September 1, 2013 3:11:31 am
Challenged by the leader of the Opposition in the Rajya Sabha to explain the current economic crisis,PM Manmohan Singh broke his vow of silence to say there was no need to panic. Similar words were uttered by the captain of the Titanic. For those who are economically challenged,a list of economic phrases to explain the present circumstances:
Animal spirits: Coined by Adam Smith,it described attempts to inspire confidence in an economic system which was really based on naive optimism. Indeed,economists have agreed that where these animal spirits come from is something of a mystery and that attempts by politicians to build confidence by making optimistic noises have rarely done any good. Manmohan Singh would know all about it: he mentioned the phrase in reference to a species which everyone else believes is extinct.
Anti-trust: Refers to government policy for dealing with certain situations especially concerning a monopoly,which the Opposition is accusing the UPA of having done for the last 10 years in terms of governance. However,in the last four years,anti-trust has come to refer to the general feeling towards the government.
Asymmetric information: Refers to situations when somebody knows more than somebody else. Such asymmetric information is a key element where transactions involving the government are concerned. A government selling broadband licences does not know what buyers are prepared to pay for them; and the one who does,is the winner,even though he might end up in jail.
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Big Mac index: An index devised by The Economist as a guide to whether currencies are at their correct level based on purchasing power parity. This suggests that a buyer should pay a similar amount for a McDonalds burger,no matter which country they live in. They obviously didnt take the rupee into account or the fact that most salaried Indians currently feel the same as French fries being dumped into boiling oil.
Cost-benefit analysis: Describes a method of reaching economic decisions by comparing the costs of doing something with its benefits. This is particularly so when the decision being contemplated involves some benefit in the foreseeable future,as in 2014.
Invisible Hand Theory: One of Adam Smiths theories which suggested that the invisible hand of market forces will achieve an efficient level of consumption and distribution of goods in a society. In India,that is taken to mean the hand of the Congress and its president behind the flurry of revenue-draining populist schemes.
Money illusion: A phrase coined by John Maynard Keynes which suggested that because of government machinations,workers are under the illusion that their circumstances are improving,even though in real terms they are actually quite worse off. The middle class is presently learning all about money illusion.
Depreciation: When the value of assets decreases over time or as in the value of a currency in relation to another. This can be quite confusing since the PM and some economist groups suggest that its actually not a bad thing and also seem to be asking for some appreciation.
Misery index: Refers to the sum of a countrys inflation and unemployment rates. The higher the score,the greater the misery. Going by that score,we must be world champions,as the cricket channels keep reminding us every day and every hour.
Zero Sum Game: An economic theory which states that a zero sum game is achieved when the gains made by winners in an economic transaction equal the losses suffered by the losers. The recent Bills passed by the government are a case in point since they are hoping to gain electorally while we,the taxpayers,are the big losers. Right now,collectively,its really the sum of all fears.
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