I think you are missing the point. My argument is our government with its socialistic policy did not allow for an economy that could have evolved in India - based on it’s own social environment! The Malaysians, the Thai, and the Singaporeans are hardly homogenous. And Indians are not as heterogeneous as you think. Now please don’t tell me that the planned soviet-style socialist interventionist economy is the original Indian way - socially speaking.

Even if you ignore Japan - Singapore, Korea, Taiwan, whole host of middle income south east Asian countries, and lastly China prove otherwise, I think.

and a blog post on the Freakonomics blog here
http://www.freakonomics.com/blog/2006/12/06/adams-fallacy/

I was making a case for more for institutions and not the “Indian” government per se. I hope I clarified myself. Government is just one cog in the wheel, but surely it is the most important one.

To make a sweeping statement that all that is evil with the current economic status of India is because of government intervention over the 50 years is definitely not qualified, and must be taken with a pinch of salt. We did not take the other road (that off less government intervention), and I reserve my opinion on what could have happened without the socialist agenda of the fifties.

In my opinion, we are just about doing OK now and I would say that we would have been not way too better off if we had gone for an all-out private model with little government intervention in the early decade after independence. There is no way anyone could prove or show it would have been better. Simply, our economy needed to mature (supporting structures had to be erected for free market forces to operate) before it could become what it is right now.

You are right to say that economic activity reflects broader society. But please don’t equate broader society with government bureaucracy and lawmakers, especially in India. Broader society can find its own economic dynamism and equilibrium in due course when government stops meddling in people’s lives with its infinite wisdom.

In fact, we are just starting to recover from the government’s economic wisdom for the past 50 years while we are being subjected to another bout of government’s wisdom – this time social - all in the name of greater good. Count another 50 years, or more, to recover from the current social wisdom dumped on the broader society.

I am not saying I want a benign government. All I am saying is that institutions do matter and often times without the intervention of institutions (government is just one of them), the exclusive solution arrived at by the free market forces is not always “effective”.

To answer your question as to why normal people cannot just organize without government intervention - government is a macro-level governance institution and although we would like to think that the economic agenda of a society is independent of its social structure (which to me seems like the more classical economic view), in reality it is not. Neglecting the notion that all economic activity is embedded in a much broader social context is a great mistake that has been and being committed by a great many view points.

A free-market solution does not take into account such embeddedness, efficient it may be, but it is not always effective.

Shreeharsh/Girish,

Even if there were examples of efficient government intervention, why do you want it? Why can’t normal people organize their lives without government intervention, efficient or otherwise? What is that greater good that you seek? And who decides what that good is?

I have yet to see a benign government, anywhere on the planet, that does good things to all people - there are winners and losers (more of them, in fact) even when government intervenes. Yet praise continues for it. People doing good things to themselves, like those Biharis and Punjabies, is just not enough, I guess.