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I = S - M

The modern way of thinking about economics has been I = M - S Where I is the I as in me, M is what is 'mine' and S is what ...

2/19/11

Gandhiji gave us a simple criterion with which to evaluate economic theory and policy: are means and ends interchangeable?* In the period before Adam Smith all the way back to Aristotle the preoccupation of economic thinkers was with right economic conduct and the fair prices that would result from it. Here means and ends were undoubtedly not only connected but also interchangeable.

With Adam Smith came the focus on self-interest as the means and a prosperous society as the end. With Smith onwards economic thinking suffers from this inconsistency between means and ends. After all how can pure greed and selfish behavior lead to anything other than a greedy and selfish society? Smith's book was called the Wealth of Nations but really is a system for creating a few fabulously wealthy individuals in a morally broken society.

The other so-called revolution in economics is Keynesian economics. John Maynard Keynes proposed a system of deficit spending during times of critical economic crises to rescue the system. Here the distance between means and ends is compounded! First we must accept a corrupt system based on self-interest (Smith). Secondly, we must accept that such a system must periodically crash and cause untold suffering. Hence we must mortgage our future to save the system (Keynes).

Using Gandhiji's simple criterion we must reject both Smith's classical economics as well as Keynesian economics unless our human imagination is limited to imagining only selfishness and overspending as our ends.

*Young India, 31-12-1931, reprinted in M.K. Gandhi, The Essence of Hinduism. Delhi: Farsight, 2009, p 67.

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