes as a large and heavily subsidized public sector, labyrinthine control over private enterprise, forcibly depressed agricultural prices, massive import substitution, government monopoly of foreign exchange transactions, artificially overvalued currency and the extensive politicization of the labour market, not to mention the corruption which is an inevitable side effect of an economy which depends on the arbitrament of bureaucrats. The first Indian government under Nehru took its cue from Nehru’s admiration of the Soviet economy, which led him to believe that the only policy for India was socialism in which there would be “no private property except in a restricted sense and the replacement of the private profit system by a higher ideal of cooperative service.” Consequently, the Indian government has now either a full monopoly or is one of a few oligipolists in banking, insurance, railways, airlines, cement, steel, chemicals, fertilizers, ship-building, breweries, telephones and wrist-watches. No businessman can expand his operation while there is any surplus capacity anywhere in that sector. He needs government approval to modernize, alter his price-structure, or change his labour shift. It is not surprising that a recent study of those developing countries which account for most manufactured exports from the Third World shows that India’s share fell from 65 percent in 1953 to 10 per cent in 1973; nor, with the numerous restrictions on inter-state movement of grains, that India has over the years suffered more from an inability to cope with famine than during the Raj when famine drill was centrally organized and skillfully executed without restriction. Nehru’s attraction for the Soviet model has been inherited by his daughter, Mrs. Gandhi. Her policies have clearly positioned India more towards the Soviet Union than the West. The consequences of this, as Dr Roy states, is that a bias can be seen in “the antipathy and pessimism towards market institutions found among the urban public, and sympathy and optimism to be found for collectivist or statist ones.” All that India has to show for it is the delivery of thousands of tanks in exchange for bartered goods, and the erection of steel mills and other heavy industry which help to perpetuate the unfortunate obsession with industrial performance at the expense of agricultural growth and the relief of rural poverty.”…..

I felt this may have been intended to be laudatory but it was also inaccurate and had to be corrected. I replied dated June 4 which The Times published in their edition of June 16 1984:

timesletter-11

I was 29 when Pricing, Planning and Politics was published, I am 54 now. I do not agree with everything I said in it and find the tone a little puffed up as young men tend to be; it was also five years before my main “theoretical” work Philosophy of Economics would be published. My experience of life in the years since has also made me far less sanguine both about human nature and about America than I was then. But I am glad to find I am not embarrassed by what I said then, indeed I am pleased I said what I did in favour of classical liberalism and against statism and totalitarianism well before it became popular to do so after the Berlin Wall fell. (In India as elsewhere, former communist apparatchiks and fellow-travellers became pseudo-liberals overnight.)

The editorial itself may have been due to a conversation between Peter Bauer and William Rees-Mogg, so I later heard. The work sold 700 copies in its first month, a record for the publisher. The wife of one prominent Indian bureaucrat told me in Delhi in December 1988 it had affected her husband’s thinking drastically. A senior public finance economist told me he had been deputed at the Finance Ministry when the editorial appeared, and the Indian High Commission in London had urgently sent a copy of the editorial to the Ministry where it caused a stir. An IMF official told me years later that he saw the editorial on board a flight to India from the USA on the same day, and stopped in London to make a trip to the LSE’s bookshop to purchase a copy. Professor Jagdish Bhagwati of Columbia University had been a critic of aspects of Indian policy; he received a copy of the monograph in draft just before it was published and was kind enough to write I had “done an excellent job of setting out the problems afflicting our economic policies, unfortunately government-made problems!”  My great professor at Cambridge, Frank Hahn, would be kind enough to say that he thought my “critique of Development Economics was powerful not only on methodological but also on economic theory grounds” — something that has been a source of delight to me.

Siddhartha Shankar Ray told me when we first met that he had been in London when the editorial appeared and had seen it there; it affected his decision to introduce me to Rajiv Gandhi as warmly as he came to do a half dozen years later.

In the Autumn of 1984, I went, thanks to Edwin Feulner Jr of the Heritage Foundation,  to attend the Mont Pelerin Society Meetings being held at Cambridge (on “parole” from the US immigration authorities as my “green card” was being processed at the time). There I met for the first time Professor and Mrs Milton Friedman.

Milton Friedman’s November 1955 memorandum to the Government of India is referred to in my monograph as “unpublished” in note 1; when I met Milton and Rose, I gave them a copy of my monograph; and requested Milton for his unpublished document; when he returned to Stanford he sent to me in Blacksburg his original 1955-56 documents on Indian planning. I published the 1955 document for the first time in May 1989 during the University of Hawaii perestroika-for-India project I was then leading, it appeared later in the 1992 volume Foundations of India’s Political Economy: Towards an Agenda for the 1990s, edited by myself and WE James. (The results of the Hawaii project reached Rajiv Gandhi through my hand in September 1990, as told elsewhere here in “Rajiv Gandhi and the Origins of India’s 1991 Economic Reform”.) The 1956 document was published in November 2006 on the front page of The Statesman, the same day my obituary of Milton appeared in the inside pages.

Meanwhile, my main work within economic theory, the “Principia Economica” manuscript, was being read by the University of Chicago Press’s five or six anonymous referees. One of them pointed out my argument had been anticipated years earlier in the work of MIT’s Sidney Stuart Alexander. I had no idea of this and was surprised; of course I knew Professor Alexander’s work in balance of payments theory but not in this field. I went to visit Professor Alexander in Boston, where this photo came to be taken perhaps in late 1984:

Professor Alexander was extremely gracious, and immediately declared with great generosity that it was clear to him my arguments in “Principia Economica” had been developed entirely independently of his work. He had come at the problem from an American philosophical tradition of Dewey, I had done so from a British tradition of Wittgenstein. (CS Peirce was probably the bridge between the two.) He and I had arrived at some similar conclusions but we had done so completely independently.

Also, I was much honoured by this letter of May 1 1984 sent to Blacksburg by Professor Sir John Hicks (1904-1989), among the greatest of 20th Century economists at the time, where he acknowledged his departure in later life from the position he had taken in 1934 and 1939 on the foundations of demand theory.

He later sent me a copy of his Wealth and Welfare: Collected Essays on Economic Theory, Vol. I, MIT Press 1981, as a gift. The context of our correspondence had to do with my criticism of the young Hicks and support for the ghost of Alfred Marshall in an article “Considerations on Utility, Benevolence and Taxation” I was publishing in the journal History of Political Economy published then at Duke University. In Philosophy of Economics, I would come to say about Hicks’s letter to me “It may be a sign of the times that economists, great and small, rarely if ever disclaim their past opinions; it is therefore an especially splendid example to have a great economist like Hicks doing so in this matter.” It was reminiscent of Gottlob Frege’s response to Russell’s paradox; Philosophy of Economics described Frege’s “Letter to Russell”, 1902 (Heijenoort, From Frege to Gödel, pp. 126-128) as “a document which must remain one of the most noble in all of modern scholarship; a fact recorded in Russell’s letter to Heijenoort.”

In Blacksburg, by the Summer and Fall of 1984 I was under attack following the arrival of what I considered “a gang of inert game theorists” — my theoretical manuscript had blown a permanent hole through what passes by the name of “social choice theory”, and they did not like it. Nor did they like the fact that I seemed to them to be a “conservative”/classical liberal Indian and my applied work on India’s economy seemed to their academic agenda an irrelevance. This is myself at the height of that attack in January 1985:

Professor Schultz at the University of Chicago came to my rescue and at his recommendation I was appointed Visiting Associate Professor in the Economics Department at Brigham Young University in Provo, Utah.

I declined, without thanks, the offer of another year at Virginia Tech.

On my last day in Blacksburg, a graduate student whom I had helped when she had been assaulted by a senior professor, cooked a meal before I started the drive West across the country. This is a photo from that meal:

In Provo, I gratefully found refuge at the excellent Economics Department led at the time by Professor Larry Wimmer.

It was at Provo that I first had a personal computer on my desk (an IBM as may be seen) and what a delight that was (no matter the noises that it made).  I recall being struck by the fact a colleague possessed the incredible luxury of a portable personal computer (no one else did) which he could take home with him.   It looked like an enormous briefcase but was apparently the technology-leader at the time.  (Laptops seem not to have been invented as of 1985).

In October 1985, Professor Frank Hahn very kindly wrote to Larry Wimmer revising his 1980 opinion of my work now that the PhD was done, the India-work had led to The Times editorial and the theoretical work was proceeding well.

I had applied for a permanent position at the University of Hawaii, Manoa, and had been interviewed positively at the American Economic Association meetings (in New York) in December 1985 by the department chairman Professor Fred C. Hung. At Provo, Dr James Moncur of the Manoa Department was visiting. Jim became a friend and recommended me to his colleagues in Manoa.

Professor Hung appointed me to that department as a “senior” Assistant Professor on tenure-track beginning September 1986. I had bargained for a rank of “Associate Professor” but was told the advertisement did not allow it; instead I was assured of being an early candidate for promotion and tenure subject to my book “Principia Economica” being accepted for publication. (The contract with the University of Chicago Press had become frayed.)

Hawaii was simply a superb place (though expensive).

Professor James Buchanan won the Economics “Nobel” in 1986 and I was asked by the Manoa Department to help raise its profile by inviting him to deliver a set of lectures, which he did excellently well in March 1988 to the University as well as the Honolulu community at large. Here he is at my 850 sq ft small condominium at Punahou Towers, 1621 Dole Street:

In August 1988, my manuscript “Principia Economica” was finally accepted for publication by Routledge of London and New York under the title Philosophy of Economics: On the Scope of Reason In Economic Inquiry. The contract with University of Chicago Press had fallen through and the manuscript was being read by Yale University Press and a few others but Routledge came through with the first concrete offer. I was delighted and these photos were taken in the Economics Department at Manoa by a colleague in September 1988 as the publisher needed them.

Milton and Rose Friedman came to Honolulu on a private holiday perhaps in January 1989; they had years earlier spent a sabbatical year at the Department.

Here is a luncheon that was arranged in their honour. They had in the Fall of 1988 been on their famous visit to China, and as I recall that was the main subject of discussion on the occasion.

Milton phoned me in my Manoa office and invited me to meet him and Rose at their hotel for a chat; we had met first at the 1984 Mont Pelerin meetings and he wished to know me better. I was honoured and turned up dutifully and we talked for perhaps an hour. I recall making a strong recommendation that he write his memoirs, especially so that the rumours and innuendo surrounding eg the Chile episode could be cleared up; I also said a “Collected Works” would be a great idea; when Milton and Rose published their memoirs Two Lucky People (Chicago 1998) I wondered if my first suggestion had come to be taken; as to the second, he wrote to me years later saying he felt no Collected Works were necessary.

From 1986 onwards, I had been requested by the University of Hawaii to lead a project with William E James on the political economy of “South Asia” .I had said there was no such place, that “South Asia” was a US State Department abstraction but there were India and Pakistan and Sri Lanka and Bangladesh and Afghanistan etc. Sister projects on India and Pakistan had been sponsored by the University, and in 1989 important conferences had been planned by myself and James in May for India and in June for Pakistan.

I was determined to publish for the first time Milton’s 1955 memorandum on India which the Government of India had suppressed or ignored at the time. At the hotel-meeting, I told Milton that and requested him to come to the India-conference in May; Milton and Rose said they would think about it, and later confirmed he would come for the first two days.

This is a photo of the initial luncheon at the home of the University President on May 21 1989. Milton and India’s Ambassador to the USA at the time were both garlanded with Hawaiian leis. The first photo was one of a joke from Milton as I recall which had everyone laughing.

There was no equivalent photo of the distinguished scholars who gathered for the Pakistan conference a month later.

The reason was that from February 1989 onwards I had become the victim of a most vicious racist defamation, engineered within the Economics Department at Manoa by a senior professor as a way to derail me before my expected Promotion and Tenure application in the Fall. All my extra time went to battling that though somehow I managed to teach some monetary economics well enough in 1989-1990 for a Japanese student to insist on being photographed with me and the book we had studied.

I was being seen by two or three temporarily powerful characters on the Manoa campus as an Uppity Indian who must be brought down. This time I decided to fight back — and what a saga came to unfold! It took me into the United States District Court for the District of Hawaii and then the Ninth Circuit and upto the United States Supreme Court, not once but twice.

Milton Friedman and Theodore Schultz stood valiantly among my witnesses — first writing to the University’s authorities and later deposing in federal court.

Unfortunately, government lawyers, far from wanting to uphold and respect the laws of the United States, chose to deliberately violate them — compromising a judge, suborning demonstrable perjury and then brazenly purchasing my hired attorney (and getting caught doing it). Since September 2007, the State of Hawaii’s attorneys have been invited by me to return to the federal court and apologise for their unlawful behaviour as they are required by law to do.

They had not expected me to survive their illegalities but I did: I kept going.

Philosophy of Economics was published in London and New York in September 1989

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The hardback quickly sold out on its own steam and the book went into paperback in 1991, and I was delighted to learn from a friend that it had been prescribed for a course at Yale Law School and was strewn along an alley in the bookshop:

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The sister-volumes on India and Pakistan emerging from the University of Hawaii project led by myself and James were published in 1992 and 1993 in India, Pakistan, Britain and the United States.

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As described elsewhere, the manuscript of the India-volume contributed to the origins of India’s 1991 economic reform during my encounter with Rajiv Gandhi in his last months; the Pakistan-volume came to contribute to the origins of the Pakistan-India peace process. The Indian publisher who had promised paperback volumes of both books reneged under leftwing pressure in Delhi; he has since passed away and James and I still await the University of Hawaii’s permission to publish both volumes freely on the Internet as copyright rests with the University President.

In 2004 from Britain, I wrote to the 9/11 Commission stating that it was possible that had the vicious illegalities against me not occurred at Manoa starting in 1989, we may have gone on after India and Pakistan to study Afghanistan, and come up with a pre-emptive academic analysis a decade before September 11 2001.

To be continued in Part Two.

Corporate Governance & the Principal-Agent Problem (a brief lecture dated 31 May 2006)

Corporate Governance & the Principal-Agent Problem
by

Subroto Roy
for a conference on corporate governance, Kolkata,  31 May 2006

I am most grateful for this opportunity to speak at this distinguished gathering.  I have to say I have had just a day to collect my thoughts on the subject of our discussion, so I may be less precise than I would wish to be.  But I am delighted I  have  a mere 7 minutes to speak, and I will not plan to speak for a second more!

I would like to ask you to consider the following pairings:

PATIENT: DOCTOR
CLIENT: LAWYER
PUPIL: TEACHER
STUDENT: PROFESSOR
SHAREHOLDER: DIRECTORS & MANAGERS
CITIZEN: GOVERNMENT

You will recognize something in common to all of these pairings I am sure.  A patient goes to a doctor with a problem, like a swelling or a stomach ache or a fever, and expects the doctor to do his/her best to treat it successfully.  A client goes to a  lawyer with a problem, of a contract or a tort or a criminal charge, and expects the lawyer to represent him to the best of his ability.  A student attends a University or higher educational Institute, and expects the professors there to impart some necessary knowledge,  to explain some difficult or complex natural or social phenomena, to share some well-defined expertise, so the student too may aspire to becoming an expert.

In each case, there is a Principal – namely the patient, the client, the student, — and there is an Agent, namely, the doctor, the lawyer, the professor.  The Agent is not acting out of charity but is someone who receives payment from the Principal either directly through fees or indirectly through taxes.

The Agent is also someone who necessarily knows more than the Principal about the answer to the Principal’s problem.  I.e. there is an asymmetry in the information between the two sides.   The Agent has the relevant information or expertise —  the Principal needs this information or expertise and wishes to purchase it from him one way or another.

A company’s Board of Directors and the management that reports to it, may be similarly assumed to have far greater specific knowledge than the company’s shareholders (and other stakeholders) about the state of a company’s operations, its finances, its organisation, its position in various input and output markets, its potential for growth in the industry it is a part of, and so on.  Yet the shareholders are the Principal and the directors and managers are their Agents.

And indeed the Government of a country, i.e. its political leadership and the bureaucracy and military that are reporting to it, also have much more relevant decision-making information available to them than does the individual citizen as to the economic and political direction the country should be taking and why, and again the body of the ordinary citizenry of any country may have a reasonable expectation that politicians, bureaucrats and military generals are acting on their behalf.

In each of these cases, the Principal, having less information than the Agent, must necessarily trust that the Agent is going to be acting in good faith on the Principal’s behalf.  There is a corporate governance problem in each case simply because the Agent can abuse this derived power that he acquires over the Principal, and breach the contract he has entered into with the Principal.   Doctors or lawyers can practise improperly, professors can cheat their students of their money and teach them nothing or less than nothing, boards of directors and managers can cheat their shareholders and other “stakeholders” (including their workers who have expectations about the company) of value that should be rightfully theirs — and of course politicians, bureaucrats and military men are all too easily able to misuse the public purse in a way that the public will not even begin to know how to rectify.

In such situations, the only real checks against abuse can come from within the professions themselves.   It is only doctors who can control medical malpractice, and only a doctor can certify that another doctor has behaved badly.  It is only lawyers who can control legal malpractice, and testify that yes a client has been cheated of his money by some unscrupulous attorney.  It is only good professors and good teachers who can do what they can to stand out as contrasting examples against corrupt professors or incompetent teachers.

In case of managerial malpractice, it is only fellow-managers who may be able to comprehend the scam that a particular CEO has been part of, in stealing money from his shareholders.   And in case of political malpractice, similarly, it is only rival political parties and when even those fail, rival political institutions like the courts or the press and media, who can expose the shenanigans of a Government, and tell an electorate to throw the rascals out in the next election.

In other words, self-policing, and professional self-discipline are the only ultimate checks and balances that any society has.  The ancient Greeks asked the question “Who guards the guardians”,  and the answer has to be that the guardians themselves have to guard themselves.   We ultimately must police ourselves .  I think it was William Humboldt who said that a people get the government they deserve.

In India today, indeed in India in the last thirty or forty years, perhaps ever since 1966 after the passing away of Lal Bahadur Shastri, we may be facing a universal problem of the breach of good faith especially so perhaps in the Government and the organised corporate sector.   Such breaches occur in other countries too, but when an American court sends the top management of Enron to jail for many years or a Korean court sends the top management of Daewoo to jail for many years, we know that there are processes in these countries which are at least making a show of trying to rectify the breaches of good faith that may have occurred there.   That is regrettably not the situation in India.  And the main responsibility for that rests with our Government simply because our Government is by far the largest organised entity in the country and dwarfs everyone else.

As an economist, I have been personally intrigued to realise that Government corruption is closely caused by the complete absence of serious accounting and audit norms being followed in Government organisations and institutions.   Get control of as big a budget as you can, is the aim of every Government department, then spend as little of it as is absolutely necessary on the publicly declared social or national aim that the department is supposed to have, and instead spend as much as possible on the travel or personal lifestyles of those in charge, or better still transform as much as possible into the personal property of those in charge – for example, through kickbacks on equipment purchases or building contracts.  For example, it is not unknown for the head of some or other government institution to receive an apartment off-site from a builder who may have been chosen for a major construction project on site.  This kind of thing has unfortunately become the implicit goal of almost all departments of the Government of India as well as the Governments of our more than two dozen States.    I have no doubt it is a state of affairs ultimately being caused by the macroeconomic processes of continuous deficit-financing and unlimited printing of paper-money over decades.   For the first two decades or so after Independence, our institutions still had enough self-discipline, integrity, competence and optimism to correct for the natural human instincts of greed and domination.  The next four decades — roughly, as I have said, from the death of Shastriji — there has been increasing social and political rot.  I have to wonder if and when a monetary collapse will follow.