Raghuram G. Rajan Quotes

For example, Shawn Cole, a professor at Harvard Business School, finds that Indian state-owned banks increase their lending to the politically important but relatively poor constituency of farmers by about 5 to 10 percentage points in election years.51 The effect is most pronounced in districts with close elections. The consequences of the lending are greater loan defaults and no measurable increase in agricultural output, which suggest that it really serves as a costly form of income redistribution.

A forced equalization of wages that disregards the marginal contributions of different workers will deaden incentives and lead to a misallocation of resources and effort.

We have long understood that it is not income that matters but consumption. Stripped to its essentials, the argument is that if somehow the consumption of middle-class householders keeps up, if they can afford a new car every few years and the occasional exotic holiday, perhaps they will pay less attention to their stagnant monthly paychecks.

Cynical as it may seem, easy credit has been used as a palliative throughout history by governments that are unable to address the deeper anxieties of the middle class directly.

And more than the quality of its institutions, what distinguishes a developed country from a developing one is the degree of consensus in its politics, and thus its ability to take actions to secure a better future despite short-term pain.

A modern, sophisticated financial sector...seeks ways to exploit government decency, whether it is the government's concern about inequality, unemployment, or the stability of the country's banks. The problem stems from the fundamental incompatibility between the goals of capitalism and those of democracy. And yet the two go together, because each of these systems softens the deficiencies of the other.

I thought there might be some grand design I did not understand, but the government's policy clearly was not working, because India was still poor. I was determined to learn more, so I became interested in economics. This book is another unintended consequence of the government's policies.

Not taking risks one doesn't understand is often the best form of risk management.

Politicians today vow, "Never again!" But they will naturally focus only on dealing with a few scapegoats, not just because the system is harder to change, but also because if politicians traced the fault lines, they would find a few running through themselves.

A book is almost always a collective effort, even if it has only a single author.

Apart from the added efficiency, the willingness to be ruthless helps innovation. Past experience and relationships are of little value in driving radical innovation: indeed,