Indias new economic model of Adam Smith, Keynes and Me Model The welfare definition of economics is an attempt by Alfred

Marshall, a pioneer neoclassical economist, to redefine his field of study. This definition expands the field of economic science to a larger study of humanity. Specifically, Marshall's view is that economics studies all the actions that people take in order to achieve economic welfare. In the words of Marshall, "man earns money to get material welfare." This is why economists since Marshall have described his definition as the welfare definition of economics. This definition enlarged the scope of economic science by emphasizing the study of wealth and humanity together, rather than wealth alone. In his widely read textbook, Principles of Economics, published in 1890, Marshall defines economics as follows: "Political Economy or Economics is a study of men as they think and move and life in the ordinary business of life. It examines that part of individual & social action which is most closely connected with the attainment & with the use of material requisites of well-being Economics has been called the science of how people get a living. We all have to make a living! And our daily lives are beset with economic questions! Why is it so hard to buy a home? Why does the cost of college rise so fast? Why are willing, able workers unable to find jobs? What about us, the voting citizens is basic economic literacy out of our reach? Economics is a given pie; it is not a pie that every economist can make at will or for which he can prescribe his own recipe. Economic theory has a nature of its own that must be respected; certainly it must be recognized if its distinctive contribution is to be made at all. But the pie that is the economic aspect of affairs is bigger than that traditionally treated by economists; it embraces all human action. The slice that makes up economic theory mayso long as it is cut from the correct piebe cut in any arbitrary way. It is impossible to draw a clear-cut boundary around the sphere or domain of human action to be included in economic science. The scope of praxeology, the general theory of human action, can be precisely defined and circumscribed. The specifically economic problems ... can only by and large be disengaged from the comprehensive body of praxeological theory. But if it is urged that economics is primarily concerned with man, and then there is an obvious need to make clear precisely which aspect of the study of man economic theory is concerned with. Different approaches have been made toward the solution of this problem. The conception of economics as a science of wealth, attention must be drawn to one of the most popular of these approaches, viz., and the view that sees economics as dealing with the phenomena connected with economic welfare.

Wealth promotes the economic welfare of man. If exclusive attention to the objects of wealth was to be declared scientifically inexpedient, then the problem could be avoided by shifting attention from the goods themselves to the welfare to which they minister. Instead of studying the effects of various measures on the wealth of a nation, economic analysis may be viewed as going a step further and studying the welfare of the nation as affected by these measures. Such a conception of economics provided a framework into which the received body of doctrine could be fitted without excessive strain, while at the same time it reflected the new recognition of the subjective basis of market phenomena. The shift to this fresh conception seemed merely a broadening of the scope of the subject from one narrowly concerned with goods to one concerned with happiness. Cannan, writing at the beginning of this century on developments since the appearance of Mills Principles, saw this broadening as the work of the theory of marginal utility: Whatever definition of economics may be adopted, it is clear that the conception of its subject has become wider than it was. The economist of today recognizes that he has to do with man in relation to one particular kind of human welfare...It would be impossible for any economist of the present day to repeat Malthus remark that Adam Smith mixes the nature and causes of the wealth of nations with the causes which affect the happiness and comfort of the lower orders of society. From the point of view of the longrun developments in the definition of economic phenomena, this broadening of the economics of wealth into the economics of welfare does not mark so radical a change as that marked by the appearance of any of a number of later conceptions to be taken up in subsequent chapters. In fact, as against the other definitions of economics, both the wealth and the welfare formulations contain much in common; many of the features found to be objectionable in the wealth criterion appear unchanged in its welfare counterpart. Both formulations are classificatory and departmental rather than analytical. Both see economics as studying something that is produced, whether goods or happiness, rather than a certain type of activity. Especially where economic welfare is understood as meaning material welfare, the concept of welfare evinced a strong bond of continuity with that of material wealth. Nevertheless, as the neoclassical expression of the classical wealthoriented definition of economics, the welfare and utility criterion did call for a conscious alteration of focus in the contemplation of economic phenomena. This point of view, while it became

popular only after the introduction of marginal utility economics, had its forerunners as far back as the classical economists. One of Adam Smiths successors, Dugald Stewart, considered political economy as dealing with the happiness and improvement of political society. The position of Henri who broadened economics so as to deal, not with the wealth of nations, but with the prosperity of nationsa concept that included civilization as well as wealth. John Stuart Mill, when he came to consider the question of defining economics, criticized Say for having a similarly wide conception of political economy. Sismondis emphasis on happiness and consumption in economics and Lauderdales allembracing definitions of wealth place their conception of economics in the same group. The Love of Money, Leslie attacked the notion that the pursuit of wealth represented a selfcontained human motive. The love of money means completely different things to different people. Unique category of wealth through reference to the heterogeneity of the demand side of economics undoubtedly contributed toward a better grasp of the nature of economic theory. For example, it was the increased attention to the demand factor that made it possible for Jevons to take utility...as the subject matter of economics, or for an American writer to declare that all definitions of economics reduce to the science of enjoyment or . the science of the means of enjoyment. Welfare, utility, ophelimitythese were the terms around which expositions of economic doctrines revolved. Economics is essentially concerned with welfare, or at least with material wellbeing, was probably the view most generally accepted among the English economists.. Cannan, however, held the criterion of material welfare to be the real distinguishing feature of economics.. Of course, the identification of economics with the study of economic welfare raised fundamental questions about the justifiability and validity of propositions concerning changes in social welfare. Sir Dennis Robertson cites the contention that the implications of envy make it uncertain that welfare would be increased even if everyone had more of every commodity. Robertsons characteristic reply to this possibility would certainly have won Cannons concurrence: The maximization of want-satisfaction invites a brief digression on the idea of a specifically economic motive or impulse. It is clear that the meaning, if any, that is to be attached to such an expression depends on the view taken of economic activity generally. Economic activity is concerned with the sustenance of human life, and then the urge for self-preservation may fairly be understood as the economic impulse. What makes the question of the meaning of the economic motive especially relevant is that the developments that have been discussed in the conception of

economic activity point for the first time to the possibility that no such economic drive may in fact exist. So long as an objective entityviz., wealth or economic welfareis singled out as the phenomenon of interest to the economist, then, of course, the concept of an economic motive is meaningful in terms of a drive towards this objective entity. And when economics is understood, as it has been in definitions considered in the present chapter, as examining the phenomena that are attendant upon the activities of man in so far as he is in pursuit of a definite end, viz., wealth, then the economic impulse emerges as the very focus of the economists interest. But when the pattern of human activity aimed at maximizing want-satisfaction is made central to economics and the idea of wealth is quietly discarded, then the nature of any economic motive becomes highly problematical. To be sure, the praxeological perspective embraces a range of human action far wider than that usually treated in economic theory. All human actions, motivated though they may be by the entire range of the purposes that have inspired and fired men to act, come within the sway of the ideal praxeological discipline. The constraint that men feel to fulfil their purposes in spite of obstacles pervades all aspects of life. It is the position of praxeology that the common category that embraces the entire range of human efforts is the key to economic science. We have seen at various points in this book that economists have again and again searched for something in economics that should differentiate it from the rest of human action. These thinkers were deterred from expounding the praxeological character of economics for the very reason that this character is common to other aspects of social life. The praxeological view sees economic science as the branch of praxeology that has been most highly developed. Perhaps other branches will one day attain a similar stage of development. Even Adam Smith conceived economics which according to Wealth of Nations written 350 years ago, visualized sharing of wealth, eouspousing the theory of wealth and not greed of the persons amongst whom the wealth was shared. In 1936, Keynes communicated a new idea- duty of the state to intervene to raise the level of activity of the country. He conceived the idea of charity by force. His conclusion was to rob the rich through taxes to bring in inclusive growth among the poor. Government of India, with economist of the ilk like P Chidambaram and Jairam Ramesh, who have invented the theory of inclusiveness among the have nots, preach one side morality beside Adam Smith and Keynes. They believe, that in an egalitarian society, there is nothing wrong in passing on the pain to the tax payer to conceive populist schemes of inclusiveness that would enable the state to dispose large sums of money to the hopeless and hapless needy. MNREGA is a flag ship scheme of the united progressive Alliance, which is aimed to create financial inclusiveness among the unemployed rural people, or assure a minimum amount during 200 days of the year, by contracting them for work, or assign work. But, the spent

money did it create any rural asset, of a fixed nature so that it automatically cycled further economic good to the community? If in an economic activity, money spent should create visible asset, which would in turn create more activity, only if it created a permanent asset which had its own economic ability to create wealth. Here, the funds were deployed to create a dead end. There was no visibility for the return or making of further assets. Is it financial inclusion? Now, the creation of Food Security Bill where crores of crores is sought to be invested. Would, at the end of the tunnel, would it solve the food scarcity, so that the end beneficiaries can depend upon some plank of economic activity that would enable them to earn for their own food. It is a duplicate Keynesian thought that never aims or even pretend to create fixed assets on which economic activity would evolve. Todays Food Security would become a legal right tomorrow. Have the planners who devised this strange plan aware of its implication. Or is it a gamble to portray their amour to the people on the eve of elections, a sort of politicking to score points over the rivals. In democracy, you have only partners and not rivals. The absurdity of spending precious money for projects which does not realize or create fixed assets which in turn is automatically able to create further wealth is fraught with serious economic consequences. Do we leave it to the people to prepare military strategy? Is it done democratically? Good idea is not compulsorily taken nor is it a legal right that every good idea should be part of democratically tested? After a lot of dithering or procasting, Central Government has come to veer around the compulsion that Goods and Services Tax have to be rolled out by Feb 28,2014 (the date of the budget)(whether interim or not). Proposed GST will have a dual tax structure, one will be levy of the Central Government (Central GST) and another by State (State GST). The prices will not depict the levy nor will it be disclosed to the consumer. The central government wants to hike the tax levied while it is not bound to revel the break up, for the same reason it does not want to invite wider criticism. State and Central component may add up to 20%. In the matter of taxes, centre and state have concurrent jurisdiction, and each will tax a product 10% each through Goods and Services Tax. While the basic features of GST would be uniform, the dual model would be implemented through multiple statutes. All political parties are board, and this is national consensus. A unique economic model of Indian Polity, of the polity for the suffering public!