31 October, 2020

Method In A Mad Plan

An extremely readable book, flouting cardinal ideas, offering a concrete plan that most economic commentators would dub crazy.

Method In A Mad Plan
Most books on popular economics are not written well and most take for granted two cardinal ideas: the need for fiscal prudence and the notion that private investors more usually get it right than governments. This book is extremely readable and also apparently flouts the cardinal ideas, and offers a concrete plan that most economic commentators would dub crazy.

This plan (with some caricature) goes thus: (a) Open a credit window so that local authorities (panchayats and municipalities) can borrow at very low interest rates for a class of projects that create public assets by employing those willing to work at minimum wages; (b) The interest rate on such loans would be zero if the RBI could monetise these loans by printing an equivalent amount of money. If this isn’t possible, say due to inflationary fears, the central government would subsidise, keeping the interest rate for this loan window lower than on central government borrowings; (c) The size of the loan window should have no upper limit. But, after an initial loan large enough to employ all those willing to work at...



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