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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 ...

6/30/14

The cardinal fault of modern economics is its conception of value. Value is absolute in its relativity.

The first effect of this is that modern value can only mean the upliftment of any one thing, say A, at the degradation of some other thing, say B. If A rises in value, B must diminish in value. Such a conception of value betrays a view of society that is split. Life is seen as a see-saw game, with some values gained only at the cost of others lost.

This conception of value, so absolute in its relativity, harms us all. It drives a wedge through the person. Unwhole individuals create split families, unstable societies, and rudderless economies. There is so much suffering in rich and poor worlds alike. False values diminish us all and lead us on a downward spiral.

I introduced the idea of dignity value at the Goat Island Performance Group's Last Symposium in 2008. It is a very simple concept. Dignity value is the inherent value in every thing and being. Value simply is.

Now the way we, society, creates problems is by assigning the wrong values to things. We have been trained by modern economics to accept the price of something as its value. Krishnamurti pointed out the error in this way of thinking of value with characteristic humor many years ago in old Bombay, when he defined stupidity as the assigning of wrong values to things.

When society assigns values, like the market price, that are different from dignity values, bubbles are born. Eventually they burst, returning values to their dignity values.

By recognizing the dignity values of all things, natural and built, as their only real and absolute value, we can create wholeness.

Human beings are capable of much stupidity. But that is not all we are capable of. We are capable of great thought, great wisdom, great sensitivity, great kindness, and taking upon ourselves the incredibly enlightened guiding principle of nonviolence.

Now I turn to the second effect of the conception of value, absolute in its relativity, of modern economics: There can never be a rise in the value of everything. By its very definition if something rises in value, something else must fall in value, all values simply can not rise.

This is a very limited understanding of the world and the role that humans, sentient thinking and feeling beings, can play in the world over an infinite span of time!

If we look at life in terms of dignity value, we can see that we can create, though few of us can at this point--given how society is organized, a rising dignity value of life. In fact this was the whole reason why Gandhiji started Tolstoy Farm and all his other ashrams.

Gandhiji intuitively understood that when people come together in wholeness and work the earth in wholeness, make things by hand and create communities in wholeness, the work, the land, and the people become one, and the dignity value of every thing and every one involved rises.

We need not just one Tolstoy Farm, but a hundred, a thousand, a million, and more, to create a rising dignity value for every single one of us, our neighbors, and through our neighbors, the world.

So Gandhian economics must begin with a new concept of value, perhaps the one I call dignity value, which is absolute without being rigid. We need to replace the present concept of value of modern economics which is absolute (hence rigid) in its relativity with something along the lines of my concept of dignity value, which is relative (hence flexible) in its absoluteness.

6/25/14

Time consistency means that a path from A to Z will be followed by all points in between such as B, C, and D or L, M, or N along the same exact trajectory. In other words whether you start at A, the beginning, or at M, somewhere in the middle, the time consistent method would follow the same route and sub route. In this sense, classical and Marxian economics are time consistent. 

Gandhian economics, on the other hand, is time inconsistent. When we start at point A, we have a certain amount of information and understanding of matters. By the time we get to B, things will have changed. We must assess our options at this new vantage point and move along the right path, not necessarily the path described at point A. 

When we successively get to points C, D, E, and so on, we must keep an open mind, modifying our plans and taking fresh paths at each point. 

In other words Gandhian economics is flexible, non-dogmatic, and constantly capable of holding a profound inconsistency of method with respect to time. 

While other approaches make much of being consistent with respect to time, Gandhian economics cares about being consistent with respect to the human being, all plants and animals, and our planet. Time inconsistency, the methodology of Gandhian economics, honors us and everything contained in mother earth. 

6/22/14

The two great myths of bad economics are

a) saving is good, consumption is bad

b) consumption is good, saving is bad. 

Let us consider them one at a time. Looking simply at the gross amount saved as a sign of a society doing well may satisfy narrow minds but is bad economics. There are those who seek to minimize consumption and maximize saving with the smug assurance of moral certitude. They are wrong. 

The gross amount of saving is irrelevant and inasmuch as it causes suffering in the form of lower consumption, is dangerous folly. James K. Galbraith has pointed out in his brilliant book The Predator State that right before the dissolution of the great Soviet empire, its saving rates were among the highest in the world. This high saving did result in low consumption, with hungry, ill-clothed and sheltered people particularly in the provinces, but did not make the Soviet economy function well enough to survive another day. What matters is never the gross quantity of saving but the nature of saving, its quality. 

The right kind of saving, generated in the living and working of whole lives, is what is good. And so is the right kind of consumption, generated from work that does not divide the self, that is made out of love and results in love. 

Let us consider the second myth. This relies on a misunderstanding of what the great economist John Maynard Keynes was talking about. When I was a graduate student in economics at Northwestern University, Robert Eisner (for whom I served as his favorite Teaching Assistant for 3 years) made us read Keynes. Eisner, a past President of the American Economics Association, was the last professor to require his students to do so. I wonder if anyone reads Keynes anymore. By the persistence of this myth my guess is no, no one reads Keynes anymore. This myth goes like this: we must keep up our consumption because more the saving the more we take away from the spending stream. Lower the spending, lower the output, lower the income. 

That is not how it works. As Keynes patiently explains, while what is saved is a leakage from the spending stream temporarily, it reenters the spending stream in the form of an injection: investment. Keynes did not explore the nature of saving but it is the next logical step:

If we save appropriately, in wholeness, without violence, the quality of the saving returns to us in the form of whole, non-violent investment. Once again, both consumption and saving are good, when their natures are appropriate and holistic. 


spending today = output tomorrow = income the day after

Step 1

spending = output

How we use our time and money, how we live our lives and spend today results in what gets produced tomorrow. How we spend our money also determines how we produce that output, whether it is produced in small, local, human scaled enterprises or large sub-human factories half way around the world.

Step 2

output = income

What is produced and how it is produced determine what and how we earn. Production results in an income equal to it both in quantity and quality. The nature of the production, its process, its roots in the community or lack thereof, is reflected in the income that we earn and how we feel about it. The more whole the production is, the more it recognizes our innate wholeness, the more whole our experience of earning is, the more whole income is.

Step 3

income = saving + consumption

What we earn and how we earn it determines what and how we save and consume. The more whole the income is, the more whole is the what we save and consume. The more we enjoy earning our income, the more meaningful the work that results in the income is, the more enjoyable and meaningful our saving and consumption is.

Step 4

saving + consumption = investment + consumption

The nature and quality of saving and consumption, how we save and consume determines the next step, which is how and what we invest and consume in our future. Saving is the act of setting aside. Investment is the act of putting to work. How we save determines how we invest and consume in the future. How we consume now determines how we invest and consume in the future. Can we see how crucial it is to save right and consume right?

Can we see that we can not save right and consume right unless we earn right? We can not earn right unless and until we produce right. We can not produce right unless we spend right! Which brings us full circle to the last step.

Step 5

investment + consumption = spending

What and how we invest and consume determines what and how we spend in the future. The nature of our investment, how we organize our productive resources, how we see people as whole beings capable of great imagination and love, how we interact with the built environment, using tools and technology that enhances rather than diminishes us, that accepts and respects us as whole beings rather than splits us into labor and capitalist, consumers and producers, determines the quality and quantity of our spending in the future.

The full cycle of economics is thus

spending = output = income = saving + consumption = investment + consumption = spending

and may be summarized for handy reference as

spending today = output tomorrow = income the day after.

6/21/14

Useful formulas in economics


means = ends

We can only achieve wholeness by being whole, we can only achieve peace by being peaceful, we can only achieve the end of suffering by ending our own actions that create suffering in our own lives and those of others. 

we = 100%

We are not the 99% fighting against the 1%. We are all in this together. We are all of us and we are every generation past and still to come. We are the 100%.

saving = investment

Saving in its holistic sense is what we put aside rather than consume and how we put aside what we do. It takes some practice and conviction to enjoy not consuming with a clear sense that we are adding to the future and the future of generations yet to come. When our saving comes out of love, our investment will come from love as well and we will have boundless good fortune that regenerates the earth, regenerates families and society. 

income = output

What we buy is what is made. What is made is what we earn. Our incomes come from output. In fact our incomes are our output. We must create output that is whole using methods that are whole and don't destroy the earth, don't split the person artificially into producer and worker, the have and the have-not. When we make wholly, we will earn wholly, and all violent conflict will simply vanish.

We are here on planet earth for a very short time. We are here on planet earth for a very long time. Both these statements are true and hinge upon what we consider to be we.

We are not just you and me, although you and me are contained in we. We are so much more than that. We are more than flesh and bones and we are more than our immediate self-interest. We include generations before us and generations after us. We are our fore-fathers and -mothers and sons and daughters and grand-sons and -daughters and onward into infinity.

When we are talking about sustaining ourselves, even flourishing upon our beautiful earth, we must take into consideration this broader sense of we.

So why do we act stupidly so much of the time? Why is modern life set up to hurt our future selves so much, to destroy nature beyond its capacity for regeneration, to leave future generations with a legacy of dwindling water, corrupted soil, and a lingering memory of grand-parents with stunted imaginations? I will tell you why.

I remember Krishnamurti saying that stupidity is the assigning of wrong values to things. 

This is very important to consider. If we hope to develop an economics that works for we in the true sense of the term, we must stop acting with stupidity. I consider most of the institutions of modern economic life to be quite stupid and the endless commentary by so-called economists sustaining this stupidity to be the compounding of stupidity at a compound rate of interest.

Krishnamurti suggests that the reason for the profound stupidity of modern economic life is that wrong values are being assigned to things. This is what I have lectured and written upon this subject:

What is value? Economists have tried to answer this question for at least two hundred years. I will try to answer it in a minute. There is an inherent value in all things and beings. It is the inherent dignity of a rock, tree, or person that gives it its value. The classical economists as well as the Marxians miss this simple point.

A tree may have no economic value-in-exchange nor reflect any labor expended by humans but surely it has value. I will call the inherent value in all things dignity value. All things natural and created have dignity value. It is when a society departs from the dignity value of things that bubbles are formed. The dignity value of all the so-called financial innovations in the real-estate market and stock market is close to zero. Their existence is of no real value whatsoever.


John Kenneth Galbraith pointed out years ago that bubbles are created by innovations in a subject incapable of innovations. In other words 'new' financial instruments are given a high and rising economic value while their dignity value is zero. The rising economic values of these financial assets in relation to their dignity value creates bubbles. Crashes return things to their dignity values. Bubbles must burst. There is after all a quiet dignity to that.*

Let us let go of this madness and change our lives, our outlooks, our ways of living and loving.

We deserve it.


* Goat Island Summer School Symposium, School of the Art Institute of Chicago (SAIC), July 2008 and  Performance Research 17.1, 2012. 

6/11/14

John Ruskin writes in the introduction to his Unto This Last: Four Essays on the First Principles of Political Economy that his book is the first attempt to express in plain English what was given in Greek by Xenophon (especially The Economist) and Plato (especially Laws) and in Latin by Horace and Cicero.

Clive Wilmer in his brilliant edition of Unto This Last and Other Writings by John Ruskin (Penguin Classics) adds to this list others that John Ruskin cites most often: Shakespeare, Dante and the Bible

All these works are concerned with fundamental truths of human nature. These works approach economics in terms of what is unchangingly just, everywhere and always, what Gandhiji simply called truth

Gandhiji had read all the Latin law-books in their original language while studying to join the Inns of Court in London. The examination in Roman Law was entirely in the Latin language. While many students chose not to read the difficult texts in Latin, Gandhiji chose to study them thoroughly in Latin, a language he undertook to learn in studying for the London matriculation. 

Gandhiji had undoubtedly read the Greeks, Shakespeare and Dante for his matriculation from Bombay University and again for his London Matriculation, which he describes in his autobiography as a difficult examination that meant a great deal of labor (Latin and a modern language were compulsory) and much addition to his stock of general knowledge. In England, while still a student, he had read the entire Bible, both Old and New Testaments. 

In 1908 when Gandhiji read Ruskin's Unto This Last: Four Essays on the First Principles of Political Economy on a life-changing 24 hour train journey from Johannesburg to Durban, he was already familiar with the great classical ideals that Ruskin based his own book upon. In fact, Gandhiji's creation of what we may now call Gandhian economics went far beyond Ruskin and his classical Greek and Latin sources. 

Gandhiji had, under the influence of the Theosophists in London, read many Hindu texts including the Bhagwad Gita. Bhikhu Parekh points out in his wonderful book Gandhi: A Very Short Introduction (and formerly in his masterful treatment of Gandhiji in the Past Masters series) that Gandhiji's mother came from a community which considered the Koran as equally holy as the Hindu scriptures. The influence of the non-violent Jain religion was very strong in the region where he grew up, especially in Gandhiji's own family. 

Furthermore, Gandhiji started corresponding with Tolstoy in 1909, during the last year of Tolstoy's life, and even translated Tolstoy's Letter to a Hindu: The Subjection of India--Its Cause and Cure into Gujarati. In his introduction to this book, Gandhiji calls Tolstoy his "great teacher whom I have long looked upon as one of my guides". 

So, when Gandhiji took the life-changing 24 hour train trip from Johannesburg to Durban reading Ruskin, he was recognizing in Ruskin truths that he already knew well and that were part of his family background, education and study. Gandhiji said he had read few books, but what he had read he had digested well. 

Gandhian Economics undoubtedly begins with Gandhiji, and its roots can be traced back through John Ruskin to the ancient Greeks with detours in Shakespeare, Dante, the Bible, Horace, Cicero, Tolstoy, Jainism, the Bhagwad Gita and Koran and that infinite pool of wisdom that was ancient India. 

6/8/14

John Ruskin's book Unto This Last: Four Essays on the First Principles of Political Economy starts with the following quote

Friend I do thee no wrong
Didst not thou agree with me for a penny?
Take that thine is and go thy way
I will give unto this last even as unto thee. 

The quote that opens Ruskin's book and provides him with his title comes from the parable of the vineyard, a simple story told by Jesus in the Gospels to illustrate a spiritual, and as it turns out, economic lesson. 

There was once a man who owned a vineyard. Early one morning he sets out to hire men to work in the vineyard for the day. A wage of a penny for the day is agreed upon and the men go to work. 

Our vineyard owner goes out at the third hour and sees the unemployed standing idle in the market place. He tells them to go work in his vineyard and that he will pay them what is right. So these unemployed go join the other men working in the vineyard. 

He goes out again at the sixth and ninth hours and finds still more unemployed men. He sends them to his vineyard to work with the understanding that he will pay them what is right. 

Our vineyard owner goes out one last time at the eleventh hour. He finds still more people who are unemployed and asks them why they stand idle all day. 

They say that no man has hired them. Upon hearing this our vineyard owner asks them to go work in his vineyard and that he will pay them what is right. 

At the twelfth hour, the end of the day, the vineyard owner asks his steward to pay all the laborers starting with the last ones hired and ending with the first. 

The group of men hired at the eleventh hour steps forward and each man receives a penny. 

Each group steps forward in turn, those hired in the ninth, sixth, and third hours, and each man receives a penny. 

When at last the men of the first group hired step forward to receive their wages, which are once again a penny per man, there is much grumbling and murmuring. They are disgruntled! They who have worked all day in the heat are paid the same as those who have worked less, some even for less than an hour!

In answer to the grumbling and murmuring of the disgruntled men who were hired first and worked all day, our vineyard owner gently says

Friend I do thee no wrong
Didst not thou agree with me for a penny?
Take that thine is and go thy way
I will give unto this last even as unto thee. 

In 1908, while still living in South Africa, Gandhiji read Ruskin's Unto This Last: Four Essays on the First Principles of Political Economy and underwent an "instantaneous and practical transformation" (Autobiography). Having discovered some of his deepest convictions reflected in this great book of Ruskin's, he talked things over with his associates, describing to them the effect that Unto This Last had produced on his mind. He proposed that all the group's political and social activities, including the press that produced Indian Opinion, the group's periodical, be removed to a farm on which everyone would labor drawing the same living wage and attending to the press work in spare time. Gandhiji's proposal was unanimously approved and £3 was agreed upon as the monthly allowance per head, regardless of color or nationality.

This was the first practical application of Gandhian economics. It led to the creation of the Phoenix Settlement, Gandhiji's first experiment in creating an ashram, where like-minded people would come together to live and work the land, create wholeness, and communicate this wholeness to the world. 

6/7/14

In 1908 Gandhiji read John Ruskin's Unto This Last: Four Essays on the First Principles of Political Economy while on a train from Johannesburg to Durban. He describes the experience of reading this book and the profound effect it had on him in his autobiography in a chapter entitled The Magic Spell of a Book.

The book is impossible to lay aside once he has begun it. It grips him. Hour after hour passes by. Johannesburg to Durban is a 24 hour journey. He gets no sleep that night. He is young. He has read very little outside of text-books for his studies at The Bombay University, The University of London and to qualify as a Barrister in England. He has been involved in nothing less than the emancipation of the human race, the early days of satyagraha, and has had no time to read books. Until this meandering train journey!

Hour after hour goes by. He is oblivious of the many stops that the train makes along the way. He sees his deepest convictions reflected in the pages of Ruskin's book. The book captures him. He sees the book as great poetry, sees Ruskin as the great poet who can with his words call forth the good latent in the human breast. He is aware that few have read this book, that upon its publication it was declared a failure, a colossal mistake of a great man in decline. He is not bothered by the book's reputation for he understands that poets cannot influence all alike, for everyone is not equally evolved. 

By the time the train reaches Durban, 24 hours have passed, and he finds that that John Ruskin's book on the first principles of political economy has brought about an awakening--an instantaneous and practical transformation of his life. 

This is the birth of Gandhian economics. 

6/5/14

Xenophon's The Economist (written somewhere around 400 B.C.) is a dialogue between Socrates and Critobulus. They are chatting about economics when the subject of wealth, of rich and poor, comes up. 

Socrates says he is rich enough already but feels compassion for Critobulus whom he sees as singularly poor. 

At this Critobulus laughs out loud! He asks teasingly what Socrates thinks each of their fortunes would fetch in the market. 

Socrates answers that everything that he owns could be sold for a total of 5 minae whereas Critobulus' property would fetch at least 100 times as much. 

Critobulus then condescendingly questions Socrates on how it could be that given Socrates' own reflection of the market value of their respective assets Socrates could still assert that Socrates was the one with no need of further wealth but that Critobulus was to be pitied for his poverty. 

Socrates replies that what little he possesses is more than sufficient for his wants whereas Critobulus, considering his lifestyle and obligations, would be barely well off if what he owned were to be multiplied by 3!

Socrates explains Critobulus' poverty thus: 

1. Critobulus is expected to offer many costly sacrifices failing which neither the gods nor men would tolerate him. 

2. Critobulus must welcome a number of foreigners as guests and entertain them handsomely. 

3. Critobulus must feast his fellow citizens and ply them with all kinds of favors or else lose their support. 

4. The State expects a man of Critobulus' position to make large contributions such as the rearing of studs, the training of choruses, the superintendence of gymnastic schools, and the conducting of consular duties. 

5. In the event of war, Critobulus is expected to make large contributions and pay onerous war taxes which are draining and difficult for him to support. 

In the event that any of the above 5 expectations are not met by Critobulus, the Citizens of Athens would treat Critobulus as severely as if they had caught him stealing their own property. 

Socrates then explains that were he, Socrates, ever in need of anything, his friends would help him out at trifling cost to themselves. Were Critobulus in need, none of his friends could help him, since they themselves depended on Critobulus' generosity for their own wealth. 

If we treat this wonderful dialogue from almost two and a half thousand years ago as an allegory, a story which can be interpreted to reveal a hidden meaning, it becomes a powerful story about neoclassical modern economics and gothic Gandhian economics. 


6/3/14

If I lend you a hand I do not expect you to return a hand with interest. What I do expect is that when I need some help you would be willing to help me. That is how society functions. 

The rich must not give up their riches. They are theirs to keep. However I would appeal to their good natures to see themselves as trustees of their wealth and lend their riches to others in their midst. I am talking about an ongoing cycle of voluntary extension of wealth to the unwealthy. 

We know instinctively that we can not allow usury. Usury is greed and implementing greed (means) can only lead to more greed (ends). Means and ends are always and everywhere convertible terms. So usury can not be used to create something positive and ease suffering. 

There has been a stipulation against usury in most cultures. In Europe, until the Middle Ages, that is to say until and including the gothic era, usury was not permitted. However what usury really is needs to be clarified. We may have an instinctive abhorrence of it and yet how is usury to be understood? 

Usury in its original meaning only applies to interest paid on unproductive loans.* This is such an important point! Productive loans, such as those made to businesses through the bond markets, have always carried interest. That market is, and has always been very good at channeling savings to investors. We are not concerned with that here. What we are concerned about is these unproductive loans which need to be funded but are not funded in the usual markets. 

I urge the rich to make wealth available to others for unproductive purposes in the form of interest-free loans. Unproductive projects and purposes could include

Getting food
Getting water
Getting shelter
Simple social engagements such as marriages, funerals, and celebration of holidays
Creating organic farms
Creating small and local businesses
Performance, art-creation, music, and their teaching
Special projects undertaken in the spirit of swadeshi



*See for instance Hilaire Belloc's Economics for Helen.