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Five Reviews of G. Omkarnath (2012), Economics - A Primer for India (New

Delhi: Orient Blackswan)

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 Volume 29 - Issue 22 :: Nov. 03-16, 2012
INDIA'S NATIONAL MAGAZINE
from the publishers of THE HINDU
(https://frontline.thehindu.com/static/html/fl2922/stories/20121116292210200.htm)

Understanding economics

JAYATI GHOSH
Lack of economic literacy is why people are not in a position to interrogate economic policies that
are often presented as “inevitable”.
ARUNANGSU ROY CHOWDHURY

PRANAB MUKHERJEE, when he was Union Finance Minister, interacting with students at the West Bengal
National University of Juridical Sciences in Kolkata after delivering the K.C. Basu Endowment Lecture on "India's
Development, Economic Policy and the Law" in 2011. At left is West Bengal Finance Minister Amit Mitra.

THERE is no shortage of problems that plague public policy and social life in India today. But one of them
is not talked about very much, though it has important —even crucial—ramifications for people’s lives:
the lack of basic economic literacy. This is a widespread problem, not just among ordinary citizens but
even among the media, legislators and elected representatives, decision-makers in public and private
organisations, and others.

This has very adverse consequences because it means there is usually an inadequate understanding of the
processes that are set into play by particular policy choices, or of other possibilities. So the public at large
is not in a position to interrogate economic policies that are only too often presented as “necessary” or
“inevitable” according to some opaque but supposedly technocratic determination.
 Volume 29 - Issue 22 :: Nov. 03-16, 2012
INDIA'S NATIONAL MAGAZINE
from the publishers of THE HINDU
(https://frontline.thehindu.com/static/html/fl2922/stories/20121116292210200.htm)
One reason for this is, of course, the disagreement among economists themselves about the nature and
workings of economic processes. After all, in this discipline (not just in India but across the world) there
are continuing and unresolved debates on almost everything. The underlying—but rarely explicit—political
and ideological predilections of different economic analysts determine not only the choice of assumptions
made in theoretical models but even the analyses of empirical outcomes. Even well-established ideas tend
to be clouded over either by a miasma of obfuscating jargon or by so many signs of two-handedness (“on
the one hand, on the other hand”) that people are just left confused.

But another reason for the lack of more widespread economic literacy is the glaring absence of books that
can provide clarity to cut through the debates and provide a basic understanding of economic processes.
Although I have been teaching and researching in economics for more than three decades, I am still hard
put to think of any title when people ask me for an easy, approachable introduction to the subject that can
be understood by intelligent laypersons as well as those who have a direct interest in understanding
economic mechanisms. And this is even more the case for books that provide a perspective relevant for
developing countries like India.

This is why a new book by G. Omkarnath ( Economics: A Primer for India, Orient Blackswan, 2012) comes
as a welcome addition. It is usually an act of great courage to write an introductory book on anything, and
it is probably even more courageous to do so for a subject like economics. This book is nothing if not
ambitious: it attempts “to bridge the gulf between the real world and introductory economics” by
introducing the subject through the medium of the Indian economy.

Given the grand nature of this task, the author has done a surprisingly good job, presenting the basic ideas
of the economic structure of society and of change through time in a logical, clear and consistent manner.
Omkarnath concisely discusses issues of production, distribution and growth; of market functioning and
how it can be socially embedded; of the significance of macroeconomic variables such as savings and
investment and how they are measured; of government policies and their effects on economies, including
both state intervention and liberalisation; of the challenges of economic diversification and industrialisation
in affecting both productive structures and employment; of the significance of petty production as well as
the persistence of informality; and other issues directly relevant to the Indian economy.
 Volume 29 - Issue 22 :: Nov. 03-16, 2012
INDIA'S NATIONAL MAGAZINE
from the publishers of THE HINDU
(https://frontline.thehindu.com/static/html/fl2922/stories/20121116292210200.htm)
Part of Omkarnath’s success in presenting and clarifying basic concepts is that he eschews the method
employed by most standard textbooks of focussing on the logic of individual choice in an abstract system
of competitive markets. Because this abstraction is so far removed from reality, it does not allow those who
have grasped its internal principles to move easily into a consideration of the world around them and
contemporary economic processes.

So a yawning gap is created between the closed world of so-called theory and the more complex and
dynamic economic reality—a gap that has led students in Europe, for example, to protest against the autistic
nature of the economics discipline that they were exposed to and generated a movement for “post-autistic
economics” that has now culminated in the study of “real world economics”.

Instead of conforming to the autistic pattern, this book unfolds within the observed reality of the Indian
economy. There is no explicit obsession with “theory” as in the courses on economic principles that still
form the staples of undergraduate and graduate pedagogy. But that does not mean that theory is absent;
rather, theories are described and elaborated upon in relation to the observed reality, which serves as an
effective way of promoting their comprehension.
 Volume 29 - Issue 22 :: Nov. 03-16, 2012
INDIA'S NATIONAL MAGAZINE
from the publishers of THE HINDU
(https://frontline.thehindu.com/static/html/fl2922/stories/20121116292210200.htm)

As noted in the preface to the book: “The specific apparatus deployed is a mix of intuition, simple concepts
and measures, accounting relations and bits of history. The user will have learnt to follow reports on the
economy and to appreciate the role of economic policy.” This may seem like a relatively modest
achievement, but in fact if it is successful this will be a huge advance because so many people—including
those whose professions actually require them to have these skills—are typically not able to interpret the
economic reality around them.

Several elementary mistakes that are frequently made in the financial press are gently clarified. For
example, consider the number of times there have been headlines screaming that “prices are coming down!”
when what is actually meant is that the rate of inflation is coming down—so prices are still rising but at a
slower rate. A box on measuring rates of inflation describes various methods in a clear way, and also notes
how for annual inflation, the point-to-point method (which is the one most frequently presented in the
media) may not capture reality as well as the average of all 52 weeks of the year.

Another significant feature of the book is its recognition of distributive issues —of how different economic
processes and policies have different distributive outcomes, and that nothing is “neutral” in that sense. This
enables a better understanding of the political dynamics that are closely associated with economics, within
national economies and in international economic relations.

Obviously, in a book that attempts to deal with so many important concepts and to cover such a large
ground in a relatively short space, there can be quibbles about the weight given to different ideas or about
the degree of explanation provided for particular concepts or processes. But these are really no more than
quibbles because the overall result is an impressive one.

This book should be required reading not just for the average person who wants to know more about how
the economy and economic policies affects his/her own life, but also for media persons, government
officials and legislators who determine economic policy, and even those regularly engaged in pursuing the
profession in different ways.
 Volume 29 - Issue 22 :: Nov. 03-16, 2012
INDIA'S NATIONAL MAGAZINE
from the publishers of THE HINDU
(https://frontline.thehindu.com/static/html/fl2922/stories/20121116292210200.htm)
This may be a sad commentary on the state of public knowledge about economics. But the unfortunate
truth of that statement shows how important it is for books like this one to have very wide readership and
dissemination.

A Refreshingly New Perspective
Pulin B Nayak
T
his is an earnest new principles
level textbook on economics which
is supposed to be a primer for
Indian students at the undergraduate
level. Economics is a major subject of
study at the undergraduate level across
the country. If the cut-off aggregate per-
centage of marks in CBSE examinations
is any indication to go by, economics
possibly attracts the very best students
in all the major universities of the coun-
try. In some of the premier colleges of
Delhi University, the aggregate cut-off
percentage for students’ school leaving
examinations is upwards of 95%.
If the best students are getting attract-
ed to study economics rather than almost
any other competing liberal arts subject,
it is especially imperative that the most
appropriate textbooks be chosen to
present the foundations of this subject to
beginners. For several decades now the
staple textbooks for Economics (Hon-
ours) students used to be the classic text
Economics authored by Paul Samuelson,
which first appeared in 1948. This is
Economic & Political Weekly EPW april 20, 2013
Economics: A Primer for India by G Omkarnath
(Hyderabad: Orient Blackswan), 2012; pp xix +271, Rs 325.
possibly the most influential principles
level textbook ever written in Economics,
fittingly, by wide consent, the greatest
post-world war master who dominated
the subject all the way till his death in
2009 at the age of 94. The book has had
19 different editions, with the latter
ones being coauthored with William
Nordhaus. It has sold more than four
million copies and has been translated
into 41 languages.
Another significant textbook, An
Introduction to Positive Economics, was
authored by Richard Lipsey in 1963,
which, too, became justly famous across
the world and was adopted by under-
graduate curricula, owing to its refresh-
ing clarity of presentation of the basic
material. Some of the Indian universities
did adopt the books by Samuelson and
Lipsey. In more recent years there has
been a spate of new textbooks mostly
authored by US authors. A particularly
vol xlviiI no 16
BOOK REVIEW
notable one has been the book Principles
of Economics by N Gregory Mankiw.
It is clear that well-written textbooks
by American authors are great for Amer-
ican freshman students. The real ques-
tion for us in India is how relevant these
texts are for our students. While talking
about money supply Samuelson and
Mankiw inevitably talk of the US Federal
Reserve, for example. There may be
some Indian students who might have
heard of the Federal Reserve, but it
should be no surprise if a large fraction
of them would not be familiar with this
body. Clearly they would be able to re-
late to and understand the issue of money
supply better if they are told about the
institutional features and functions of
the Reserve Bank of India. Similarly for
issues pertaining to fiscal policy, trade
policy or government regulation to deal
with market imperfections, for example.
It is here that it becomes important to
see if we should not be actively seeking
introductory textbooks for students in
India that adequately address the above
difficulty. In fairness, there indeed are a
good number of textbooks in the market
penned by Indian authors. These typically
are somewhat cheaper, and are therefore
more affordable for students coming
from weaker financial backgrounds, but
25
BOOK REVIEW

these books almost always seem to fall
short on quality, both in terms of the
nature of theoretical analysis, as well as
in terms of providing a reasonable ac-
count of the Indian institutional set-up.
The end result is usually not satisfactory
at all. A large number of universities and
colleges in the interior heartland of India
nevertheless prescribe these books by “In-
dian authors” chiefly because they are
more easily accessible at the local book-
sellers. At metropolitan centres like Delhi
and Kolkata, books by foreign authors are
routinely used, but here the student
while studying collective bargaining, for
example, is made to learn the Wagner Act
(1935) and the Taft-Hartley Act (1947)
passed in the US Congress, whereas for
him or her it should have been the Indian
legislations to which they would have
related more naturally.
Indian Conditions
It is in this context that one needs to ap-
preciate the effort of the author of this
book, a professor of Economics at the
University of Hyderabad. The effort is
particularly notable because the author
scrupulously seeks to present Indian
data and examine the Indian reality. For
instance, while talking about the shares
of organised and unorganised sectors in
Indian GDP, the author presents data
from the Central Statistical Office’s (CSO)
National Accounts Statistics for the year
2010 (p 218). Elsewhere, while covering
the system of money and finance the author
presents and discusses the various relevant
rates such as the repo rate, the reverse repo
rate, the cash reserve ratio (CRR), the stat-
utory liquidity ratio (SLR), the base rate,
the saving bank rate, the prime lending
rate (PLR), etc (pp 110-17), terms that a
student would standardly encounter in
newspapers or business TV channels.
The book is divided into two broad
parts, the first part dealing with the eco-
nomic structure of society and the sec-
ond covering the process of economic
growth. In the first part there is a fairly
elaborate treatment of the systems of
production, markets and money and fin-
ance. The author adopts a Marx-Sraffa-
Leontief like production scheme and
presents an input-output structure of
the Indian economy (pp 8-19), using
the aggregative sectors of agriculture,
industry and services.
Other than contextualising diverse
economic issues with Indian, rather than
American or British, data, there is another
important way in which the author seeks
to introduce the subject of economics to
beginners. The books by Samuelson,
Lipsey and Mankiw, are all definitively
in what may be called the current main-
stream Anglo-American tradition. This is
also very much the dominant neoclassical
treatment of the subject that is associated
with the line of economists that runs
from Edgeworth, Marshall, Hicks, Allen,
Samuelson and Solow onwards. The cur-
rent mainstream tradition also encom-
passes, along with the above, the Keyne-
sian approach to understanding the
macroeconomy, a project that was very
much bolstered by the seminal contribu-
tions of Hicks and Samuelson. This book
explicitly seeks to present the subject
that is distinctly different from the
mainstream neoclassical tradition.
Real World Problems
The real world today is beset with myriad
economic problems. After the Lehman
Brothers crash of 2008, the western world
is still in the grip of depression-like

Two Recent Books by Dr. M. R. Kolhatkar

IAS (Retd), former Adviser (Education), Planning Commission,
Govt. of India.
Education and Federalism in India – Rawat Publications, Jaipur & Delhi (2012) – Price: Rs. 975/-
Survey of Higher Education (1947-2007) – Concept Publishing Company, New Delhi (2012) – Price: Rs. 1,250/-
Praise from Scholars/Administrators

B. N. Bhagwat, former Secretary, Sports,

Kolhatkar’s “Education & Federalism” is a monumental contribution to a very topical
GoI in Harmony (Journal of IAS Association
subject and is a must-read for academicians and policy-makers alike.
of Maharashtra, August 2012)

Pawan Agarwal, Adviser (Higher “I have gone through your books and must compliment you for the extensive and
Education), Planning Commission, painstaking research that you have undertaken. I would particularly like to use your book
Government of India. on higher education for scholarly writing in higher education” – Message to Author

Prof. P. G. Joganand, H.O.D. Sociology,

“Dr. Kolhatkar has made a very bold suggestion regarding reinstatement of English as
Mumbai University at the release function of
a medium of instruction at P-G level in all Arts faculty colleges/universities in India”.
the book at WRC of ICSSR at Kalina on
21/11/2012

Available at Concept and Rawat Booksellers

including Kamal Kakkad, Manager, Education Services, Shop No. 3, Kakkad Compound,
Behind Kadambari Sweet Home, Near Apna Bazaar, Jayprakash Road, Andheri (W) Mumbai 400 053.
Mobile: 9892626836 Email: kamalkakkad21@gmail.com.
It is also available at Kitab Khana at Fort, Mumbai, phone: 22888041/42

26 april 20, 2013 vol xlviiI no 16 EPW Economic & Political Weekly

conditions. Unemployment rates in Spain
and Greece are still in the range of about
25%, the rate that prevailed at the height
of the Great Depression in 1933 in the
US. In a major developing country like
India poverty stalks at least a third of
the population, inflation of basic food
items is unconscionably high, farmers’
suicides continue unabated and inequal-
ities are widening alarmingly. Ecolo-
gical degradation is proceeding at an
alarming pace that affects both the ad-
vanced as well as the developing coun-
tries. There is clearly a disconnect bet-
ween the tight economic logic of indi-
vidual rationality and the seriously trou-
bled real world outside.
The author of this book asks the ques-
tion, “is conventional economic theory
safe for a beginner?”, and proceeds to
answer it by suggesting that the Report
of the UN (Stiglitz) Commission “at-
tributes the global crisis to wrong poli-
cies and eventually to the wrong theory
which informed those policies. The
theory under the scanner is precisely the
kind celebrated in textbooks. The appeal
of mainstream economic theory has
been shaken by the crisis and a search
for alternative theories may be in the
offing” (p xiii).
In the last chapter of the book there is
a consideration of economic theory. The
author briefly sketches the main fea-
tures of the classical, Marxian, neoclas-
sical and Keynesian approaches. Neo-
classical economics is essentially con-
cerned with issues of efficient resource
allocation, is essentially static and fo-
cuses on the sphere of exchange, and
gets a “poor” grade. Keynesian econo-
mics is concerned with the short period,
and recognises that a free enterprise
economy is not self-regulating, and gets
a “mixed” rating. It is the classical/
Marxian school that is concerned with
growth and development of society,
where the production sphere defines
the key social and productive relations
of the economy, and, in the assessment
of the author, gets a “good” rating. The
personal predilection of the author is
very clear.
This reviewer could notice only one
diagram in the entire book. It is on
page 69 and it deals with the supply of
Economic & Political Weekly EPW april 20, 2013
manufactures against its long-run price.
It is a horizontal supply curve denoting a
constant cost industry till the capacity
level of supply, S max, is reached, after
which the curve expectedly turns up-
wards. Another way of looking at this
diagram is to say that the price of manu-
factures remains constant till the capac-
ity level of output, S max, is reached.
The author has entitled this diagram as
“Price of manufactures”. There must
have been some reason why the author
decided to draw precisely one diagram
in this entire book. To me this looks very
much like a diagram in the Marshallian
mould. It says at once, in a simple visual
depiction, that manufacturing prices
may be expected to hold at a constant
level till the entire idle capacity or slack
is exhausted, after which the price of
this good would go up.
This leads me to make one observa-
tion about this book. Marshall’s epigraph
in his Principles of Economics was “Natura
non-facitsaltum”, i e, nature does not make
jumps. Marshall described an ordered
world where time was the quintessential
element in the working out of the eco-
nomic process. Marshall’s equilibrium
price was the result of the forces of de-
mand and supply, like the blades of a
pair of scissors. It was as pointless to ask
whether supply or demand-regulated
price as to ask whether the upper or the
lower blades of the scissors did all the
cutting. Marshall’s purpose was to illu-
minate analysis, and this he was able to
do with consummate mastery. Processes
and tendencies that kept economists
somewhat muddled for decades, if not
centuries, got clarified with a few simple
carefully drawn diagrams.
Theorising on Economics
It is this which makes economic theoris-
ing such a fascinating enterprise. But it is
also true that there are pitfalls here, too,
which we ought to squarely recognise. A
fascination with a priori theorising might
easily lead one to a situation where the
logical construction might be so far out
of line with reality that it remains a mere
mathematical puzzle. It is here that one
has to sift the good relevant theory from
the ones that are simply fancy logical
constructs. I for one would rather prefer
vol xlviiI no 16
BOOK REVIEW
that the amazing fascinating insights
of Ricardo’s comparative advantage,
Cournot’s duopoly model suggesting
the original Cournot-Nash equilibrium,
Marshall’s market equilibrium, Keynes’
general theory, or Samuelson’s theory
of revealed preference, be presented to
a beginner student of economics. There
is much still going for them. Learning
would be that much poorer if one would
wish to deliberately ignore these extra-
ordinary leaps of imagination.
The mark of a creative mind is not to
shut these out from the discourse of anal-
ysis, but to use them creatively, if need-
ed, to throw light on a particular reality.
There is nothing wrong with these theo-
retical breakthroughs. Nearly two cen-
turies back Malthus had alerted us to the
possibility of underconsumption which
Keynes theorised in 1936, and the rest is
history. There was plenty of professional
discourse in the post Reagan-Thatcher
years that warned policymakers of the
perils of deregulation. But it was the
dominant ideology of the finance wiz-
ards of Wall Street that took no notice
of these warnings. The denouement of
2008 was simply waiting to happen. I
think it would be incorrect to say that
when it came, it was a total surprise.
Never short on flamboyance, Paul Sam-
uelson had once said: “I don’t care who
writes a nation’s laws if I can write its
economics textbooks”. I believe the
author of this textbook has done a won-
derful job of presenting the subject from
the eyes of beginner Indian students of
the subject who ought not to necessarily
exclude senior policymakers. There is
much to be learned from this refresh-
ingly new perspective.
Pulin B Nayak (pulin.nayak@gmail.com) is at
the Delhi School of Economics.
available at
Oxford Bookstore-Mumbai
Apeejay House
3, Dinshaw Vacha Road
Mumbai 400 020
Ph: 66364477
27
 http://www.worldeconomicsassociation.org/newsletterarticles/review-primer-india/

Review of Economics: A Primer for India

A review of Omkarnath G. Economics: A Primer for India, Hyderabad: Orient Blackswan Private
Limited 2013, xix + 271pp. ISBN 978 81 250 4632 5 by Stuart Birks and Srikanta Chatterjee

It would be fair to say that the importance of the discipline of economics as a social science and
its usefulness in public policy-making are widely recognised. However, the manner in which its
academic curricula has evolved over a long time has come to be increasingly criticised as either
too narrow or unnecessarily abstract or both. In recent times lay observers and professional policy
makers alike have questioned the relevance of the subject when its practitioners fail to foresee such
catastrophic “real world” phenomena as the global financial crisis, for example. The questions as
to how economics should be approached as an academic discipline, what sort of issues it should
deal with and what other cognate disciplines an aspiring economist should also be exposed to are
being raised around the world.

The present book is largely a response to these challenges. It seeks to address another challenge,
viz. to make the subject particularly useful and relevant in an Indian context. It seeks to develop
an approach that enables the reader to understand the functioning of the society around them within
an analytical framework which is not too “technical” or abstract. In its two major parts and a shorter
addendum, it does put together a coherent account of the Indian economy in both its existing
structure and some temporal changes to it. As a social science, economics cannot free itself
completely from a political/ideological leaning in its discourses. The present book probably leans
toward a “leftist” or a Marxian framework. Its intended readership, as stated in the preface, are the
undergraduates in Indian tertiary institutions and the interested non-specialists wishing to
understand the Indian economy and its changes. It couches its discussion of the selected topics
around what may be termed a “common sense” approach, rather than a particular theoretical
framework. Rudiments of economic theory are introduced in the very last chapter which should
help provide an analytical perspective to the topics discussed in the book. This approach has helped
the book to avoid being entirely descriptive or using a conventional theoretical framework in all
its discussions, as is often done in books targeting both the undergraduate student and the
“interested layman”.
 http://www.worldeconomicsassociation.org/newsletterarticles/review-primer-india/

With the Indian economy as its canvas, references to such issues as unpaid or underpaid labour (in
households or the casual labour market); externalities such as pollution and its control through
legislation; unintended consequences deriving from some labour and trade union laws for example,
or the manipulation of the Minimum Support Prices of food grains in the post-1991 reform era
would have further enhanced the quality of the book. But it is, admittedly, a beginner’s text; it does
not therefore need to cover everything that is pertinent.

The book has some strengths which may appeal to heterodox and pluralist economists. It follows
in the tradition of Kurien’s ‘real life economics’, attempting to develop an analysis building on
observations in the real world. Theory comes later. This recalls an earlier tradition in economics,
now largely lost with the growth of the tendency, identified by Kuhn, to force nature into our
conceptual boxes.

Omkarnath recognises the importance of theory, and much of his description reminds us of
conventional perspectives. However, there are important differences in terms pf the emphasis and
the avoidance of extreme and unrealistic assumptions. He stresses the importance of institutions,
as with the nature of competition between producers, for example. The distinction between inputs
and outputs is rightly challenged on the basis that most of a firm’s outputs serve as inputs to other
firms and its inputs are outputs from other firms. This makes categorisation into input prices and
output prices problematic at best, especially where it is assumed that one of these varies while the
other does not. In other situations ceteris paribus assumptions may make little sense where many
things are related to each other. For example, if price changes result in income changes to the
suppliers, then it may not mean much to consider price changes while incomes are constant.

Accepted relationships for exchange are also challenged. Omkarnath claims that 94 percent of the
Indian workforce operates in the unorganised sector, with complex social relations and systems of
production. More generally, in the labour market the emphasis on rates of pay is questioned on the
grounds that “moral incentives and opportunities for ‘self-actualisation’ may be at least as
important as material rewards”. As Minsky has said, theory serves as both a lens and a blinder.
Starting from accepted theory we may be blind to alternative influences.

The book is very readable and illustrates some of the problems with conventional perspectives on
economic behaviour. It is likely to be thought-provoking for many, including newcomers and those
 http://www.worldeconomicsassociation.org/newsletterarticles/review-primer-india/

with a grounding in mainstream theory. An alphabetical index at the end of the book would have
been most useful to readers wishing to go back to a topic for another look.
‘FRAMES’ - REAL LIFE
ECONOMICS
Stuart Birks, k.s.birks@massey.ac.nz
In the traditional tale, six blind men each attempt to describe an
elephant. They touch different parts of the elephant and, by analogy
conclude that an elephant is like a wall, a tree, a snake, and so on.
Similarly, with our theories we construct analogies for the economy
and society. Should we consider that one of the blind men has the
‘right’ description of an elephant? Framing the issue in this way, it
is unlikely that any specific economic analogy correctly describes
economic activity. Economic pluralism with an added layer of
realism is likely to provide a better understanding than a single
theoretical perspective.
Several Indian economists on returning to India after an overseas
education, often in the US, found that their training did little to help
them understand the activity that they saw around them. For some,
this has led to the development of alternative descriptions. C. T.
Kurien uses the term ‘real life economics’ to describe his preferred,
ground-up, approach.
Similar dissonance can also be experienced in the west, but it can
be difficult to persuade many established economists to see the
problem. Kuhn (1970, p. 5) described normal science research
as, ‘a strenuous and devoted attempt to force nature into the
conceptual boxes supplied by a professional education’. Plato’s
allegory of the cave also comes to mind. What is reality, the artificial
world of our theories on which we focus or the real world outside?
Pressure to conform is perhaps an inevitable aspect of group
identity even in an informal setting. Within the NZAE it has in the
past been debated whether economists should see themselves
as a profession, with the Association serving as its professional
body (and so having responsibility for standards, registration,
and disciplinary processes). This idea was floated on council and
rejected some years ago, but constraints still exist. Economists,
at least in the “mainstream”, have clear ideas of “best practice”,
meaning accepted conventions which should be followed for
research to be of an acceptable standard. Alternative approaches
are likely to require much supporting argumentation, and to be
viewed very critically, if not rejected out of hand.
Does this mean that we are overly reliant on one simplified view of
the elephant? There are signs that we are. Among other things, the
Non-Equilibrium Social Science group is reacting to the use of static
analysis with its focus on equilibria which are assumed to exist
and, commonly, to be attained. A focus on equilibrium equates to a
consequentialist view, looking at the end state without looking at the
processes used to get there. It is also a construct of the artificial,
static framing of the situation. In the real world we find that there
is no such thing as an equilibrium. We have a flow through time,
with participants entering into and withdrawing from a particular
market or area of activity. There is no auctioneer waiting until there
is common agreement before trades are to proceed. Many trades
can actually take place at various prices, or trades may fail to occur
because the price the potential participants observe at the time is
something unacceptable to them (even if they would be prepared to
trade at an “equilibrium price”). In our stories, excess demand
and supply are driving forces in markets, but do they really exist? In
many real world instances they may be ephemeral, disappearing as
soon as the actors decide to do something else.
http://www.nzae.org.nz
Asymmetric Information, Issue No. 52 / April 2015
The issue of process, the process of adjustment in markets for
example, is also something highly significant, as some of those who
have been observing markets in reality have noticed. Omkarnath
(2012) and Kurien (2012) contend that a theory based on
consumers and producers trading directly with each other simply
does not fit reality. In practice there are potentially a large number
of intermediaries and they can be very influential.
Omkarnath also has problems with the idea that there are prices of
products and prices of inputs, whereby you could consider product
markets with input prices fixed. For the majority of producers, many
of their inputs are actually the outputs of other producers (see,
for example the celebrated case of Apple described by Kraemer,
Linden, and Dedrick, 2011), and the outputs that they are creating
then go on to be the inputs of other producers. So it is highly
problematic to build explanations of economic activity based on
these two distinct sets of prices, one of which can be assumed
constant while the other varies.
Even ceteris paribus assumptions can be suspect. They require an
absence of links between the different determinants of the various
economic phenomena under consideration. It may be that it is
simply not possible to change some things while holding other
things constant.
Marginalism is central to neoclassical microeconomics, but how
realistic is it to assume that there is this infinite range of options
available to people and very small changes are possible? In reality
there is lumpiness, with a discrete number of options, limited
flexibility, and potentially large jumps from one situation to another.
The idea that atomistic individuals operate independently also
assumes away the whole process of society and community
interaction and relationships between individuals that are central
to much of people’s everyday lives. A structure that assumes away
so many dimensions of actual real-world activity is bound to lead
us to question its direct relevance to the situations that we actually
face. So what we have are tools, or sets of tools that describe highly
artificial structures with inbuilt biases. An inbuilt bias of much of
mainstream economics is that we should be relying on markets
and that we can actually conceive of a world based solely on
markets. This is considered to be relevant to our system of mixed
economies, where governments play a large part and much activity
occurs within institutions or organisations, far away from any trading
structure. To see this as sufficient on its own might not be the most
sensible approach to take. Perhaps we can do better.
One step in this direction could be to start from the real world so
as to give a context for analysis. It is important to see models and
model estimation as only one component of analysis. There has to
be recognition of the assumptions and other aspects which have to
be considered, along with frequent reference back to the real world.
As a starting point, a clear recognition of the role and significance of
framing is required, not least in the teaching of economics.
Kraemer, K.L., Linden, G., and Dedrick, J. (2011) Capturing Value in
Global Networks: Apple’s iPad and iPhone. http://econ.sciences-po.
fr/sites/default/files/file/Value_iPad_iPhone.pdf
Kuhn, T.S. (1970) The structure of scientific revolutions (2 ed.).
Chicago: University of Chicago Press.
Kurien, C.T. (2012) Wealth and illfare: An expedition into real life
economics. Bangalore: Books for Change.
Omkarnath, G. (2012) Economics: A primer for India. Hyderabad:
Orient BlackSwan.
| 9
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Book Reviews

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 254 Book Reviews

finesse and theoretical coherence, so that particular cases are often convenient foils on
which the discussion is built upon and have no independent importance. Fourth,
economics suffers from a structural disability — namely, the missing discipline of field
economics fashioned after anthropology (pp. 89, also 114). Randomized control trials
cannot substitute for field economics (pp. 89-90).
This notwithstanding, one could argue that the errors possibly vary randomly
across years and countries, and also that their magnitude is small so that statistical
analyses can still yield meaningful results (pp. 31, 109-110). This is precisely what
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Jerven disproves: The errors in African national accounting statistics are unusually
large and systematic. The quality of data for certain years and countries is so bad that
they can justifiably be described as “fiction” (pp. 39, 71) and “random numbers” (p.
119). Two examples of misleading inferences from flawed statistics are in order. First,
post-structural adjustment growth in Africa has been overestimated (p. 53), which has
serious international policy implications. Second, output volatility is often wrongly
treated as a feature of African/developing economies (pp. 29-30, 71).
To conclude, Jerven’s book, addressed to the general social science reader and
policy-maker, will hopefully force advocates of “evidence-based policy” within
economics to close the gap between “knowing innately” that data could be
problematic and their remarkable “unwillingness” to study the problem (p. xiv). This
short book’s main weakness is the lack of sufficient discussion on historical and socio-
political factors. Four examples are in order. First, the influence of biases informed by
the modernization theory — which figure at least twice in the discussion (pp. 1, 38-39)
— on international expert advice to African statisticians is left unexamined. Second,
the discussion on the relationship between levels of literacy and political incentive to
manipulate data is incomplete (pp. 9, 104). Third, discussion on the combined effect
of faulty censuses and national accounts on estimation of per-capita income is
missing. Finally, comparison between Africa and other developing regions is lacking.

Vikas Kumar
Azim Premji University

Vikas Kumar is an assistant professor of economics at Azim Premji University, Bangalore (India).

Economics: A Primer for India, by G. Omkarnath. New Delhi, India: Orient BlackSwan,
2012 Paperback: ISBN 978-81-250-4632-5, 325.00, 296 pages.

The West has dominated scientific knowledge since the onset of the industrial
revolution. Physical retreat after decolonization did not lessen its dominance.
Decolonization led to three developments. First, self-sufficiency drives promoted
reverse engineering and a few developing countries moved up the ladder. But, in most
cases, unrealistic initiatives only accentuated dependence on the rapidly innovating
West. Second, nationalist rhetoric seeped into humanities and social sciences. In its
Marxist avatar, this often led to clichéd output and, in its pure nationalist/religious
 Book Reviews 255

avatars, it led to disasters. Neither posed a credible intellectual challenge to the West.
Third, the flow of skilled manpower — including scholars cutting across disciplinary
and ideological boundaries — to the West increased manifold after decolonization as
immigration restrictions eased. The link to Western markets promoted a few
privileged institutions within the higher education sector of developing countries,
which catered to the needs of the former. These institutions differ from their poorer
cousins in a number of ways, the use of European/American textbooks being one of
the key differences.
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Since the use of Western textbooks is among both the causes and the
consequences of Western intellectual dominance, it is worth asking: What would an
Indian textbook of economics look like? A cheaper paperback edition, an edition with
Indian proper nouns and currency symbol, or an edition with examples from Indian
economy? G. Omkarnath has taken the next step. His primer “introduces economics
through the medium of the Indian economy” (p. xiv) because he believes that a
foundation course “must be grounded in a specific reality the student can relate to
naturally” (p. xiv).
The book has ten chapters that are distributed across three parts. The first part
deals with the economic structure of the society and focuses on production, markets,
as well as money and finance. In the second the focus shifts to economic growth,
where the author compares the pre- and post-liberalization periods, followed by a very
engaging discussion of petty production. The last part deals with monitoring of


economic activity and introduces various economic theories.

The book does not contain an index. Only seven chapters end with reading lists.
Suggested readings are mostly old books, and papers and government sources of data.
In the former category most readings will surely be inaccessible to Indian
undergraduate students. Moreover, on one hand, the readings are very rarely referred
to in the text and, on the other, the reading list is not annotated. As a result,
discussions in the book are rarely linked to discourses in the rest of economics. Each
chapter is supported by a number of simple, small, and helpful tables, figures, and
textboxes.
There are several things about the author’s attempt in this primer that merit
special mention. First, despite his justifiable leftist leanings, nowhere does the
textbook sound like yet another tirade against mainstream economics or capitalism.
Second, while Western economic experience is referred to only when necessary, at no
point does the exclusion seem contrived, and the book is anything but parochial.
Third, the book is written in very simple and straightforward English, and it eschews
jargon and mathematics. Fourth, there is an earthiness to the discussion explained
perhaps by the exclusive focus on India’s real economy. Fifth, while the author does
not review past attempts to write India-centric textbooks, it is indeed difficult to find a
comparable undergraduate textbook. A major shortcoming of this book, which is
intended for undergraduate students, is that it does not introduce the readers — even
if cursorily — to the diversity within economics. For instance, economic analyses of
non-market phenomena are completely ignored.
 256 Book Reviews

But what counts as an Indian textbook of economics? I must say that writing
such a textbook is simultaneously a political as well as an intellectual project. The
author, in fact, admits as much when in one of the most important chapters he traces
his lineage to late nineteenth-century Indian nationalists like M.G. Ranade, “who
called for a separate ‘Indian’ economics” (p. 217). It is perhaps not a mere
coincidence that the author has never held a teaching position in Delhi. In any case,
the bulk of the textbook is devoted to understanding the Indian economy using
“Western” economics. It is only in the eighth chapter on the informal economy, and
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the related discussion in the ninth, that one comes across glimpses of “Indian”
economics. For instance, the author argues that India’s employment data is of little
help to those interested in the informal and village economy because Indian
employment accounting “uncritically imitates, albeit with some modifications,
accounting appropriate for industrially advanced countries” (p. 236). The present
accounting system is incapable of reliably measuring informal labor at reasonable
intervals and at a reasonable level of disaggregation. But the Western intellectual
foundation of economics is not at stake. For instance, the last chapter, which presents
a comparative discussion of economic theories, does not include a non-Western
alternative. One can justifiably claim that this is a primer (here I am focusing on the
eighth chapter) for economies with a significant informal component that uses India
as its example. One gets another glimpse of “Indian” economics when the author
refers to the social side of India’s economy, but he does not attempt to build a case for
a sociologically informed Indian economics.
A truly Indian primer of economics will be built around the Indian economic
and social experience and Indian economic thought, without jettisoning or belittling
the West’s enormous contribution. On the one hand, this requires developing the
idea of economy and economics in India using ancient (the Kautiliya Arthasastra,
which the author considers to be a “manual of economic administration rather
than ... a treatise on economic principles,” p. 258) and medieval (Ain-i-Akbari) texts, as
well as the works of modern Indian economists trained in Western thought. On the
other, it will require introducing a comparative discussion of the moral philosophies
and social realities of the West and India that, in turn, will both challenge and enrich
the discipline of (“Western”) economics. It is in this latter task that the Arthasastra is
indispensable because it is one of the rare instances of Indian moral philosophy
applied, among other things, to a wide range of economic problems.
Finally, in a country where an overwhelming majority does not understand
English, the choice of language is important. Omkarnath’s is a textbook written in
English. Even though he uses simple English, an Indian language may have been a
better choice. Indian languages simply cannot be ignored for long if Indian
economists want people to be able to follow their arguments.

Vikas Kumar
Azim Premji University

Vikas Kumar is an assistant professor of economics at Azim Premji University, Bangalore (India).

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