Tuesday, October 31, 2006

An evening with Bhagwati

I have given up on winning a Nobel — this is the title of a rather candid interview Jagdish Bhagwati gave to the Times of India last week. He said earlier that if he might become the second famous Gujerati to not win a Nobel. It is, indeed, a great surprise to most economists that Bhagwati hasn’t won the economics Nobel yet.

Pedants would of course say that economics isn’t a real Nobel. They are right. Technically it is The Bank of Sweden Prize — Alfred Nobel didn’t leave any money for economics you see. The good folks at the Swedish central bank only started handing these prizes out in the late 1960s. This is why a grandee like John Maynard Keynes didn’t win one. Now, there was already a big queue of eligible laureates in the late 1960s, and the back log has continued to the present day.

This is why cynics say that you have to be obsolete to win the prize. Perhaps that’s why Bhagwati hasn’t won one yet — even though he has been on people’s lists since the 1980s, his seminal contribution is far from obsolete. Trade barriers enacted to protect the poor (or the environment or the local culture or whatever) do nothing to protect the target but hurt everyone in the society, this is what Bhagwati showed in the 1960s, and this is one of the few things most economists unequivocally agree on.

You could read more about Bhagwati’s work here. In that piece, the IMF’s Arvind Subramaniam introduces Bhagwati this way: [B]oth theoretician and policy wonk, wielding a deft pen and moving easily between the ivory tower, op-ed pages, and corridors of influence…. a man who tries to score a point on the merits of free trade by invoking a Balzac novella.

I would have added an acerbic wit with that. I was present at a conversation on the Indian economy recently, where Bhagwati made the following quips.

Corruption is like pornography. The hard-core is straightforward, but where do you draw the line with the soft stuff?

Arguing with communists in India is like killing cockroaches in New York — there’s no end to it, and still it has to be done.

For the record, I agree with him on both counts. I also agree with more serious things he said.

He strongly stressed that inequality is a red herring, whether in Desh, Africa or the West. Rather, the problem is poverty. Economic growth through liberalization, privatization and deregulation is the best way to alleviate poverty. He was very critical of the World Bank for wasting resources on the inequality project.

He did, however, agree that it is important to compensate the (temporary) losers from open markets during the transition process. He also noted that it is irresponsible to sell globalization as a panacea to all problems. He was particularly scathing about Tom Friedman: Palestinians should forget about their olive grove and build Lexus, and people read that crap!

To be sure, Bhagwati may have been a tad bit jealous. His really good book has been outsold by Friedman’s lame attempt. I think he has every right to be peeved. But he is also right in saying that Tom Friedman is completely illiterate where economics is concerned (Ed Leamer makes the case here).

Turning to what is happening in India, Bhagwati said that Congress is totally dominated by unreformed socialists and communists. In the characteristically blunt way, he said that voters expect continued growth, and when populist socialism will fail, Congress will again find itself in the political wilderness. Here I simply don’t know enough to have an opinion. But I did ask him why he thought Congress kept winning during the Hindu rates of growth. Those were the days of chalta hai expectation: this was the answer. Incidentally, Bhagwati stressed a number of times that had Nehru been presented with strong pro‑market evidence, socialism would have been abandoned much earlier.

Maybe, we would never know. But let me finish with this joke he cracked.

In the very old days, to show your wife that you’re on her side in the battle against the saas, you’d have move out to your own place. Then came the days when you’d acquire a green card. These days, you’d get her an NGO.