A caller in a recent Free Talk Live¹ show claimed that a roommate system which most people follow is a very good example of a Socialist society(and egalitarianism) in work. Although there are huge scalability problems with this example, I would not go into a critique of this system and instead suggest an alternate system, a more Capitalist roommate system. Feel free to absorb, use improve upon it. You won’t find it on any other site.

Problem:

The existing “Socialist” (maybe egalitarian would be a better term) roommate system is insufficient to meet the demand of modern individualist people. There are numerous issues among roommates on whom should be doing the job, people don’t perform well, everybody complains about the other one not doing their duties properly. The whole house/room suffers from the “tragedy of the commons” where because a property is deemed to be owned by everyone, gets overused and undercared compared it how it would have been if it had one single owner.

More problems come in when there are tasks which nobody wants to do and they don’t need to that frequently like cleaning toilets, or taking trash out.

Although compared to that a marital household, or an atomic family household is quite successful, but the main reason is that usually there is only one person who earns and everybody knows only he has to earn. The bread-earner of the family is the only person who is expected to earn. He does not get offended or dissents if the other member does not do his part, moreover the bread earner of a family is also the leader of the family, he has the authority. These things cannot be applied to a voluntary association of two individuals who just wanna live together.

Solution:

The Capitalist room sharing system would start out with equal share of the rent among all the roommates. So if the rent of the room is $1000 and there are 4 room mates then they start out by owing $250. Now take all the tasks which are shared among the roommates, like cleaning the toilets, taking the trash out, even cooking, buying groceries etc etc, and hold auctions of those tasks. That is, the roommates bid on these tasks on whom will be doing for how much money.

For example lets take the task of keeping the toilets clean. Nobody wants to do this task. The bidding will start from say $50. Now does anybody want to do this job for $50 a month? If yes then they will bid for that price. Now if roommate A is willing to do that job for $50 a month and nobody else is willing then roommate A wins the bid. Now lets say if roommate B thinks that he might be willing to clean the toilets for less than $50, say $40 then he can bid that amount. If now A thinks that he might be willing to do that same job for $30 per month and that he needs it more than B, then he might bid that amount and might end up being the winner. That means now every month roommate A will get $30(essentially he will pay $30 less from his monthly share), and other roommates will pay a total of $30 to A(that means B, C and D will pay $260 per month).

If say no roommate is willing to do a task for $50 a month, then the bidding is automatically increased to $55, $60 and so on, until some room mate is incentivized enough to do that job.

Similarly this approach will be adopted with any task which requires allocation of labor to it. For example vacuuming the whole house can be considered as a task. Eventually it could happen that the room mates end up paying the same amount of money as they were to in a complete egalitarian distribution, but the difference would be that in this case they all would be doing the task they like to do the most.

This system gives a more relaxed classy room mate an opportunity to do less work by simply paying more rent, and a room mate with more financial needs an opportunity to reduce his expenses.

This solution is actually very open-ended, you can make it into anything as long as there is no compulsion of “everybody must pay equal rent and everybody must do equal job”. For example you can have a weekly or per-task auction. You can have task sharing for example a friend of yours find that your room mates are paying too much to have the snow cleared off the drive-way so he might agree to do that job for less.

The jobs which can be subjectively judged by the quality or nature, like cooking can have a choice of the room mates. For example if one guy is a really good cook, and he can cook most variety of stuff then the room mates might vote for him to do most of the cooking over a cheaper less dexterous cook room mate.

If you find a problem or an issue with the above suggestion do write down in the comments section. If have a better more Capitalist solution then again feel free to write down we will cover it in an update and credit it to you.

1. Free Talk Live A Libertarian Talk Show [↩]

The inflation rate in Indian economy is sharply decreasing since some weeks and now it is around 0.44%. As some economic pundits have predicted, India may face deflation eventually. Obviously, it is an alarming effect of the deep recession India is facing and will have to face.

Is Deflation good or Harmful?

Today’s Economic Times has the screaming article Indian Economy staring at deflation. Is it good news ? in its front page that claims that, deflation is a threat, which must be tackled with.
The most common belief about deflation is that falling prices constitute deflation and thus must be feared and, if possible, prevented.
As Economic Times explains the belief

“If deflation lasts for some time, as seems possible, it would be a new experience for India. Japan went through a decade-long deflation in the 1990s, termed as the “lost decade” for that country. At present, most major economies are witnessing disinflation — a lowering of the inflation rate — and some have also seen deflation kicking in. Japan and China have already reported negative inflation rates in the latest data and there are signs that the US, too, could be heading the same way.
While a fall in prices may sound like good news to most laymen, economists see this as an ominous sign of a collapse in demand in the economy.¹ “

While ET demonstrated, deflation as falling prices, deflation is not falling prices but a decrease in the quantity of money or the measure of spending in the economic system.
Deflation actually is fall in demand. Falling prices are an outcome of deflation, not the deflation itself.
If prices fall even though demand remain steady or may increase, than it is prosperity and profit for the consumer and the producer both, and that happens in a free market with enough options of competitions between producers.
On the other hand, if demand decreases, (that is, deflation occurs) the prices falls as a result of decrease in demand.
Deflation is obviously harmful, yet the falling price is not harmful, in fact, falling prices is the actual and only possible cure for the deflation.
Falling prices are that cure to the economy, which is suffering from deflation that makes it possible for the economy to recover from the situation of deflation and start enjoying the economic progress again.
Let me explain this again. Deflation is decrease in Demand, or decrease in willingness to spend, it is a dangerous situation as it causes unemployment and chaos, the solution is Falling prices, that is, the falling prices indicates that the economy is at the path of recovery from deflation, how is it possible?
Let us consider that before any deflation Mr. Ramesh used to go once a week to buy flour from the shop, he could afford to spend Rs20 for the flour per week, at a price of Rs2 per Kg, he used to buy 10 Kgs of flour. Suddenly the economy suffers deflation and victimizes Mr Ramesh too. Now he is not willing to spend Rs20 for flour and at most, he can spend only Rs10.
If the prices will not fall, Mr Ramesh will be able to buy only 5 Kgs of flour, while his weekly need is of 10 kgs, that is, he will suffer a loss of 5 Kgs of flour, and He may starve. On the other hand, if prices fall from Rs 2 per Kg of flour to Rs 1 per Kg of flour, Mr. Ramesh will be able to buy 10 Kgs of flour for a week at his affordable spending of Rs10.
If one look for the situation properly, they will understand that deflation was Mr. Ramesh’s lack of will to spend Rs 20 to buy 10 Kgs of flour, his demand for flour was forcibly reduced, but as the prices fell down, he again bought 10 Kgs of flour, that is, his demand reached the proper need and that is the cure of deflation.
What is Mr Ramesh deny buying a commodity even at reduced prices, will it help economy?
Let us say Mr Ramesh used to buy 2 Litres of milk every day before deflation at a price of Rs8 per Kg, that is, he was ready to spend Rs16 per day for milk before deflation. Due to deflation, that is, due to lack of money, he reduced his demand to 1 litre per day as he wished to spend only Rs 8 for milk per day. To counter the deflation, the prices of milk fell down to Rs 4 per litre, that is, now he can buy 2 litres of milk for Rs 8. Yet, if Mr Ramesh decide not to buy extra milk, which will save his Rs4 from the amount he decided to spend on milk. Obviously, he will be able to spend that extra Rs 4 on some other commodity, say he will buy a packet of Biscuit Parle G. Overall; the fall in prices will help in reducing and eventually completely curing the effect of deflation.
Thus, although deflation is a sickness to an economy and hence it is harmful, yet the falling prices is the only possible solution for deflation and the current scenario in India where the deflation will soon signify its consequences in form of falling prices, the things will better by themselves.

What is the cause of Deflation; can government intervention solve the situation?

India is facing liquidity crunch since last November. Finance ministry and RBI issued three stimulus packages to solve out the credit crisis, yet it provided no betterment in situation, the bail out of economy in form of economic stimulus absolutely failed. It was obvious as any governmental intervention can never help any market, it may cause havoc though. We explained it here and we discussed why economic stimulus is nothing but robbery of common citizen.²
The liquidity crunch in India is because of the bad assets of the government and private banks and the lost money in failed credits. Government and the centralized bank RBI control the repo rates, credit and lending policies in India. In order to increase GDP and profits, government and RBI always try to stimulate government and private banks to lend credit as easily as possible, and that often causes bad assets.
Some times, for the cause of making greater profits, the private banks also make risky adventures and fails miserably, and that all causes credit crunch. As the money in market decreases, the demand starts decreasing and hence the deflation.
The reason for such failure is the obvious monopoly of the government and RBI over currency supply in market, and the flaw in the system is because of the Fiat Currency system. The fiat currency often forces high inflationary rates, which may reach the hyperinflation rates and the forced bad risk dealings in the environment of economic bubbles often leads to a situation causing deflation.
Thus, initially, the fiat currency system, government monopoly and interventionism in market and bad decisions based on fake profits due to economic bubbles causes the cycles of Inflation, hyperinflation and deflation.
As demonstrated earlier, the falling prices cure this sickness of the regulated mixed economies.
The falling prices not only cures the problem of deflation, it also cures the mystery of economic bubbles and provides a clear picture of actual market growth by eliminating almost all the non-productive and non-profitable activities in the market.
As the enforced policies of regulatory government and institutions like RBI causes the cycles of inflation, hyperinflation and deflation in a market by misleadingly regulating the supply of currency in market, we cannot expect further supply of currency by government to solve out the liquidity crisis. That is the reason why the economic stimulus plans of various countries including USA, India and China are actually providing no results.

Will the government interference in form of economic stimulus change the situation?

Government talk of providing economic stimulus to counter the falling prices.
As falling prices are, the solution to deflation, by trying to avoid falling of prices, governments actually increases the tenure of economic crisis. It happens because the stimulus leads people to postpone buying even in situations where they have ability to buy, the consumer prefer to wait for falling of prices. On the other hand, the falling prices stimulate the consumer to buy the commodities.
Thus, whatever interventionism a government adopts to provide economic stimulus, further increases the mess in the economy.
Also, considering the fact that Indian government suffers one of the highest fiscal deficits everyday, we know that Indian government does not have potential to provide any economic stimulus, yet the government already have provided three economic stimulus of amount Rs2000 crores each, and now, the upcoming elections will further cause Rs10,000 crore of spending.
When government is already going in fiscal deficit, how will the government manage these extreme spending?
Government have three ways to support these already provided stimulus packages, the election expenses and further Rs30,000 crores of stimulus government have promised by any of the following ways
1. Higher government taxes
2. More government borrowing
3. More, freshly printed Reserve Bank notes.
Any of these moves will further deteriorate the economy by giving birth to a new cycle of economic boom and burst.
Taxation is a failed measure of revenue projection that is why Indian government always remains in fiscal deficit. Besides, higher tax rates discourage people from saving and investing, especially when such taxes target the rich.
Increasing taxes on middle or poor class makes no sense, and increased tax on rich deprives the economy of the funds necessary to grow production, income, and employment.
Thus, the first option is failure by default.
Indian government already have asked for economic help from World Bank and IMF, thus we can expect that Indian government may take further loans and debts. We know that foreign aids never helps an economy, we discussed how foreign aid actually harms a nation’s economy.³
The government monopoly over the currency is the ill-power, by which government can create money from thin air any time, but printing more currency does not help any body, it causes further extreme problems though which we discussed here.⁴
Thus, no matter what way government adopts to fight against the falling prices, the way will lead to further deterioration, not only that, countering the falling prices itself means strengthening the deflation.
We have already seen how economic stimulus proved a big failure in USA, Indian government should take lesson from the failure of Obama stimulus packages and should keep away from market, adopting the policy of free market, no interventionism.

1. Deflation, is it good news?, Economic Times [↩]
2. economic stimulus is not cure, it is venom, Reason for Liberty [↩]
3. Foreign Aid Versus Foreign Investment, Reason for Liberty [↩]
4. The story of Money, What causes Inflation, Reason for Liberty [↩]

“I”

‘I’—am the witness. Witness of countless creatures passing by….
By the hazel spread of this sun, ’I’ exist.
Perpetual! In this perpetual light…
My broad, sturdy branches—complement my being.
I look up to the sky and it resounds—sky is your limit!
Every shred of my structure—a life giver.
Passing days—they are calm and I like spending time with them,
I can see—“see through” things.
I laugh…
Under the same sturdy branches, I witness virtually all gamuts of emotions—Broken hearts, meeting hearts, success’, failures, vows, maturing thoughts.
All blossoming and withering right under me. I smirk at it, I laugh and then suddenly I am drawn towards myself—and I am happy again!
Myriads of “colours” pass by me without even noticing me; except a ‘few’…
And to those ‘few’ I know, I give courage…
Courage—to face a lifetime.
Those ‘few’ who stop by to notice me are my epitomes. My alter egos….
I smile again, looking at them; those eyes, those beautiful, pristine eyes watching me and they give me—sheer pleasure.
Pleasure of watching them. The same pleasure which they derive, watching me…
We don’t talk but we understand a lot.
A reverence we pay to each other…..
I look back at myself and here again I am reaffirmed that Life holds new opportunities in the form of those ‘few’ and that Life goes on and that Life sees ‘Colours’,”Colours” don’t see life..
‘I’— am the world, ‘I’-am life,’I’-am complete.
I am I, the Individual.

“Hindi-Cheeni Bhai Bhai” (Indian and Chinese are brothers).
Now again after years, China and India are together on a plane to project their political protest against the socialist USA and its protectionist policies and moves.
Chinese Ambassador Zhang Yan stressed that China along with India is strongly against trade socialism in form of protectionism. He stressed that such move is harmful for the recovery and growth of world economy. India and China now are against any form of protectionism and socialism and want to establish and stand by the principles of Free Market capitalism.¹
The Indian and Chinese policy maker realizes that socialism in form of protectionism is detrimental to the world economy and I second that.
Now when the most ardent supporters of communism and socialism are pleading for Free Market principles, and opposing any protectionist move of USA, I feel that things may go in right way.
Yet, do we realize our own hypocrisy?
When protectionism is dangerous and harmful for world economy, how can protectionism be purposeful for Indian or Chinese economy?
When Indian government is ready to fight against USA socialist protectionism in World Trade Organization, why do not Indian politicians fight against Indian internal protectionist policies like reservation, subsidies, government interventionism and enforcement, taxes, bans, government promotions, and economic stimulus and bailouts?
When India and China both understand and agree that the protectionist moves of USA will harm not only India and China but whole world including USA, why do not these countries should start removing the wrong and mending their own ways first?
Indian Minister Kamalnath and P Chidambaram strongly expressed their stern opposition for Obama tax plans and confirmed that they will contest against US policies in IMF and WTO, will congress leaders express same truth in India too and oppose Indian own policies of protectionism? Will they call for free market and capitalism in India and China too?
Or do they want India and China to remain socialist and enslaved yet they assume USA should remain capitalist and promoter of free market?
If free market is detrimental for whole world, how it can be favorable for India or China?
Indians should learn to accept that truth does not turn it face with nations, if socialist protectionism is going to harm whole world, than reservations, bailouts, free education, subsidies and taxation is harming India too.
What is necessary for progress, happiness, affluence and good life is Liberty, All the stimulus we need is “No taxation without deliberation.”
Socialist protectionism will hurt whole world in the same way in which Indian government’s interventionism hurt Indian agriculture. The government’s policy to promote GM seeds² caused the genocide forcing Indian farmers committing suicide, even now 46 farmers on average commit suicide daily in India, do government realize that before opposing USA’s policies of socialist protectionism, Indian government should take positive step to free Indian agriculture, announcing it a industrial sector and let free market principles help the farmers lead their life make their own destiny and riches?
In next G-20 meet, India, Brazil, China, South Africa, all nations will oppose protectionism and will support free market principles, why should not Indian government announce to support free market principle in water resources management, water distribution, electricity production, maintenance and distribution?
We all know all Indian rivers are suffering from extreme pollution and India is suffering water scarcity which will take a giant shape within decades, we and all politicians know and realize that government intervention is the cause of this and if free market principles are applied, Indian problem of water scarcity and pollution, electricity and power problems will be reduced to bare minimum.³
When Indian politicians are ready to oppose American socialist moves and protectionism, why should not they strengthen Indian commitment for Liberty, freedom and free market principles?
Indian major problem is poverty, we know poverty cannot be removed by worthless free-education program, poverty can be reduced only by increasing the productivity of the poor, and that can be done only by free market, redistribution of wealth through taxes and subsidies causes wastage and misuse of resources alone and that increases poverty and suffering. Why should not Indian government and politicians should stand together and vow to establish free market principles within India first to reduce poverty? Government cannot create job, government cannot create wealth, government, and by its interventionism, can waste resources, wealth and human efforts in non-productive-activities alone, which becomes the reason of all corruption, poverty, frauds and mismanagement.⁴
Since last 60 years, India is trying to spread literacy, and it failed because of government interventionism, (The myth of complete education,Reason for Liberty)) let the free market principle project education so that even the poorest can get proper useful education not dependent on some fuzzy governmental certification system but on the basic objective principle of education and that is to provide a way to earn a honest, proud, and self-worthy earning, to learn the right way to think rationalize and project a good life based on proper positive moral standard of self-respect, happiness, independence and liberty, liberty of man from men.
Indian health care system is one of the worst whole around the world. Government is just unable to provide good health care opportunities, after all it takes wealth, resources and human endeavour to provide health service, why should not free market, education and free market health care system be allowed to help Indian poor to fight against any ailment and earn their own right for comparably good health care procedures? Just like free market forces alleviate Indian IT and engineering sector, just like now we have immensely large number of technicians, engineers and diploma holders in all branches and sectors of engineering and technology, why should not free market be allowed to produce doctors and simplify medical education system and then let the doctors earn their ways by helping the poor?
Health care is expensive because of government interventions, free market will ensure the increase in number of specialist doctors to fulfill the demand, and that will reduce the cost too and will provide millions of new jobs in health care.⁵
It is a high time when Indian public, the common man, Indian politicians, the rulers and Indian bureaucrats should accept this simple fact, that since they realize protectionism is going to harm whole world, they should realize that their own governmental intervention in Indian market and productive life harms whole India, causes wastage, increase poverty, suffering, corruption and crime.
Just like India as a nation deserve free market capitalism and globalization opportunities in world market, Indian citizen deserve Liberty in India.

1. China joins India against Protectionism, Times of India [↩]
2. GM Genocide, Reason for Liberty [↩]
3. Water Scarcity in India, Reason for Liberty [↩]
4. Population, Poverty and Production, Reason for Liberty [↩]
5. Indian Health care requirements, Reason for Liberty [↩]

Lemme make it loud and clear even before I start writing this article. I do not support Network Neutrality legislations. That’s right, Network Neutrality is a legislation which asks Governments to step in and make it a law that all the ISPs must treat all bits equal.
The worst part of this whole campaign is they have disguised this “Fairness Doctrine for the Internet” as “Save the Internet Freedom campaign”. One after the other my Libertarian friends are falling into the delusion of being pro-Internet Liberty.
One of the co-author on our site wrote an elaborate article on how though network neutrality is desirable but it should be implemented through free market(I disagree that Net neutrality is desirable, I will elaborate that later). She clearly does not support the idea of govt stepping in and doing anything, but she is clearly impressed by the “Save the Internet Freedom” slogan.
One of the most intriguing example of this thing was seen in an article written by a fellow blogger where he makes a case against government regulation but ends up endorsing Net Neutrality campaigns:

The reason for me to share this incident is, due to unnecessary regulations, government policies, people are deprived of quality porn. The porn movies that are shown in theaters are nothing compared to what we get now in this Internet age. Though I am no good at economics, I can see the difference between porn available on the “unregulated, free” Internet and those in the “regulated, government authorized” theaters (I no longer visit them). So in an unregulated market, it is likely that we get access to quality things (not just porn). So at least, lets save (Link to a Network Neutrality site) Internet from being regulated, now and in future, thought the threat is not imminent in India.

Its kind of funny, asking to regulate the Internet to prevent it from being regulated.

What is Network Neutrality?

Network Neutrality is the government legislation under which an ISP will be forced to treat every bit equal that means they won’t be able to prioritized or deprioritize data depending upon the source or destination of the data.
Take for example if a doctor in India is performing surgery in Africa’s remote hospital with a robotic arm, the ISPs will be prohibited by law to prioritize that data over lets say my iTunes songs download, or youtube viewers. If you do not understand the gravity of the situation, understand this simple thing, right now Internet surgeries are not feasible because of the unreliability of the network lag. If a doctor uses right arm to lift umbilical cord of a baby and uses the left arm to cut it(for an illustrative example) and the packets for cutting operation receive before the packets of right arm operation then the arm would end up damaging the baby or the mother.

If Internet was a private road system, then Network Neutrality would be like expecting the private road owners to give same speed lanes to everyone. IF an ambulance or businessmen wanna travel even by paying more, they must not allowed to do so. How is that a Libertarian point of view? Isn’t discrimination of anything a core of private property. When I bring my 10 KG of apples to a market, I discriminate against all those people who are unable to pay high price and I sell them to the highest bidder. How about “save the freedom of the apple market” and bring a legislation called “Apple Price Neutrality”, where the apple seller will be forced to treat every apple buyer equally and he must sell it to them at whatever price he sells it to anyone else. In simple words its nothing but price control in disguise.

Is Network Neutrality desirable?

No! Network Neutrality is not desirable just like a road neutrality is not desirable, we want different lanes for different speeds. We want the data which makes more money, and does more business to be prioritize over the data which does pleasure. It will be different than what Internet is right now, but it will be much more efficient.
For example, the Stock Market quotes and transaction should be prioritize over all the other data, right after the other real time critical data. Ebay bidding process should be prioritized over free blogs. Real Time web business meetings should be prioritized over youtube videos. There is no desirability in having all the data delivered equally to everyone.
People just don’t get it because Google, Microsoft and Yahoo supports it and people like those companies and the free services they provide.

If all these things confuse you just remember whose property rights are we talking about here? Definitely the ISP and Telecom company’s property rights in a violation here.

Can ISPs and Telecom companies block websites?

Yes they can, they can block access or slow down access to say GMail to promote a local email provider who pays them more than GMail. If you understand Free Market you will understand that a “level playing field” is a myth perpetrated by Neoclassical economists. Nobody needs to level the playing field for all the players, the people with more investment and a better business model must be able to get better services to reach more people in a better more efficient manner for the maximum efficiency of the market.
When an apple seller sells his apples to the highest bidder, he achieves maximum money to grow more apples and serve the next highest bidder. Similarly when ISPs will be able to charge more money to the people who need faster and more critical Internet they will be having more money to serve the other people who cannot pay that much.
The only people who would be in a disadvantage are companies like Google, Microsoft and Yahoo. The youtube vidoes come to you at the same speed as your email, your stock quotes, your Internet video and voice chat, your blogs, your P2P music and movies.

The most realistic scenario is that no ISP can make money or stay in market by arbitrarily blocking websites they don’t deem fit. Sure a Church Affiliated ISP will be blocking all the immoral websites but then you are free not to take their services.
The only reason why an ISP would block or slow down a service intentionally if they get PAID to do so. Who would pay an ISP to slow down GMail? A competitive mail provider. The competition would be in the service providers, not in unique content. For example, Cato.org is not going to have Mises.org blocked. Even New York Times cannot pay to have New York Post blocked(even if they do it would be more like competition among the two on who outbids whom, so it would be a totally futile and unproductive exercise).

Why is everyone supporting Network Neutrality (Legislation)?

Mosts people who are supporting Network Neutrality don’t realize the truth, congrats to the brilliant work team google is doing to run this campaign. The usage of the words such as “Freedom”, “Save the Internet, Save the World”, and other stuff which stirs emotion among people, turns almost all the bloggers into pro-Net Neutrality supporters. They wanna keep Internet free from Telecom companies but in fine print its the government who has to take control of the Internet in order to keep Internet free from Telecom companies. Its kind of ironic.
If someone asks me the question “Do you wanna keep the Internet free from any kind of Censorship?” My answer would be yes, and then they say “Well then support net neutrality, the telecom companies are going to censor us”.
The non-Libertarians who think that they are doing the pro-Liberty thing get confused when their life long Libertarian friends don’t support them at this issue. Seriously what Libertarian wants to support Government intervention for anything. Its the same thing as, Equality before Liberty, or Liberty before Equality.

The problem is nobody will tell me that to keep the Internet free from Censorship we will have to invite the Government to do the job. Its the irony of most democracies. To save the society from violence, thugs and robbers we have to give all the power to commit violence, theft and robbery to one organization.

I call you to raise the awareness about the truth of Network Neutrality, I don’t mind people chose to support it even after that, but at least don’t allow people to support it without even knowing what the real issue is. Please feel free to drop the link of his article on the blogs who get the issue of net neutrality wrong.

Globalization not only has raised a stage of cultural sharing and expansions, it has provided a wider scope in every aspect of common life whole round the world.
National politics is also not unscathed of the global effects. Out national politics and economics, so much depends on the various global international groups, organizations, planning commissions, treaties and protocols.
One of the most important of them is the Kyoto Protocol and Environmentalism is the new political mantra at the helm.
Almost every other country is now whirling around to cut the carbon emission rates.
Now when there are enough evidences that global warming is nothing but a fake idea, the environmentalist politicians have a new way to rush upon their emotional tactics based on the call to “save mother earth”.
US president Obama has promised to invigorate the green energy industry as the new engine for the economic growth. The current economic crisis is providing enough chances to raise his sticks and implement his plans to create the new bubble of green economy providing millions of new jobs and to achieve that, he is going to implement some governmental “incentives” to promote green energy.
These incentives include carbon taxes and huge subsidies for innovation and development of “renewable” non-carbon energy resources.
India is also not very far behind, and as India is a signatory member of Kyoto protocol, Indian government promised it would introduce new norms that would involve tax concessions, incentive schemes including legislative framework to motivate Indian Inc. to effectively undertake carbon emissions reduction program.¹
India is already facing an electricity crisis and we really do not produce enough electricity to provide electricity in every household. A big portion of rural India still remains in dark at nights. Yet our politicians can promise to reduce carbon emission within a scheduled period.
Obviously, politicians never promise to fulfill their commitments.
On reality grounds, the “green energy” drive is fake and failure because, the environmentalists not only oppose the coal thermal electric plants, they also oppose nuclear plants too, and what they support for is the “renewable energy resources” like wind, solar and sea energy and that makes it a conundrum.
The governments, by providing huge subsidies to the innovation in green energy market can make it some heavy deal, but it will not be helping anyone.
The renewable energy resources cannot fulfil our requirements of energy not because we lack technology, but because it is not viable nor it is economic.
Around 76% of Indian energy comes through coal thermal plants, 21 % by hydroelectric plants and 3 % by nuclear plants. With the new nuclear energy deal, India will try to look for options to increase the percentage of nuclear energy.²
The “renewable” resources play almost no role. We cannot rely on wind mills because of intermittent nature of winds; also, wind mills require huge grounds. We cannot rely on solar cells, because of extremely low efficiencies of solar cells; also, it is not economically viable idea. The latest and most efficient solar cells use Lead selenide (PbSe) in their making. Just like PbSe, almost all heavy metal salts necessary for a solar cell are toxic in nature and can cause much greater harms to environment than what CO2 can cause. That is, the renewable resources can harm nature much more. In addition, heavy metals are rare, hence expensive, and thus not economically viable.
No matter how huge subsidies government provide, we cannot afford it.
Furthermore, such endeavours have already proven their failure.³
Many European countries are again returning towards coal thermal plants because their earlier initiatives to bring upon carbon taxes, investment, and subsidies in green energy are making electricity too much costly and hence common people are suffering, also, no plans are working to decrease any carbon emission.⁴
The conundrum of energy is because, fossil fuels are finite, we cannot remain dependent on them forever, renewable energy resources are not sufficient to fulfill our requirements, and nuclear energy is also not a very viable option.
Although fossil fuels may end earlier, yet the charcoal and coal tar beds will keep providing enough fuel and hence power to the world for longer periods.
The example of European failure clearly explains why taxes never work. Because of increased carbon taxes, the price of coal increased sharply and that was what government wanted to fight against global warming. Yet the result of all this is the huge increase in power rates needed for everyday usage.
India is already facing huge inflation rates. The rich can buy costly power and electricity too, the green energy steps will stress more burdens over the poor and no carbon tax can actually reduce that burden.
Carbon tax is also not a good economic move and it will increase poverty. We know that to reduce and ultimately remove poverty, production is the only way. By slapping carbon taxes on production houses, government will reduce the production and that will increase poverty.
The overall situation is government can provide no viable solution for electricity crisis and the environmental cause simultaneously. Government interference in market in support of environmentalism will not only make people poor, it will hurt the environment more. We cannot opt for hydroelectric plants because of the other side damages hydroelectric plants can cause (Earthquakes). With the limitations of wind and sea energy, and the economic failure of solar cells, we can not rely on them; furthermore, the making of solar cells can prove to be bigger danger to environment and human life. Not only Lead Selenide but polysilicons also left a huge toxic residual, which harms human life and nature much more than coal and we cannot rely on nuclear energy production too. Even in US nuclear power plants provide only 17% required energy and government are in opposition to nuclear plants because of the dangers of nuclear waste and the consequences. There is no safe way to dump nuclear wastes.
Overall, coal is the best option for our energy requirements and as we know that coal will keep serving us for many centuries more, we have enough time to innovate, invent and discover new ways, yet for that too, government interference is not viable.
In fact, the more we provide freedom to market, the more close we reach towards the solution for the energy conundrum.⁵
The current electricity losses in India during transmission and distribution are around 45%. It is huge and if we privatize the production, transmission and distribution of energy, the private owners will reduce this huge loss because of their profit incentives and that not only will bring electricity within reach or poor, it will make many dark villages bright.
The privatization of electric distribution is already an ongoing process and it is helping in reducing the wastage, yet we need a free market in electricity sector as that would induce the private investment in the innovation and development of energy production techniques and that will include nuclear techniques too.
Furthermore, if government stop interfering in oil, coal market, and stop providing subsidies, the common users will also get incentives to reduce wastage and over usage.
Thus, the real green initiative will be the reduction of government interference in market and provision of property rights as that will reduce any chances of exploitation of common man through government supported corporatism. We need to understand the difference between corporatism or crony capitalism and free market laissez-faire capitalism, and we need to adopt the later one.
The current slapping of carbon taxes on Industries and dumping of collected tax in non-viable energy resources is not going to help either environment or the economy.
Basically, the US government and other governments also, aim to slap carbon taxes just to decrease the fiscal deficits, as government know that industries cannot work without carbon. Such moves are never taken for helping environmental cause; they are rather more Keynesian economic steps to increase taxes, which ultimately hurt the economy as production reduces.
The promises of huge governmental investments and subsidies in green energy are also nothing but similar Keynesian steps to increase government spending.
Yet, it is highly improbable to help any economy with such spending in non-productive activities; they will cause further economic downturn.
Taxation and subsidies never brings any good.

1. Indian government to Introduce new Carbon emission norms, Commodityonline news [↩]
2. Electricity in India, Wikipedia [↩]
3. Failure of European Green Initiatives, Reuters news [↩]
4. Failure of European Green Initiatives, Reuters news [↩]
5. Electricity in India, Wikipedia [↩]

The Machines

A very famous economic fallacy that has won a huge number of supporters has been the belief that machines cause unemployment. Such preposterous beliefs which have neither rational justification, nor any empirical validity have been the roots of growth of primitive ideologies, which have called for mankind’s return to it’s “glorious” past.

For centuries men have believed that machines, or technological changes in general, destroy jobs on a large scale, and that they’d have to stay home jobless the next day on. It is true that technological changes destroy particular jobs, at least partially if not completely, but it should also be understood that these technological changes create new avenues of growth which will create new jobs.

The improvement of production techniques and the resultant mass displacement of jobs from agriculture a century ago, might seem like an unacceptable act of cruelty against the masses. But it’s quite the exact opposite, that is, the technological changes have benefited the masses.

More than half of the labor force of North America and Europe was employed in production of food stuffs during the early twentieth century. But today, less than 3 percent of the labor force is required to feed a population that has grown many times more. In fact, in the last century, the population of North America has increased four times, and Europe’s population has roughly doubled, while the percentage labor force required to feed the increased population has shrunk by about 15 times.

It makes sense to track the fate of those displaced workers. The technological change has in fact helped mankind, by releasing labor from agriculture to be used for production in other sectors of the economy. The advantage of technological changes is that it increases the marginal productivity of labor, that is, the quantity of goods a laborer can produce has been increased by the use of machines. This is the only way the living standards of the masses could be improved.

The dislike for technological change could be seen pronounced in the writings of economists of the modern era as well. Their concern is about the Information Technology revolution that has made economies knowledge intensive, and the disparity in wages among the members of the labor force.

But this could be no reason to stop technological growth, since even though there may be differences in relative wages, which in fact is an unavoidable character of economic competition, the real wages of laborers increases due to increase in the total wealth of the particular society. That is the real purchasing power of a laborer’s wage money increases as wealth of the society increases.

This sort of faulty reasoning of economists is the product of undue emphasis on the immediate effects of technological changes, with no heed to their tremendous beneficial effects in the long run.

As Austrian economist Henry Hazlitt says:

“Economics is a science of recognizing secondary consequences. It is the science of tracing the effects of some proposed or existing policy not only on some special interest in the short run, but on the general interest in the long run”.

Outsourcing Companies

US President Barack Obama has announced his intent at withdrawing tax-cuts to American companies that outsource work to foreign countries. This announcement comes in as one of the many ingredients, of a slew of populist measures that Obama has been churning out since assuming office last month. Policy-makers claim that heaping the tax burden on American companies that outsource jobs to foreign countries could save American jobs.

This sort of an economic policy could be disastrous to general efficiency of the economy and slacken creation of new jobs. One must take care of the fact that work is always there to be performed in any economy, since human needs are without boundaries. We essentially live in a world of scarcity, and any level of increase in the productivity of labor will never suffice to satisfy the immeasurable needs of the society. So the basic point is, labor is scarce, and will always remain the same.

But what are those statistical figures we get as unemployment numbers in government reports? Nobody could deny unemployment does exist. But such unemployment in today’s world is usually a result of government policies which adversely affect job prospects, and in turn efficiency of the economy in the long run. In a truly free market, the only two kinds of unemployment that could exist are frictional unemployment (that is, the temporary unemployment during the period when people search for new jobs) and voluntary unemployment (where people make a voluntary choice not to work).

Talking about outsourcing of jobs and it’s impact on domestic unemployment, it should serve us better first to imprint in our mind that labor is scarce, as already mentioned. The next important step is to understand and trace the consequences of discouraging outsourcing of jobs to foreign countries.

There are three important points to be considered here:
1) The basic reason why companies from developed countries outsource jobs is the availability of cheap labor from developing countries. So this means the products that these companies produce to serve mainly the American consumers become cheaper considerably. This implies that the real purchasing power of an American dollar should increase.

2) The funds that American companies save by employing cheaper foreign labor while compared with high salaries previously paid towards Americans, could be used as investment in other sectors of the economy, or to increase the size of existing industries which would create new jobs for Americans. In the absence of the outsourcing option, the American companies would be forced to spend comparatively more in the already existing industries (that is when compared with costs incurred when foreign labor could be employed), without having a chance to invest in new industries (or expand existing industries) which could create new jobs.

3) The availability of cheap labor also means American companies become more competitive and efficient than their counterparts in other countries. It also makes Americans compete and become more efficient. More than anything it makes specialization of jobs, which is the reason for the riches of today’s industrial civilization.

The only thing that policy-makers need to understand is that businesses need to be given the complete economic freedom worldwide to create new jobs at home, and increase living standards of Americans. Any short-sighted measure to save current jobs, will definitely halt growth in the long-run.