The State, Markets And MDC

Updated: Nov 9 2003, 05:30am hrs
Is this a book on markets and governments or is it a volume in honour of Dr Mrinal Datta-Chaudhuri It should not pretend to be both. For generations of students who have passed out of the Delhi School of Economics, Dr Mrinal Datta-Chaudhuri, more accurately MDC, was, and continues to be, an institution. Other than the introductory biography, there are 12 references to MDC in the book. Three are in the introductory chapter, co-authored by the three editors. Of the nine remaining references, barring that of Dr Amartya Sen, Dr Pranab Bardhan and Dr Dilip Mookherjee, all the others are allusions to MDCs paper published in the Journal of Economic Perspectives in 1990. This paper was titled, Market Failure and Government Failure - the theme of this book.

What do Dr Amartya Sen, Dr Pranab Bardhan and Dr Dilip Mookherjee have to say about MDC in addition to the 1990 paper Here is Dr Amartya Sen: Mrinal Datta-Chaudhuris deep interest in human freedom is not only clear from his academic work (including his investigation of the respective roles of the market and the state e.g. Datta-Chaudhuri (1990)), it has also been a major influence on his life and priorities.

His basic commitments were well exemplified in the active part Mrinal played in defending rights and freedoms in India in the so-called Emergency Period in the mid-1970s. Mrinal Datta-Chaudhuri was both insightful and courageous in resisting the political programme of undermining civil and political rights in the Emergency period.

Here is Dr Pranab Bardhan: Over the last three decades, Mrinal and I have discussed at considerable length many issues of life in general, but if there is one theme that we have come back to repeatedly it is that of political economy. I have always been delighted by the opportunity to indulge in long conversations with Mrinal on free-floating big-think issues in general, and political economy in particular.

Here is Dr Dilip Mookherjee: Mrinal Datta-Chaudhuri, or MDC as he has been known through generations of successive Delhi School of Economics students, first introduced me to the modern literature on growth, development, and information economics. MDC went early in the sequence, laying the groundwork for the theory of development planning, as it was then known. A footnote in Dr Kirit Parikhs paper also says, Of course, every one knows about his sense of humour and his delightful stories.

Interpreted as a festschrift for MDC and as one of MDCs students, this is my strongest objection to this book. MDC published much less than he could have or should have. To equate MDC with his published papers is to do injustice to the man. More than a published researcher, MDC was a teacher, an individual one could interact with, a person. The introductory biography states, Most of the contributors have known him as a friend of long standing. Some have been his colleagues and some have also been his students.

This was not necessary. There are plenty of MDCs colleagues, friends and students floating around in this world. Had it been known that a festschrift for MDC was being planned, given the kind of person MDC is, there would have been no dearth of voluntary paper writers. A festschrift that consisted exclusively of his colleagues, friends and students and that did justice to more than MDCs published record, should have been no problem at all.

Actually, this book does worse. It reduces MDCs published record to the 1990 paper. Thus my point. This is a failed volume in honour of MDC. Let us only look at it as a book on markets and governments.

Of the 11 papers in the volume, four stand out. Dr Dilip Mookherjees excellent review of the market versus State controversy is the closest to MDCs 1990 article. Dr Amartya Sens views on development and freedom, or if you prefer, development as freedom, are well known. His paper on freedom is a rehash, not of the Development as Freedom book, but of his views more generally. In a Crouching Tiger, Lumbering Elephant paper, Dr Pranab Bardhan revisits the China-India comparison, with a stronger focus on the Chinese experience.

A quote more or less sums up the thrust of the paper. When I was young we were frequently told that the Chinese were better socialists than us, and now we are told that they are better capitalists. It is partly the contention of this paper that these two aspects are not as contradictory as they sound, and that the political complexities behind Indias lagging performance may also give us some clues about the long-term uncertainties in Chinas future.

In the market versus State failure controversy, several papers in this volume suggest the answer lies in shades of grey. However, Dr Bhaskar Dutta undertakes a modelling exercise to examine government failure alone, suggesting how political factors can cause governments to choose inefficient policies.

In the remaining seven papers, the link with the market versus State issue is somewhat stretched and contrived. Dr George Akerlof and Dr Rachel Kranton model positive affirmation in the United States. Dr David Farris and Dr Prasanta Pattanaik discuss the notion of optimality in welfare economics.

MDC always had an interest in labour laws, law and economics, or institutional economics. Dr Kaushik Basu, Dr Garance Genicot and Dr Joseph Stiglitz model minimum wage laws and unemployment benefits and suggest there is a case for unemployment benefits on efficiency grounds, not reasons of equity. Dr Ranjan Ray has a cross-country econometric exercise on the determinants of child labour.

That still leaves three papers that do not seem to fit into the volume at all.

Dr Kirit Parikh has an otherwise excellent paper on the Indian attempt at reforming the power sector. Dr Eytan Sheshinkski and Dr Luis Felipe Lopez-Calva have a cross-country review of privatisation experiences. And finally, Dr Pulin Nayak has a paper on Schumpeters Tax State. MDC was (is) interested in most things under the sun and not just stuff on Economics. (MDC might not remember. But we once had a conversation on St Augustines City of God. I no longer remember the link, but this conversation had started with Gary Becker.) However, I doubt that even MDC would have been inordinately interested in Schumpeters Tax State.

The blurb proclaims this volume will be a useful resource to policy-makers, researchers, students and teachers. True, to a very large extent. What I would have dearly liked to happen will unfortunately never come to pass. I would have liked MDC to review this book in his honour, using the sarcasm, wit and anecdotal richness one is used to.

Dr Debroy is director, Rajiv Gandhi Institute For Contemporary Studies of the Rajiv Gandhi Foundation and consulting editor of The Financial Express