Friday, March 03, 2017

Debraj Ray on Arrow

here. Debraj seems to have interacted with Arrow from 80s onwards. Before him in the sixties, another Indian who interacted with Arrow was Bagicha Minhas. I met both Debraj and Minhas in ISI Delhi Centre. Both seemed brilliant and of different generations and I am not sure how much they interacted with each other. I was working in pure mathematics most of the time though I gave some mathematics talks to the economists due to the insistence of V.K.Chetty. Debraj' article has the following quote about Minhas:

"Joan Robinson on Bagicha Minhas and the CES production function: “It is a sad comment on the state of our education that a talented young man be brought from India to be bamboozled like this.” "
There is one version of how this came out in the book 
Rumination of a gadfly by Deena Khatkhate which I have not read. The book promises to be interesting, a review here
The post by Debraj Ray has the following quote from a lecture of Arrow;
"“[I interpreted] neoclassical economic theory and particularly the then new and rapidly developing discipline of welfare economics as pointing to an ideal efficient economy rather than the actual one, marked both by massive unemployment and by monopolistic distortion… In true Hegelian fashion, capitalist instability and the socialist counterattack seemed to be synthesized: it seemed possible to have an economy that retained much of capitalist drive and initiative and yet gave room for the government to intervene to avoid at least the worst inefficiencies of unemployment and the idling of other resources. I accepted provisionally what seemed to be a widespread consensus in the euphoria of postwar economic growth. The state had an active role to play in maintaining effective demand and in dealing with the many imperfections of the market system revealed by theoretical welfare economics — the overcoming of market failures and monopoly and the realization of economies of scale…
I have spoken of a provisional acceptance. I still felt it important to explore more deeply the possibility that socialism was a superior possibility. I was more aware of the complexities of operation of a socialist system and sought to develop more deeply the theory of such a system. I also sought to explore more fully the criteria for a democratic social organization… [Today,] the apparent pause in economic growth, the crisis in stabilization policy occasioned by the current inflationary threats and realities, and the loss of purpose in redistributional measures all combine to raise anew the question of alternatives to capitalism.”
Yes, Arrow did make a cautious case for socialism. To me, it was particularly interesting that in the end, the case was made not on the positive grounds of inevitable destruction of the capitalist system, but rather on the normative grounds that such a system could be rife with inefficiencies and unequal treatment."

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