Foundation Day Lecture

The next transformation for humankind: Towards egalitarian and green growth by Professor Amiya K Bagchi on October 8, 2013.
Challenges of Exclusion and Inclusive Growth in India by Professor S K Thorat on October 08, 2012.
Fallacies of Economic Theories which affect Public Policies by Professor Utsa Patnaik on October 8, 2010.

Foundation Day Lecture on the 'Fallacies of Economic Theories which affect Public Policies' delivered by Professor Utsa Patnaik, JNU, New Delhi. The salient features of her lecture as follows:
She discusses three common economic fallacies which are commonly and widely accepted in economic theory that impact public policy. These fallacies render incorrect these theories and are not recognized as fallacious by the profession to this day. Therefore, these incorrect theories continue to be taught uncritically and the incorrect public policies based on these fallacious theories are also accepted uncritically. Three common widely accepted arguments in economic theory, which are fallacious and incorrect, are considered for discussion for the present article as follows: Fallacy #1: The Argument of Reducing Government Expenditure and cutting Budget Deficits even when there is Unemployment; Fallacy #2: David Ricardo's Theory of Comparative Advantage –Another Case of Material fallacy of the type, the Converse Fallacy of Accident; Fallacy #3: Official Poverty Estimates in India: A Case of the Fallacy of Equivocation; First, the fallacious idea, that government expenditure as well as the budget deficit to GDP ratio should be lowered regardless of whether there is unemployment of resources and labour. Second, the fallacy in Ricardo's theory of Comparative Advantage which is used to argue that mutual benefit results from specialization and exchange in international trade. Third, the fallacy in official poverty estimates in India and the resulting untrue claims of poverty reduction. Two of these fallacies (Fallacy 1& 2) fall under the category of material fallacy of a particular type, the converse fallacy of accident, while the third example is a verbal fallacy, the fallacy of equivocation. All the above said economic fallacies give rise to inappropriate policy measures. First there is public expenditure deflation in a situation of unemployment which only worsens the employment situation further.
Second, the economy being opened to free trade leads to diversion of land away from food grains to exports and tends to reduce domestic availability. Third, incorrect estimation of trends in poverty and the unfounded belief that poverty is declining, leads to a continuation of both the first two sets of policies and worsens the poverty situation. Therefore, we can never overestimate the importance of examining critically the assumptions underlying theories or consciously looking for logical flaws in theoretical arguments, because all policy measures ultimately depend on theoretical positions, whether these positions are explicitly articulated or are only implicitly held. Incorrect theories give rise to misguided policies which have the potential to lower welfare substantially. Conversely, an understanding of why certain theories are misconceived can help materially in correcting adverse policy measures and putting them on a logically sound footing.
Professor Ghanshyam N Singh, Dr. Suresh Prasad, Dr Chirashri Dasgupta, Dr Manish Kumar, participated in open discussion. Vote of Thanks was proposedby Dr. Sudhir Kumar, Registrar, A.N.Sinha institute of social Studies, Patna. The programme was coordinated by Professor Nil Ratan, Convener, Seminar Committee, A N Sinha Institute of Social Studies, Patna