Hi Friends,

Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do. There is just no time to look back, no time to wonder,"Will anyone read these pages?"

With regards,
Hemen Parekh
27 June 2013

Now as I approach my 90th birthday ( 27 June 2023 ) , I invite you to visit my Digital Avatar ( www.hemenparekh.ai ) – and continue chatting with me , even when I am no more here physically

Wednesday 4 October 2017

HOW TO MAKE INDIA LOW COST ECONOMY


Theoretically ?  May be  /  Practically ?  Impossible  !

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Sunday Times ( 01  Oct  ) carried following QUORA question :

“ If I start destroying currency , how will that affect economy ? “



Alex Tabarrok ( Professor , George Mason University ) replied as follows :

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Amazingly, burning your cash would make everyone else a little bit richer. “


Suppose that you get a job and earn $100 that you use to buy a pair of jeans. You created $100 worth of value and you consumed $100 worth of value. Now suppose you give the $100 to charity. You created $100 worth of value and someone else consumed $100 worth of value.

Now suppose you work and burn the $100. This is the same as the charity case! You created $100 worth of value but didn't consume anything. But the value you created doesn't disappear. You did the work and society is richer because you did the work. So who does the extra consuming?  Everyone  else. 


How does this work?

When you burn your cash you reduce prices just a tiny, tiny, bit. The fall in prices means that other people can buy more. How much more ?


Exactly $100 in value more ( $100, divided by the population who participates in that economy, so not very much per person ! ).


So the upshot is that those fat cats lighting their cigars with $100 bills are really benefitting all the rest of us !


* I am assuming a normal, well-functioning market economy. In a recession with sticky prices there could be short-term Keynesian considerations which I have ignored as these don't seem to be at the heart of the question as asked. “

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Theoretically , Professor is right


But practically , you cannot expect anyone to work for the society , without expecting anything in return !


No doubt , some rich / well-to-do , individuals do join NGOs / Charitable Organizations and work for “ Free “  . But they are exceptions and in minority


But , can we get millions to , “ Give more to the Society in relation to what they receive from the Society “ ?


Can we get them to sacrifice a “ little bit “ , in order to enrich the lives of other poor people  ?


Can such “ small sacrifice “ on part of millions , make India , a “ Low Cost Economy “ and set in motion a “ VIRTUOUS  CIRCLE “, making us globally competitive  ?


Yes , it is possible as described in my following blogs :


Automation is Inescapable  [  30  Nov  2016  ]


GIST  :

Reduce " Cost of Inflation " by limiting  " Annual Wages-Salaries Increases " to 75 % of

the  preceding year's GDP number ( ie: if GDP for 2015,  is 8 % , maximum salary /

wage increase  that can be granted on 01 April 2016 , will be 6 % ) . 



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04  Oct  2017


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