Protected: The point is not about a PhD but deception about it

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Protected: Why the Governing Body of India’s National Council of Applied Economic Research (NCAER) Must Resign In Toto And A Fresh Board Constituted: A Letter to Shri Bimal Jalan, MP, Rajya Sabha, et al

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Protected: The Case of the Missing Princeton PhD Thesis

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Just how much intellectual fraud can Delhi produce?

Today’s English-language newspapers report a front-page story that suggests the extent of intellectual fraud emanating from our capital-city’s English-speaking elite may be unending and limitless and uncontrollable (and this  Delhi-based elite has spread itself to other places in the country too).

Such  may be a source of our ridiculous politics, paralleled by the corruption in organized business in both public and private sectors.  Delhi was perhaps the wrong place to which to move India’s capital  one hundred years ago; the geography was such that it made ordinary survival hard or at least highly stressful, and when you have a capital-city in which the elite have to work so hard all the time merely to remain within the city-limits, it was inevitable perhaps that truthfulness and honesty would become  major casualties.

Subroto Roy, Kolkata

Can President Obama resist the financial zombies (let alone slay them)? His economists need to consult Dr Anna J Schwartz

The wonders of the Internet continue to surprise (and yes Virginia, there was a world before SMS and before the Internet too).  In early January, in context of India’s Satyam fraud (of a size of perhaps 1 or perhaps 2 billion dollars),  I referred here  to what seemed to me the likelihood of Satyam becoming a zombie company and I said “we in India have many such zombies walking around in the organised business sector”.    I drew attention to Andrew Beattie’s astute  definition of zombies and other such ghoulish phenomena in the financial world, and also referred to John Stepek’s excellent if brief November 2008 analysis “How zombie companies suck the life from an economy”.  Today I find Ms Arianna Huffington has made reference to Mr Martin Wolf’s reference a couple of days ago to zombie companies and to his statement that President Obama needs to “Admit reality, restructure banks and, above all, slay zombie institutions at once.”  Ms Huffington has agreed, though of course all this slaying may be easier said than done.  (It is better that zombies not be created in the first place.)

Mr Wolf has pointedly asked a question that many around the world may have half-thought about but not articulated: “Has Barack Obama’s presidency already failed?”   It would be  a grave and appalling  state of affairs if it has, within less than a month of entering office.   I am grateful to find in Ms Huffington’s article a reference to an October 2008  Wall Stret Journal interview of Dr Anna Jacobson Schwartz, perhaps the most respected voice in monetary economics today.  There have been numerous people claiming to have predicted America’s financial crisis but none may have as much credibility as Dr Schwartz.   Six years ago, in a National Bureau of Economic Research study dated November 2002, “Asset Price Inflation and Monetary Policy”,Working Paper 9321 she had said with utmost clarity: “It is crucial that central banks and regulatory authorities be aware of effects of asset price inflation on the stability of the financial system. Lending activity based on asset collateral during the boom is hazardous to the health of lenders when the boom collapses. One way that authorities can curb the distortion of lenders’ portfolios during asset price booms is to have in place capital requirements that increase with the growth of credit extensions collateralized by assets whose prices have escalated. If financial institutions avoid this pitfall, their soundness will not be impaired when assets backing loans fall in value. Rather than trying to gauge the effects of asset prices on core inflation, central banks may be better advised to be alert to the weakening of financial balance sheets in the aftermath of a fall in value of asset collateral backing loans….”

Most poignantly too, Dr Schwartz was present when Ben Bernanke said  in  a 2002 speech honouring the late Milton Friedman “I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”   Dr Schwartz told the Wall Street Journal ‘”This was [his] claim to be worthy of running the Fed”.  “He was ‘familiar with history. He knew what had been done.’ But perhaps this is actually Mr. Bernanke’s biggest problem. Today’s crisis isn’t a replay of the problem in the 1930s, but our central bankers have responded by using the tools they should have used then. They are fighting the last war. The result, she argues, has been failure. ‘I don’t see that they’ve achieved what they should have been trying to achieve. So my verdict on this present Fed leadership is that they have not really done their job.'”

President Obama’s economists need to urgently consult Anna J Schwartz.

Subroto Roy, Kolkata

Postscript:  My own brief views on the subject are at “October 1929? Not!” dated September 18 2008, and “America’s divided economists” dated October 26 2008.  The latter article suggested that playing the demographic card and inducing a wave of immigration into the United States may be the surest way to move the housing demand-curve firmly upwards.

Satyam and IT-firms in general may be good candidates to become “Labour-Managed” firms

Satyam may be able to summarily solve the problems caused by its high-level corporate fraud by transforming itself into a “Labour-Managed Firm”.

One of the new Government-appointed board members has stated publicly today that the company has little or no debt.  If this is true it would be interesting because not only were the vast cash-assets non-existent, the liabilities-side of the balance-sheet also may be small, which could mean the company was simply far smaller in terms of value than it had made itself out to be.  In a bankrupt firm, the remaining assets normally come to belong to the creditors but what if the main creditors happen to be the work-force?  If that is in fact the situation in this case, Satyam may be a prime candidate to be transformed into a “Labour-Managed Firm” of the sort discussed by Jaroslav Vanek (The General Theory of Labour Managed Firms and Market Economies, 1970) and James Meade (The theory of the labour-managed firm and profit-sharing, Economic Journal 1972), and surveyed by e.g. Louis Putterman in the New Palgrave Dictionary and by Martin Ricketts in The Economics of Business Enterprise 2003.

As I had briefly mentioned earlier here, the transition could be made by Satyam’s existing  technical and other staff being allowed to participate (with their personal savings and claims to future income) in any auction of the “works-in-progress” that constitute the client contracts the company presently has around the world and which constitute its major intangible asset.   This may be the single best way to preserve the firm’s value as well as the income-streams of its staff.

The staff would have to make a transition from being employees to becoming self-managers which may not be easy in practice, although in theory the information-technology industry may be well-suited to labour-managed firms given the peculiarly intangible nature of their products.  The marginal cost of production of (true) information is typically very high but the marginal cost of dissemination of information  is near- zero.

If this happened and a corrupt bankrupt Satyam-I transformed itself into a viable Labour-Managed Satyam-II, the newly appointed board would become redundant even more quickly than it would have done otherwise — though this board may be even less likely to know of Vanek and Meade than to be familiar with modern corporate finance.  Time perhaps to hit the textbooks, gentlemen, and burn that midnight candle!  Is that something we can expect from some of the key lobbyists of India’s organized business sector?

Subroto Roy

Postscript  1 :  Of course if the asset-side has been fraudulently exaggerated while the liabilities-side has been small, the fraud has been directly perpetrated on equity-holders who held stock that was overvalued  by the market as a direct result of the fraud.

Postscript 2:  I find (grotesquely) amusing the new found emphasis on “Independent Directors” in view of the obvious fraud in the advertised biographies of some rather notorious Independent Directors in the IT-business and other sectors of corporate India and the higher bureaucracy!   There seems in fact to have been a wild hyperinflation of reputations generally, especially in Delhi,  Mumbai,  Bangalore, Pune and other such hip with-it places  — people claiming to have earned PhDs when they have none,  people calling themselves “Dr” on the basis of some defunct Soviet management institute  having once paid them off, people claiming to be Harvard postgraduates on the basis of  some outsourced executive development programme of a few weeks’ duration, people claiming academic publications and academic affiliations which are non-existent, etc etc.   All that for another day!  (But any former students of mine who may find the above pertinent to themselves may please know their old prof is cross with them! Tsk tsk!)  (And then there was the one of the senior government economic planner who told his astrologer on the  telephone his correct date  of birth but had lied to the Government of India by a couple of years…. clearly he did not want to get his own Ptolomaic horoscope wrong even if his plans for India in the Copernican world went awry!)

Become a US Supreme Court Justice! (Explorations in the Rule of Law in America)


For almost two decades, Since the summer of 1988 when *Philosophy of Economics* got accepted for publication, I have found myself in a saga exploring the Rule of Law, the nature of justice and freedom, and the nature of racial animosity and xenophobia in the United States. Judge it here for yourself. Files 1 and 2 marked SCOTUS are the front-matter and Petition for Writ of Mandamus as received by Circuit Justice Sandra Day O’Connor of the Supreme Court of the United States in February 1996. Files 3 to 10 constitute the Appendix of Record giving the rulings of the US District Court for the District of Hawaii and the US Court of Appeals for the Ninth Circuit, including especially in File 8 the “after-discovered” evidence of how my attorney had been covertly purchased by my opponent. An example of perjured trial testimony is contained in File 2. In September 2007, I asked my opponent — the Government of one of the 50 States — to voluntarily admit its wrongdoings to the present Chief Judge of the US District Court as is required by law. Government lawyers should, after all, try to act lawfully.