Thanks to a commentor known only as Corrector of Maladies, I was able to skim through the original report by Goldman Sachs on which Rajeev Srinivasan based his article, and it turns out that I was thoroughly wrong, and unfair in my criticism of the author. The report does indeed do what Rajeev says it does, and I made a really bad mistake. The mistake I made was:
If you read page 18 of the report. which contains the assumptions of the model, you’ll see that the predicted GDP growth rate is entirely based on variables that are not dependent on policy. The variables that the GDP depends on are labour, “technical progress”, and capital stock at that point in time. Good policies help you achieve and exceed the growth rate, and bad policies prevent you from achieving it. So if you generate the predicted GDPs for the period from 1960 -2000, you will indeed find that countries that followed good policies scored close to, or exceeded their predicted GDP, and countries that had bad policies did worse than the predicted GDP. The report specifically mentions India and Argentina, which did badly because of bad policies. In India’s case, it did much much worse than its potential, and crores of Indians remain poor as a result. Rajeev Srinivasan correctly calls it the Nehru Penalty.
I misunderstood his article, because it gave me the wrong impression that the model predicts the GDP growth rate based on assumptions about what policies will be followed. That is what turned out to be wrong.
I realise that there is a lot of crow to be eaten, and I would have gladly done that if I weren’t vegetarian. Apologies are due to 7*6 with whom I fought a pointless fight based on a misuderstanding, to Shyam Nair whose post I nitpicked and a whole bunch of others, with whom I fought in my earlier posts. Incredible as it may sound, I’ve written two earlier posts on the same topic.
The only saving grace is that now I can truthfully say to defenders of Nehru that I sincerely tried to be fair to him and look where it got me. Yes, this is an effective answer to all those who claimed that Nehru “built an infrastructure for India’s future development. I can now take grim satisfaction in saying that they are bullshitting.
At least those cyber-coolies who are from IITs and now toil for the white man and contribute to christian GDPs should stop talking ill of Nehru.
Dont u get bored bashing Nehru all the time? How about wrting on what would have happened to India if RSS/Hindu Mahasabha came to power in 1947 and ruled india for 50+ years?
Moral: Listen to what Mallus say.
Ravikiran: You have to eat even more crow.
Here’s why:
Suppose a model gives the function GDP(v1,v2,p)
where v1, v2 are some arbit parameters
and p is a “policy” parameter.
Assume that for p = 1 (good policy), GDP predicts “accurately” i.e. for test inputs with p = 1, the predicted values are close to actual values.
For p = 0, the prediction is bad, off by a huge margin.
Now, for some PARTICULAR values of v1,v2; cant we compare GDP(v1,v2, p = 1) and “actual GDP with p = 0”? And argue if the former is larger;
that p = 0 is a bad policy?
I concede that it is logical.
No WMD. I don’t get bored of bashing Nehru all the time.
No 7*6 I won’t eat crow on that. You are badly twisting the meaning of “prediction” Let’s see the implications of what you are saying.
Suppose that GDP(v1, v2, 1.0) returns the predicted value of 8.5 which is close to the actual value of 8.2. But if GDP (v1, v2, 0.0) returns 2.5 and it turns out that the actual value is 8.5, i.e. “off by a large margin”. What does it prove? Does it prove anything other than the inaccuracy of the model?
Now suppose that in another case, GDP(v1, v2, 0.0) returns 7.5, while the actual value turns out to be 3.5 . How can you possibly claim that the difference was due to the low value of p? It simply means that the model was inaccurate in this instance.
Or to put it another way 7*6, remember that my misunderstanding of the model was that
GDP(v1,v2,0.0) for India returned 7.5 while actually it was 3.5. Now given this result, a Nehru-defender could have said “See? The model conclusively proves that it was not Nehru’s policies, but something else that caused India to lag behind. The model clearly predicts that even with Nehru’s policies, which you call ‘bad’, India should have grown at 7.5% a year. But in fact it actually grew at 3.5. This clearly indicates that it was something else that held us back.” What could you have said to him? We wouldn’t know what caused the deficit of 4 points. It could be other policies, not covered under the model, or it could be non-policy factors like culture, social rigidity, etc.
how about this argument: even with Nehru’s policies we must have clocked a 7% growth because the model says so; that we haven’t been able to achive it
means that they must really have sucked, beyond the
comprehension even of the model. 😉
of course, this would mean that the Nehruvian Penalty is larger then 3. 😉
You can make the argument, but it wouldn’t be backed by any proof. 🙂
remember that my misunderstanding of the model was that
GDP(v1,v2,0.0) for India returned 7.5 while actually it was 3.5.
Indeed. I was just saying that even with a model GDP(v1,v2,p) which depends on policy, and which predicts badly for p = 0 (bad policy), it can still be used to derive a Nehruvian penalty,
by comparing GDP(v1,v2,p = 1) and actual GDP.
But you are right that this doesn’t entail your eating more crow since this wasn’t your misunderstanding at all.
I just thought that since you were already eating crow, and there were so many crows, I should…
We have to be honest about Nehru, he was a jerk regarding foreign
policy and economics. Never has one so naieve ever held such a
high office. He had no understanding of sovreignty as he sent
the Kashmir question to the UN. Nehru let down Tibet as an
alliance with the US could have saved that country. He admired
communism and adpoted its suicidal economic policy.
His non aligned movement produced nothing except conferences and
pompus dinners. How many Africans were pulled out of poverty
because of NAM ? zero
at the same time he had a Soviet tilt which was a stategic shoot
one self in the foot as Pakistan fell into the American orbit.
You tell me what is so moral about aligning with Stalin and
the Soviet Union ? whats so moral about appeasing red china ?
Why is this important ? many Indians consider decendents of Nehru
to have a god given right to rule ! how backward !
This really harms the nation.
PS I am not a RSS fan , anti-muslim, or anti democratic.