The moral requirements of Nirmal Mulye

This story boggles the mind. The Chief Executive Officer is either Indian or of Indian origin. His comments are politically incorrect, at the minimum and wrong, at worst.

“The point here is the only other choice is the brand at the higher price. It is still a saving regardless of whether it is a big one or not,” said Mr Mulye.

Mr Mulye compared his decision to increase the price to an art dealer that sells “a painting for half a million dollars” and said he was in “this business to make money”.

He also defended the actions of Martin Shkreli, who became infamous in 2015 for his decision to raise the price of an Aids and cancer drug from $13.50 to $750 per tablet. Shkreli was jailed earlier this year on unrelated fraud charges.

“I agree with Martin Shkreli that when he raised the price of his drug he was within his rights because he had to reward his shareholders,” said Mr Mulye.

Mr Mulye pointed out that Shkreli was able to increase the price of Daraprim so dramatically because his company was the only one making it.

“If he’s the only one selling it then he can make as much money as he can,” said Mr Mulye. “This is a capitalist economy and if you can’t make money you can’t stay in business.”

He added: “We have to make money when we can. The price of iPhones goes up, the  price of cars goes up, hotel rooms are very expensive.” [Link]

I do not know whether he has learnt that the goal of capitalism was not rewarding shareholders at all times; that it is a construct of the 1980s, etc. Further, I wonder if he also knows that capitalist enterprises could survive only if they are also seen by the market as being fair players and not amoral players. Then, there is Karma, of course.

I wonder what Adam Smith would have made of him, had he been around.

Students of economics can debate the following questions:

  • Is market economy compassionate?
  • Or, is there no place for compassion in a market economy? Why not? Shouldn’t it be there?
  • Without compassion, can there be a society? Without society, can there be an economy? – market economy or non-market economy?
  • Further, is he right to come across as so callous and insensitive? He may score marks for honesty but is the CEO being  insensitive?
  • There is another angle: Intellectual Property Rights/Patents of Pharma companies. Should there be IP protection at all, in the first place? If so, for how long?

These are all the questions one can explore.

Das Activist Manifesto

I cannot fathom why I did not blog on Frank Partnoy (with Rupert Younger)’s article on ‘The Activist Manifesto’ (‘What would Karl Marx write today’ was the title of their article in FT in March 2018). By chance, I stumbled upon it again, today.

I was writing to my friend Gulzar about some of the books written by Wall Street insiders. ‘F.I.A.S.C.O’ came to mind. Frank Partnoy was the author. He wrote it after he worked for Morgan Stanley. I had read the book long ago. I liked it. He practised law after that and joined University of San Diego in 1997. I understand that he is now shifting to University of Berkeley as tenured law professor. I had used his article in ‘The Atlantic’ on Wells Fargo (‘What’s inside American banks?’) in the courses that I teach.

I decided to check and see if he had a Twitter handle. Thankfully, he had one and even more thankfully, he was not an inveterate Tweeter! In the process, I chanced upon the FT article again on the rewriting of ‘Das Manifesto’. They had a website for the manifesto.

I spent time reading Professor Alan Morrison’s great introduction to the manifesto of Partnoy and Younger. Worth reading. I am yet to download their new manifesto and the original. Intend to do so.

In the process, from Partnoy’s Twitter handle, I read the wonderful review of Adam Winkler’s book, ‘We, the Corporations’ by Zephyr Teachout. Sample this comment:

Beginning in the 1970s, a group of activist lawyers associated with the University of Chicago persuaded courts to gut well-established principles designed to protect open markets and decentralized power, and to replace them with an ideology of efficiency that has contributed to our current crisis of monopoly capitalism and inequality. Winkler mentions the Chicago school in passing, but he doesn’t address the post-1980 antitrust cases, a striking oversight because they fit neatly into his theory: Corporate monopolies gained rights by asserting that they benefited the rights of others (in this case, consumers). [Link]

Teachout says that Winkler missed out on this but writes a nice tribute to his work.

Also, read the review of ‘The Chain of Title’ by David Dayen, reviewed by Frank Partnoy himself. It is the kind of stuff that one sees in developing economies. Nobody knew who had the titles to the properties that were foreclosed. Yet, they foreclosed! This happened in America. Heart-rending, actually:

Lisa Epstein, a nurse, learns that the bank foreclosing on her, the one at the end of
the securitization daisy chain, could not prove that it had legally obtained her loan. When she challenges the bank in court, its lawyers present a document dated three months after she was served with foreclosure papers — a “poorly drafted cover-up,” Dayen writes. She meets Michael Redman, a car salesman who had a similar experience, and persuades him to publish an online guide to uncovering mortgage fraud. The two of them connect with Lynn Szymoniak, a lawyer, who investigates the signatures in her own foreclosure action and finds one with a date when the signer was actually in state prison.

Exposing those lies becomes a moral crusade. The homeowners’ stories are emotional roller coasters, which Dayen meticulously reports. He and his characters find the banks’ behavior not just indefensible but criminal. Prepare to be surprised, and angry.

Partnoy also reviewed Anita Raghavan’s Billionaire’s Apprentice.

So, an evening in ‘partnership’ with Partnoy!

 

How to become a good economist

Yesterday, I began teaching for the fifth year, the Global Macroeconomics and exchange rates course at the Singpaore Management University to graduate students of the Wealth Management programme, 2018-19. The first session is to set the stage for the course, for learning economics, the right approach to learning economic theories. Emanuel Derman says that they are models and models, to him, are approximations. A theory is an ‘explanation of everything’. Economic theories cannot be that. He calls them models.

In the process of preparing for the class, I read the first chapter of the book, ‘A brief history of economics: artful approaches to dismal science’ which I had downloaded some years ago. Ray Canterbery writes well.

Sample these lines:

As important as pure analytics, mathematics, and statistics are, if we know only the tools of the trade, we will be unable to know the place of economics within the broader community of ideas, much less be able to explain it to the uninitiated. We will be unable to engage in the rhetoric of the intellect….

…A broader approach invites readers to range across the neighboring fields of history, philosophy, mathematics, politics, natural science, and literature….

… Historical perspective puts the lie to any claim that economics always is a progressive science—operating, like nuclear physics, outside time and in pursuit of eternal verities.

….We cannot recognize truly new ideas unless we are familiar with the ideas that economists have already explored. And we cannot understand the ideas of the great economists unless we understand the times of their lives.

…..Institutions include formal systems, such as constitutions, laws, taxation, insurance, and market regulations, as well as informal norms of behavior, such as habits, morals, ethics, ideologies, and belief systems.

The highlighted portion is what Deirdre McCloskey would call ‘Bourgeois Virtues’ – courage, temperance, prudence, justice, faith/love. She says the word, ‘Bourgeois’ strictly referred to the ‘Middle Class’ before. She is using that word to refer to the ‘Middle Class’.

By the way, the interview of her by Arjun Jayadev here is very good read. There is also a link to the transcript of the interview, if you do not like to watch the videos. But, the good thing about the videos is that they are broken into small slices on specific topics. You can pick and choose. Thoughtful, in all.

See this paragraph:

The focus on a deeply felt and embedded analysis is typical of McCloskey for whom economics is better understood as social history rather than meteorological prediction. As a critique of the faux scientific economics that pretends otherwise, she went over her long-standing criticisms of the narrowness of economic methods (as she put it, the discipline as the breadth of ‘M to N’ rather than A to Z) and its delusions. …

…. To McCloskey, a criticism of the ways in which economics is currently practiced is not to deny the importance of formalization and abstraction but rather to know its place and to never stray from the serious business of understanding the world.

She makes an observation in the course of the interiew, that is rather significant:

The American Statistical Association, incidentally in the spring of 2016 issued an official report denying that tests of statistical significance are a sensible guide to the importance of a variable. [Link]

Read what she says about philosophy:

In economics, this surprises outsiders, the word philosophy is a swear word. People say, ‘That’s rather philosophical’ as though that was an exceptionally stupid thing to
say.

Back to Ray Canterbury:

For all its concern with form, the new rhetoric about rhetoric nonetheless relies on argumentation within context. Without the villainous mercantilists, Adam Smith’s free trade arguments would have been as dull as the proverbial Scottish coastal town to which the tide, having gone out, refused to return. If David Ricardo had been championing industrialization during the Middle Ages, the more pious Malthus would have won their debate. Besides, there always was more than rhetoric. The great economists gave us entire systems for observing economic behavior.

Canterbury’s introduction ends with these lines, aptly:

Wall Street Capitalism had culminated in a Casino Capitalism characterized by making money with money through speculation.

Quite. It is also the apt note on which to end this blog post.