The Human Cost of Zoning in Indian Cities

scep1_corporatetower_1Read my article “The Human Cost Of Zoning” on FEE.org. I hope zoning in the third-world gets more attention with essays like this. I am glad that Financial TimesTyler Cowen, Alex Tabarrok, ACI Scholarly Blog IndexOrange County Register,  Urbanomics and economist Ajay Shah blogged about this article. Quartz shared it, and NYU Stern School Of Business’ Urbanization Project, Marron Institute,  and Brandon Fuller tweeted it.  Continue reading “The Human Cost of Zoning in Indian Cities”

Rejoinder on “Classical Liberalism”


My critique of Sanjeev Sabhlok’s draft on libertarian anarchy, he writes, grossly misrepresented his positions.  I had a hard look at my own article and his reply. I sincerely apologize if I have misrepresented Sabhlok’s positions, but I was unable to see where. By no means did I confuse Classical liberalism with socialism. All I said was that socialism is the logical end result of statism-which means: If we accept the necessity of the state and follow it consistently, we will be taken straight to a totalitarian cage. This is true. Soviet Russia is the logical end result of the philosophy of statism. It should be kept in mind that the difference between classical liberalism and interventionism is only a matter of degree. It is not possible at all for a principled thinker to advocate a particular Government intervention and reject another. A natural law allows no exception, as Gustave de Molinari rightly pointed out.

Continue reading “Rejoinder on “Classical Liberalism””

Our Socialistic Constitution

A writ petition by an NGO challenging the insertion of the word “socialism” in the Preamble to the Constitution was rejected by the Supreme Court on Monday. Section 29 A (5) of the Representation of the People Act makes it mandatory that every political party in India should swear allegiance to socialism. It came into effect through the Constitution (42nd) Amendment Act, 1976. The preamble reads as follows: “We, the people of India, having solemnly resolved to constitute India into a sovereign socialist secular democratic republic.” A political party which fails or refuses to do so will be rejected at outset. Senior counsel Fali Nariman argued that the 42nd Amendment had evolved during the Emergency period, and that it violated the basic structure of the Constitution. Nariman had said before that “It is contrary to the Constitution and to its democratic foundations that political parties be called upon to swear allegiance only to a particular mindset or ideology.” Dr. B.R. Ambedkar had opposed the inclusion of the word socialism in the constitution. Continue reading “Our Socialistic Constitution”

Is Libel Wrong?

GOOGLE was fined $US 8500 in Brazil for libel after an anonymous internet user posted defamatory messages on its hugely popular social networking website, Orkut, against a priest, calling him a “paedophile”. The defamatory post called the priest “the pedophile, the thief who has a lover”. The court in the state of Minas Gerais pronounced its verdict in favor of the 54 year old priest, known as JR. The court rejected the argument that Google should not be held accountable for the actions of its users on Orkut, or even its blogging platform Blogger. Last year, Orkut was fined 5, 00,000 dollars for a fake profile of race car driver, Rubens Barrichello. Orkut is highly popular in India and Brazil, and understandably, these two countries were on the top of the list of countries which requested Google to remove content from its social networking website. “By making space available on virtual networking sites, in which users can post any type of message without any checks beforehand, with offensive and injurious content, and, in many cases, of unknown origin, (Google) assumes the risk of causing damage” said the judge Alvimar de Avila. Continue reading “Is Libel Wrong?”

Morality Of Capitalism

Many have told me that it was from Ayn Rand they learnt that Capitalism is not only the most practical, but also the only moral politico-economic system in the whole history of mankind. In my opinion, which I know is true, Rand’s moral defense of capitalism, despite her brilliance & strength of arguments, is really weak. Rand’s arguments overlook one fundamental fact, the initial allocation of land property rights though she expatiates in length on the property status of airwaves. There are further inconsistencies in Rand’s defense, including her belief in territorial integrity, government production of security, opportunistic stances in macro politics, in defining the rights of war and peace, patriotism and lavish praise on the founding fathers, all of which I don’t wish to get into here.

Ayn Rand’s claim to absolute originality in this aspect is rather spurious, all claims and praises to the contrary notwithstanding. It is certainly true that it was Rand, who, for the first time stated a moral defense in so explicit a manner. Herbert Spencer’s ‘Social Statics’ was of course, a notable exception. It must also be said that she had many predecessors who failed to emphasize properly and make a big deal out of the moral aspect. There were always men who clearly sensed right was on their side, which didn’t need so strong an emphasis, especially in the earlier days of statism. There were even men who matched her in brilliance and style-Frederic Bastiat, Lysander Spooner & Etienne de La Boetie, to name a few. It’s only that they weren’t born in the right time, didn’t present a full case or make use of so popular a medium as fiction.

I am only happy that the word Capitalism is identified with Ayn Rand. It makes me, but, a little sad that some other extremely competent men are forgotten. The 19th Century Anarchic Political Theorists Lysander Spooner, Benjamin Tucker, French Economist Gustave de Molinari and the 20th Century Economist Murray Newton Rothbard were some of the men who did present much more consistent views in certain aspects of the issue. Both Spooner and Tucker were market anarchists and advocated the compensation of slaves and serfs and their instant emancipation while some other inconsistent proponents of liberty shied away from these issues. It shocks me that an extremely honest and knowledgeable Economist like Mises dismisses the treatment of slaves in that era as ‘humanitarian’ in most cases. Words could be quoted from Spooner’s works which would put all the professedly consistent advocates of the Free Market to shame, in brilliance, intensity, style and humor. It’s a pity that both remain unknown, even today.

A much more mature, consistent and fully moral case for Capitalism had been presented by the brilliant Economist, Philosopher, Historian, Scholar, Anarchist, Political Theorist, Politician and Satirist, Professor Murray Newton Rothbard through his classic, ‘The Ethics of Liberty’. In the words of Rand, he was a ‘moth-eaten whim worshipper’. Why?-For being consistent all the way through the end. Rand even sued Murray for plagiarism. It’s true that a lot of Murray’s ideas were deeply influenced by ‘Ayn Rand’, which he is said to have never admitted in his post-Randian days. What right, but, could have Rand had to accuse him of borrowing? One could quote line by line from Spencer, Nietzsche, Aristotle, Aquinas, Locke, Spinoza, Mises, Adam Smith and the least acknowledged of all, the French Economist Frederic Bastiat, where all she had borrowed and given her own twists. It was only that Rand was more of an independent thinker, knew well to hide her sources and claimed of an originality she hadn’t. Murray, to be honest, never matched Rand’s popularity, brilliance of style or evocative power. He couldn’t scare the hell out of readers by passing moral judgments like thunder bolts either.

Murray’s works, yet, were far, far ahead of his times and held much more ‘mature’ and ‘sophisticated’ views, in the very literal sense of those terms. He really did dig deep into, and knew what he was talking about. His views were immensely superior to that of Rand’s in the case of big businesses, foreign policy, rights of War & Peace, Security production & territorial integrity. He furthermore, didn’t overlook the issue of the initial assignment of property rights. In essence, there was no hypocrisy in his stance-Let justice be done, no matter what the consequences.

It was only that Rothbard was shadowed by two giants, Rand and Mises. Our society wasn’t, and still isn’t ready for his seemingly eccentric views including market anarchism. Even Rand’s own work sounds like a communist manifesto in the ground of his views. Moreover, Rothbard uses humor in an allegedly inappropriate manner and held intentionally eccentric views in some issues as children’s rights and women’s liberation, which even I can’t really approve of. In some issues, he truly gives out the idea that he shouldn’t be taken seriously at all. If you have sense enough to dismiss it all and get to the root of his arguments, you can see that he was right in most of the issues he set his hands on. His allegedly naïve and immature views were not only sophisticated, but also grounded in an extremely complex knowledge of political theory and economics. It’s only sad that the public would need a long line of ‘experts’ to acknowledge and testify to adhere to those views even when every reason should have told them to do so.

Are there any grounds on which one can defend the initial assignment of property rights other than the utilitarian one? There are the extremely convoluted cases of forceful appropriation of land for government projects. There are cases of undeserved grant of privileges, as happened in Nandi gram. And the most complicated of all, we have the issues of slavery and feudalism. It was the above facts that made me uncomfortable and tortured in formulating my own moral defense of Capitalism. Yet, these obvious facts are seldom discussed by the opponents of Capitalism. At most it is argued that it breeds war, imperialism, inequalities & monopolies and might even lead to depressions-all of which can be crushed by the very fundamentals. I have always wondered why these air-heads are hell-bent on picking up all such fallacies from their musty old books, when they could have made a much more sharp and understandable case against it.

It is possible to go through works of extremely competent defenders of the market too, finding no discussion of it at all. This is one more stark case of the defenders of the free market digging their own grave. It’s one more reason why so many sided with the ‘left’ in many parts of the world as they thought they would have a better chance with them. Reasons could be various-Utilitarianism of Bentham, Mill’s & Mises, Social Darwinism of Spencer, Immanuel Kant’s Anti-reason epistemology and irrational skepticism. Stockjobber ethics and skepticism can’t fully account for this fact, though.

How this issue is to be resolved? The land should be handed back to the victims or their descendants wherever they could be identified and tracked down. In cases of slavery and feudalism, the land should be divided among the serfs equally. Murray says so, following the tradition of Spooner & Tucker. This is a view I most emphatically agree to and had come to, even before reading their works. It is of course, a curious fact that most men were figuring out how to compensate the slave owners and feudal lords for their losses at the emancipation of slaves in the days of Spooner and Tucker. It’s a very good demonstration of how apparently smart men can get their perceptions muddled and be the defenders of the status quo.

I have also heard many say it was only when they read Ayn Rand they came to the truth that ‘moral’ and ‘practical’ aren’t the opposites. I had come to this too much earlier, as long as I can remember, but it was only when I read her that I noticed the shark contrast between morality and practicality in this particular issue. How would we go about it? Let’s leave aside the fact that in most cases the descendants of victims can’t be tracked down. What if they could be? It would certainly be a horrible scene and even the ones on the receiving end, if sane and smart enough wouldn’t want it that way.

A fully moral defense of capitalism can’t be formulated keeping this issue out of sight. The usual argument is that the feudal era is long gone by and we are all now living in an industrial age. Some would argue that the current owner was acting on it for so long a time and according to the homesteading principle it can only be his. All such arguments are to be dismissed. Surely one wouldn’t argue that stolen or rented land is his own if he acts on it for long. What if a sky scraper stands on the land which is to be handed out to one utterly incapable of handling it at all? The building should be crushed, swept down and handled back to him if the current owner feels it that way. Either way, it would immeasurably reduce the advantages we have now in living in a division of labor society. It could be argued that the advantages in preserving the status quo would be much greater than otherwise for every one of us involved, but such an argument would certainly be utilitarian and not moral. The most practical solution which could be put forth is to compensate the victims monetarily reaching a settlement to this issue through privately run courts. This is the reason I believe why many self-proclaimed moralists paid only lip-service to this issue, if at all. Their answer is, to paraphrase John Galt, ‘blank out’.

Sexually Harassed

“Fools think that this is just nonsense. Something left over, old-fashioned. But there’s always a purpose in nonsense.”- Ayn Rand

One of the most fascinating aspects of Schools, which attracts its fair share of media attention presently, is sexual harassment. What? Is that what we send our children to school for? Is that what you are tempted to ask? Surely, you must realize I am not talking of teachers running after kids, tying them to a bed and raping them. Oh, not in that very primitive sort of way, but, on a deeper, and therefore, much more important level.

We have some really interesting notions of child abuse and sexual harassment. The very image the word child abuse conjures up in our minds is that of a brute trampling on children. Reality, however, is much more complicated than that. The abuser, needless to mention, is not altogether a brute. He could be a relative, teacher, or even, as in most cases, a parent. It is not even necessary that the abuser is a man. Women, usually get away with what would have cost a man a lot. In most cases, the child may not know that he is being abused. He usually gives the ‘otherwise so nice’ woman who cuddles him the benefit of doubt and keeps his mouth shut.Children in some cases like such treatment and that too may prevent them from opening up. In an overwhelming majority of the cases, children, simply are not comfortable discussing such issues.

What has physical punishment to do with sexual harassment? Physical punishment certainly has it’s origins in the Solomon’s dictum in Bible,’ Spare the rod and spoil the child’. It is no coincidence that Solomon kept many mistresses and was a child molester himself. How does it differ from rape? Physical punishment is no different from sexual harassment, other than it is done in so covert a manner. A rapist doesn’t make professions of goodwill. He makes no claims of benevolence. He is too innocent a man to make such professions. He simply tears off your clothes and starts raping you! Corporal punishment, as it is in the case of all other tyrannies perpetrated on mankind, is done in the guise of a favor done for the child’s own benefit. Is it less harmful as it is capped and sugarcoated as that? No, it is even more so, and more shameful and offensive at that. There are even instances of children beaten to death or given electric shock. How could someone argue it all is done by some high, benevolent motive? You must be coming from a long line of dinosaurs to give it any other interpretation!

Most parents and teachers have problems admitting that their behavior is sexually abusive, that, it is their real intention. One is tempted to quote Ayn Rand- “God, how you make me sick, all you hypocritical sentimentalists! You go along with me, you spout what I teach you, you profit by it–but you haven’t the grace to admit to yourself what you’re doing. You turn green when you see the truth.” You can of course, hide your real intentions from others, and even from yourself. It changes neither the nature of your intentions, nor its consequences. Speak up for yourself! If you are a pedophile and enjoy abusing your child, you should have the grace to call it by that name!

How is someone supposed to change anyone by means of force? Could all these men and women be so dull that they are incapable of giving it a moments thought? Couldn’t it be that they evade it as they can’t bear the thought of confronting the nature of their real emotions? The answer is obvious! The usual argument against corporal punishment is that it doesn’t work. ‘It serves no purpose!’ Oh, those fog-bound semi-somnambulist wretches! They think it is intended to work! It just obviates that these knuckleheads have no idea of what they are talking about. The basic issue is not whether it works or not, but the right of an individual to his own property, which, in this case is his own body. One has every right to regulate, persuade, bribe or preach. No one has the right to physically aggress against anyone. Why is it that a child doesn’t have the right which people take for granted in the case of adults? Is it that one can run roughshod over individuals incapable of retaliating? Is that only fear which keeps these molesters ‘moral’ in relationships with adults?

If you say one has the right to aggress against someone else, it is to deny the right of that person to his own property. If it is so, and if there is anything such as a universally valid logic, you too shouldn’t have the right you deny to your fellow beings. When you say so, you are using your senses and body parts, which obviously, is your own property. When you manipulate words with your property, you yourself are claiming that right, contradicting your own statement. If you are now to say that you aren’t concerned with principles, you are making an exception for it in your own statement. You are now about to scream that a contradiction doesn’t prove its fallibility, which is to contradict yourself again and end up in a paradox which you can never get out on your own!

Let us now move on to the ‘purpose it serves’. When a child is physically aggressed against by a person he values, he comes in conflict with an emotion which he can neither define nor cure. One can have control in the way one reacts to his emotions. One can’t, but, have any control over his emotions at a particular moment. He starts eroticizing it. The child and the molester may prevent the real issue from entering their mind. It doesn’t change the nature of that issue. It doesn’t change the nature of their emotions. The same attitude is seen in other cases in which individuals deal with traumatic experiences-broken love affairs, painful childhood and many similar experiences. It could lead to various psychological disorders, including chronic alienation & hostility.

Man is too complex an organism, and individuals respond to the very same treatment through different means. In some cases, the victim feels alienated from his own body and normal sex becomes impossible. Compliant children, who are usually said to have turned out good, are the ones who suffer from such disorders the most, as they find no other means to relieve their emotional overload. No one speaks of these issues, which every one knows. Intellectual dishonesty in repressed psychological issues is similar to that of the way intellectuals react to other innovative concepts in social sciences. Even when media digs up such issues, no one dares to call it by its name. A Google search is all it takes-What do you see? Hundreds! Thousands! Hundreds of Millions! Good God, those are pornographic sites! Is there anything more to be said?

Often these issues are met by deliberate evasion, silence & ridicule. Alice Miller writes in ‘Breaking the Wall of Silence’, that most psychology students interested in dealing with this issue in their final papers are discouraged by their professors. In the whole world, there is not one single faculty in which a degree is offered in the study of psychological injuries in childhood. Lloyd de Mause writes in one of his works of a brilliant Scientist whose path breaking work in childhood in America was met with scorn and ridicule by the media and academia that it finally drove him to suicide. Surely, a conspiracy of silence! Instances could be quoted of similar treatment meted out to the innovators in other branches of humanities too. It’s inconceivable that it all is done without any purpose.

I know, most readers of these blog wouldn’t admit that they were abused, or are being abusive. It is for the same reason the issue is treated by the media and academia with scorn. They have, deep inside, an inarticulate sense of fear, pain and anger when confronted with such issues. ‘Isn’t it more of an exception, than a generality?’ they ask. It is of course, understandable that they don’t want themselves and their parental figures in question. Most of them would even deny that they have any idea of what I am talking about .Let us, for the time being, admit that it is so. If so, why this ominous silence? Why this evasion? What do they fear this much? Why they blush and cringe? Are they all so incompetent, unintelligent and dishonest that they have to struggle this hard to hide their humiliation and yet hold on to their professed convictions? I can say with utmost certainty, from my readings and life, that such evaders are not an exception, but constitute almost all men and women on earth. In case you have problems taking it from me, go through all the novels in your local library and find out for yourself, with what precision and detail are instances of corporal punishment dealt with in novels. Rousseau’s ‘Confessions’ are still read, mostly for his fantasies. Some translators smuggle in some spanking scenes into their own translated version. Are such authors’ exceptions? Are you capable of pointing out sadistic interpretations?

Quoting Ayn Rand: “Nobody said that. Nobody would talk about it at all. All I know is that I—and that’s what I can’t forget! At first, I kept wondering how it could be possible that the educated, the cultured, the famous men of the world could make a mistake of this size and preach, as righteousness, this sort of abomination—when five minutes of thought should have told them what would happen if somebody tried to practice what they preached. Now I know that they didn’t do it by any kind of mistake. Mistakes of this size are never made innocently.”

The Right To Inheritance

My fellow blogger,Raghuram Ekambaran has written a post based on my article-“In defense of Capitalism.” He has pointed my attention to the issue of inheritance.He is right in saying that children don’t have an inherent right in the property of their parents.Anil & Mukesh Ambani doesn’t have an inherent right in the property of their parent-Dhirubhai Ambani.But,the basic issue at stake here is not the right of the children.The basic issue in the right of a product is that of the producer-the parent.The producer has the right to dispose of his product in any means.He can even flush it down the loo.He certainly has the right to hand it to his children,whom he loves.

With righteous indignation,people ask-How is it that a rich kid deserve a better education than a poor child.However,they are wrong.The basic issue here is the right of a rich parent to buy for his child the best education he can afford.It is not the right of the child we have to focus on,but of that of the parent.

A related question which statists and socialists ask is-How is it that a CEO deserves a private jet when millions of children are starving? What they don’t realize is that the CEO has produced his wealth and that wealth rightfully belongs to him.He has the right to spend it in any manner he chooses.He can spend it on a private jet as the starvation of millions of children doesn’t cause him any misery-His wealth wasn’t taken away from the starving children.The CEO deserves the private jet,when the starving children doesn’t have any right to the food the CEO’s wealth would have provided to them,if forcefully extorted by the Government.

Theft: The Origin Of Property?

“All property is theft”, said Proudhon. The very statement contradicts itself. An act could be called theft only if it involves taking the property of another which is legitimately owned. If no one legitimately owns any property, then how could it be termed as theft? If one could extort a grain of truth out of Proudhon’s statement, it would be that property was largely acquired through wrong means in the past. In India, in most cases land was forcefully appropriated by kings and distributed to Zamindars for the ease of tax collection. The Zamindars have no just claim to the land they acquired in this manner. There were cases of feudalism and slavery in the past. The crucial question is whether ownership claims to land possessed by the descendant of the looter have legitimacy or not. Should it be handed back to the descendants of the victims?

A few days back a reader of my blog posed this question to me: What if an industrialist who is creating wealth and providing jobs for millions is the descendant of a person who earned his wealth by loot? Should his right to property be respected? In all my readings I haven’t found a libertarian thinker deals with this aspect morally other than Murray Rothbard. Ayn Rand is said to have provided a moral basis to Capitalism. But she doesn’t deal with a crucial aspect –The initial allocation of property rights. Capitalism is a politico-economic system based on private property rights and this sort of evasion is hard to digest.

The question I was asked is quite valid. Take the case of Dalits. Most of them are poor. In the past property was acquired through wrong means and it can’t be denied that it has played a role in the poverty they suffer from. The same could be said of blacks in the United States. Should anything be done about it? I am not a fan of Arundhati Roy and was a strong critic of her views, but I shall quote a few interesting lines from Roy’s An Ordinary Person’s Guide To Empire “Even if it were true that there is a Hindu temple under every mosque in India, what was under the temple? Most likely an Adivasi Shrine. How deep shall we dig?” This is the reason I am not at all sympathetic towards Anti-Reservation activists.

I am of the strong opinion that Capitalism is the only moral and practical politico-economic system. There is nothing wrong with Capitalism as such. Capitalism is perfectly moral. It is only that some people suffer from the inequities of a wrong past system, which had nothing to do with Capitalism. Capitalism is incompatible with feudalism or slavery. The fact that in the past property was acquired through wrong means in no way means that people shouldn’t be allowed to keep the property they earned through right means. Two wrongs doesn’t make right. The fact that some of the wealthy inherited looted wealth doesn’t mean that all the wealthy should be taxed out of existence. It is not at all evident that all the wealthy got their wealth through wrong means. Past slavery and feudalism doesn’t make a valid case for Statism or Socialism. It is also not at all evident that confiscating all property and distributing among all would lead to a more prosperous society. It can only lead to poverty and chaos.

Let me quote some libertarian theorists in this issue. Rothbard writes in “Egalitarianism-As A Revolt Against Nature” that “It is not enough to call simply for defense of the “rights of private property”; there must be an adequate theory of justice in property rights, else any property that some State once decreed to be private” must now be defended by Libertarians, no matter how unjust the procedure or how mischievous its consequences.”

To quote Rothbard again, in the “Ethics of Liberty”: “Suppose, for example, that Henry Jones I stole a piece of land from its legitimate owner, James Smith. What is the current status of the title of current possessor Henry Jones X? Or of the man who might be the current possessor by purchasing the land from Henry Jones X? If Smith and his descendants are lost to antiquity, then title to the land properly and legitimately belongs to the current Jones (or the man who has purchased it from him), in direct application of our theory of property titles.” “Suppose that centuries ago, Smith was tilling the soil and therefore legitimately owning the land; and then that Jones came along and settled down near Smith, claiming by use of coercion the title to Smith’s land, and extracting payment or “rent” from Smith for the privilege of continuing to till the soil. Suppose that now, centuries later, Smith’s descendants (or, for that matter, other unrelated families) are now tilling the soil, while Jones’s descendants, or those who purchased their claims, still continue to exact tribute from the modern tillers. Where is the true property right in such a case? It should be clear that here, just as in the case of slavery, we have a case of continuing aggression against the true owners-the true possessors–of the land, the tillers, or peasants,by the illegitimate owner, the man whose original and continuing claim to the land and its fruits has come from coercion and violence. Just as the original Jones was a continuing aggressor against the original Smith, so the modern peasants are being aggressed against by the modern holder of the Jones-derived land title. In this case of what we might call “feudalism” or “land monopoly,” the feudal or monopolist landlords have no legitimate claim to the property. The current “tenants,” or peasants, should be the absolute owners of their property, and, as in the case of slavery, the land titles should be transferred to the peasants, without compensation to the monopoly landlord.”

Ludwig Von Mises’ ideas are entirely opposite in this regard. He writes in “Economic Freedom And Interventionism :“Under the conditions of the capitalistic market society this program of land reform no longer makes any sense. In the market economy the consumers daily decide anew who should own the material factors of production and how much anybody should own. By their buying or abstention from buying the consumers allot control of the material factors of production to those who know how to use them in the best and cheapest way for the satisfaction of the most urgent wants of the consumers. Ownership of land means in the market economy the sovereignty of the consumers. The owners are mandataries of the consumers as it were, bound to employ their property as if it were entrusted to them by the people. When they fail in this regard, they suffer losses. Then they are forced to improve their management or, finally, they go bankrupt. Others who know better how to serve the consumers replace them.”

I would have to state that I am totally in agreement with the views of Rothbard in this issue. Property appropriated wrongfully should be given back to the victims of his descendants wherever they can be traced.

Ayn Rand’s Troubled Economics?

Mark Skousen is an economist I respect a lot. He is inclined towards Capitalism, and is a consistent critic of Keynesian economics. However, in his article “THE TROUBLED ECONOMICS OF AYN RAND” he proves that he has grossly misunderstood Ayn Rand’s philosophy and the concept of consumer sovereignty. Howard Roark, Skousen writes, denies a basic tenet of sound economics–the principle of consumer sovereignty, when he says. “I don’t intend to build in order to serve or help anyone. I don’t intend to build in order to have clients. I intend to have clients in order to build.”

The principle of consumer sovereignty was (and is) espoused by many sound economists, including Ludwig Von Mises and W H Hutt. They are right in saying that in a free market, people are urged to produce goods which are demanded by the consumers. But, this is far from proving that the consumer is “sovereign”. It was one of the greatest achievements of Ayn Rand to prove the fallacy of consumer sovereignty, a notion which has misled even great economists. As she put it, “There are the economists who proclaim that the essence and the moral justification of capitalism is “service to others—to the consumers,” that the consumers’ wishes are the absolute edicts ruling the free market, etc. What all such theorists fail to mention is the fact that capitalism grants economic recognition to only one kind of consumer: the producer.” Even Ludwig Von Mises would have agreed that people pursue their monetary interest “only to the extent that other things are equal.” The consumer is not sovereign. He hasn’t’ (and shouldn’t have) the right to compel producers to produce goods he desire.

Sovereignty is in fact, a political concept, as expressed in statements such as “The King is sovereign”. It doesn’t apply to economics. As an economist wrote, “Sovereignty” is the quality of ultimate political power; it is the power resting on the use of violence. In a purely free society, each individual is sovereign over his own person and property, and it is therefore this self-sovereignty which obtains on the free market. No one is “sovereign” over anyone else’s actions or exchanges. Since the consumers do not have the power to coerce producers into various occupations and work, the former are not “sovereign” over the latter.”

Mark Skousen is off the mark when he says “Randian selfishness ignores the interest of others.” I wonder whether he has carefully studied Ayn rand’s philosophy. There is no clash between legitimate interests of people. One doesn’t ignore the interests of others when pursuing ones selfish interests. One, in fact, aids it.

The Chaos Of Price Controls

The Indian Government appointed panel headed by Kirit Parikh has recommended a hike in fuel prices. The media hails the recommendations as a deregulation of the fuel prices. Ayn Rand fans would remember Wesley Mouch (In “Atlas Shrugged”) explaining his plan to Rearden: “Under this plan, we will grant the industry a five per cent increase in the price of steel.” Tinky Holloway adds: “A certain increase in prices will have to be granted to the producers of iron ore—oh, three per cent at most—in view of the added hardships which some of them will now encounter.” We hear Rearden speak “I rebelled against the looters’ attempt to set the price and value of my steel”. In the same novel, Dagny Taggart wants to raise the prices before price controls are being imposed. Boyle and Mouch opposes her. But, Dagny wins in the end by providing information to Mouch for blackmailing Rearden. When the economy breaks down, Wesley Mouch calls a secret meet of special interest groups. He puts forward Directive Number 10-289, which contains eight policy changes. Point Seven imposes universal price controls.

Jennifer Burns tells us in “Goddess of the Market”, how Ayn Rand vehemently opposed the pamphlet of Friedman and Stigler against Rent Control (which is a form of price controls), as the authors didn’t oppose Rent Controls on moral grounds. She wrote to Mullendore, “Not one word about the inalienable right of landlords and property owners. Not one word about any kind of principles-Just expediency and humanitarian concern for those who can find no houses”

The economic argument against price fixing by the Government carries much weight. It creates shortages or unsaleable surpluses depending on the case. It leads to black-markets, long queues, wasted time, poor quality products, expensive methods of production, and in the long run, higher prices. But, the primary argument is moral. The Government has no moral right to interfere in deals based on voluntary consent for mutual benefit. Such government interference makes both parties worse off. The argument against price controls hold even if customers benefit (which obviously isn’t the case) from price controls. The consumers don’t have a moral right to buy goods at a price lower than the producers would have set. Price controls are an outright infringement of individual rights. The benefits to tax payers (when subsidies to fuel producers are eliminated) and the cut in the fiscal deficit are only side benefits. Markets aren’t rational when the players don’t have the valuable signals coming from market prices. The market price system left unhampered would lead to more rational behavior on both the sides.