Legality, Morality, Constitutionality and Economic Efficiency

October 25, 2012. Revised October 27, 2012

Sankarshan Acharya
Pro-Prosperity.Com and Citizens for Development

To:          Presidents of India and USA and other leaders and concerned people

Sub:    Legality, Morality, Constitutionality and Economic Efficiency

Date:      First drafted October 25, 2012 and Revised October 27, 2012

The financial catastrophe of 2008 has been characterized (by the Federal Reserve) as worse than the Great Depression. The catastrophe unfolded with panics and runs on $3.5 trillion in uninsured money market funds and $7.8 trillion in uninsured bank debt and caused losses of trillions of dollars of wealth and employment in Main Street.

Media punditry and political commentary have attributed the most catastrophic economic turmoil in the American history to 'immoral' (or unethical) shenanigans of a greedy Wall Street. The shenanigans which benefit a few by causing massive loss of wealth and employment to the multitude in Main Street are obviously immoral.

The Fincancial Crisis Inquiry Commission report released in 2011 blames the experts, industry honchos and regulators for causing a manmade crisis. But no individual whose failure has caused the crisis, according to the FCIC, has been prosecuted. The few successful trials of insider trading cannot account for the trillions of dollars of wealth wiped out in the crisis.

Leaders have remarked that the Wall Street financial shenanigans, which caused the crisis, did not break any rule on the book. These remarks were broadcast to justify the passage of new rules via the Dodd-Frank Act of 2010. But such remarks also convey something profound:

The pre-crisis rules indeed protected those who practiced the immoral shenanigans to get rich by subjugating the Main Street to unemployment, underemployment and penury.

None of the pre-crisis rules has been repealed after the crisis.

After the passage of the new rules and after adoption of unprecedented monetary expansion, the rich has become richer, 93% of the growth in income has flowed to the top 1% and the per-capita annual income of the middle class has shrunk by 4300 dollars. Above all, post-crisis, the immoral but legal shenanigans have continued as indicated by the J.P. Morgan & Chase's London Whale trade with billions of dollars of losses.

This means the post-crisis policy - of adopting new rules without repealing any pre-crisis rule and of unprecedented monetary expansion - is immoral because Main Street continues to lose as the few at the top become richer.

If leaders justify the pre-crisis rules as legal, they would obviously assert that the post-crisis policy rules or whatever they adopt as law is legal, even if such rules, laws and policies cause, protect and perpetuate immoral shenanigans.

If immoral shenanigans and policy rules which protect the perpetrators of such shenanigans are not illegal, how can We the People redress manmade financial calamities? Are We the People supposed to appeal to God for the perpetrated immoral shenanigans causing enormous loss of their wealth and employment, because the shenanigans are legal and no public institution including courts can redress them?

The political leaders of We the People have not given any guidance about appealing against immoral but legal shenanigans before God. This memo, therefore, delves into the most ancient written scripture for guidance. It finds that morality as per the oldest scripture of humanity -- written as Dharma in Gita, attributed to Lord Krishna, as ancient philosophial wisdom needed for civilized coexistence of humans, 5000 years ago when organized religions did not exist -- is the same as legality granted by the oldest written modern constitution (that of USA) which has been embraced around the world.

Dharma as well as the kernel of the modern constitution prohibits usurpation of public and private wealth, even surreptitiously.

Morality may not be defined this way in the Bible or Quoran or other religious documents. But no theist, atheist, scientist, philosopher, political leader, media pundit or even mendicant saint can dare to disagree with the principle of Dharma adopted as the kernel of the modern constitution. Any group who disagreed would at least have attempted to amend the kernel of the constitution. Even the usurpers do not like to be usurped.

Dharma akin to the kernel of the modern constitution, therefore, is unanimously agreeable.

Not surprisingly, both India where Gita was written and USA where the modern constitution was founded are now embroiled in the same crucial confounding issue: immoral or anti-Dharma and unconstitutional but legal shenanigans afflicting their economies.

This begs the question of whether private market shenanigans which cause huge disparity in income and wealth and the policy rules that perpetuate and protect the shenanigans are merely immoral or anti-Dharma. Or, such policy rules and protected shenanigans are unconstitutional.

Unconstitutional policy rules - even if they are passed by constitutionally elected leaders - are illegal.

Simply because the Supreme Courts have not considered, suo moto, whether a certain policy rule passed by constitutionally elected leaders is constitutional does not make the policy rule constitutional.

The public which has been usurped and enervated (financially, physically and emotionally) does not have the wherewithal, courage, keenness or organizational ability to contest unconstitutionality of policy rules which cause usurpation surreptitiously. The usurpers have mustered enormous resources through unconstitutional usurpation and are protected by existing policy rules which they have foisted on the usurped public. After acquiring wealth and power through unconstitutional usurpation, the usurpers (driven by the philosophy of maximization of their networth taught by the pundits in esteemed universities) will, of course, thwart every attempt to repeal the policy rules which protect and enrich them perpetually, until the system crashes and explodes publicly, if at all.

India is now deeply embroiled due to public outcry over unseemly profitable transactions between rulers and private agents (individuals and business entrepreneurs).  This memo argues that (i) such transactions cause unconstitutional usurpation of public and private wealth, (ii) rules which facilitate usurpation are unconstitutional, even though they are legal, (iii) morality and constitutionality are equivalent and rooted in the ancient Indian Dharma, and (iv) constitutional rules are necessary for economic efficiency, prosperity and stability of a nation.     

The constitution certainly authorizes the rulers-in-charge of governance at the Center or a state to pass rules (laws and policies).  Is it illegal for rulers and private agents to follow the rules to make a profitable transaction like buying land from farmers at a lower price and selling the same to builders at a higher price?  The constitution does not proscribe profitable transactions.  Rulers and their proxies have, therefore, asserted that transactions which do not break rules are perfectly legal and cannot come under the purview of public institutions including courts. 

But the public has loudly protested against transactions which have fetched immense unfair power, privilege and profits in a short time for rulers and their agents.  The public is outraged about the unfairness because any apparent conflict of interest is not easy to prove in a court. 

Qualified pundits appearing in mainstream media have also rationalized rule-based profitable transactions as legal.  They have, however, mentioned that such legal transactions maybe unethical or immoral.[1] The arguments of pundits, rulers and agents can be summarized as follows:

  • All rules passed by rulers elected through constitutionally mandated elections are legal and constitutional.
  • Rules passed by rulers to legalize profitable transactions between rulers and their agents are constitutional, though the public is free to consider them immoral or unethical.
  • All transactions legalized by rules passed by rulers are constitutional even if the public may consider them unethical or immoral.
  • The constitution has vested power on the rulers to craft any rule even to facilitate profitable transactions and privileges for themselves, their kith, kin and cronies.
  • The public and their governmental institutions including courts cannot undo the power of rulers to prescribe any rule which may even perpetuate nonpareil richness, privilege and power of rulers, their kith, kin and cronies.
  • The public and their institutions are, however, free to pray God to penalize those (rulers and their agents) who commit immoral or unethical transactions which have been legalized by rules.

Even the American rulers, pundits and their agents conveyed to the public the above mantras of the now-failed system of governance after the financial crisis of 2008, which the Federal Reserve considers worse than the Great Depression.  Americans lost trillions of dollars of wealth and millions of jobs.  The Financial Crisis Inquiry Commission appointed by the US Congress blamed top academic experts, government regulators and industry honchos for causing a manmade or avoidable crisis.  But no major individual blamed for the crisis has been prosecuted.  The US President has indicated that no one found responsible for the crisis broke rules on the book.  This means the US rules were indeed crafted (as I knew all along) to protect those responsible for causing potentially avoidable crises.  After the 2008 crisis, none of those rules has been repealed.  Instead, pundits have attributed the mega systemic failure to immorality of a greedy Wall Street. 

A noted academic pundit in an esteemed university like Yale has authored a book, published by a prestigious academic press (Oxford University Press) to paint the 2008 financial catastrophe as a slap of the invisible hand (God).  This means the same pundits, who justified manmade rules which caused an avoidable crisis, are now teaching the public to pray God to alleviate their avoidable financial pain and contain the immoral acts of greedy Wall Street agents. This is exactly what India’s Financial Express editor implies in his Indian Express column a few days ago.

The Kauravas of Mahabharata too reminded the Pandavas and Krishna about the legality of the game of Pashakhela–in which Kauravas usurped all the land and properties of the Pandavas–because the King (the then ruler) had signed on those rules.   Krishna was not convinced about the legality of Pashakhela.  He then conceived of Manav Dharma (which Vyasa wrote as Gita) defined as a struggle against those who usurp others’ wealth, even surreptitiously.  The Americans too fought against the British rule of printing money in UK to buy sweat-filled merchandize and service from the colonists.  The independence movement of India too sought self-rule to avert usurpation of wealth of persevering Indians. 

After winning the war of independence, the American founding fathers wrote a constitution whose thrust is the ancient Indian Dharma of governance to protect life, liberty and property of individuals.  Life is the most valuable property of an individual.  Physical properties and life are necessary for liberty and happiness.  India too has adopted the same tenet of constitutional governance, consistent with Dharma of ancient India.

The author of Gita perhaps exaggerated Krishna as God to spread the universally longed spirit of Dharma of not usurping public wealth and others’ private wealth, even surreptitiously.  This underlying spirit of Dharma is universally longed by all because even usurpers do not like to be usurped.  There exists “A Unifying Philosophy of Governance,” published in the Journal of Governance and Regulation, which renders god in a way to be acceptable to the theists, atheists, scientists, economists, mathematicians, spiritualists, religious people, and infidels.[2]  Dharma is consistent with this unifying philosophy. 

People perhaps tolerated Vyasa’s exaggeration of Krishna because his intention–of spreading the universally longed spirit or philosophy of Dharma–was unquestionably benevolent.  Krishna was peerless and distinct.  He did not marry.  He orchestrated destruction of his own family (Jadu dynasty) so that no relative would claim his legacy.  He was not driven by self interest.  Krishna would not have admitted worshipping of his idol after his death.  Such selfless dedication to conceive and spread a seminal universally longed philosophy must have galvanized Vyasa to depict Krishna as God. 

My point is that Vyasa may have exaggerated Krishna to spread the nonpareil universally acceptable philosophy of Dharma for benevolence of mankind.   Contrast the intention of Vyasa, however, with that of leading modern economists concocting theories to promote universally loathed and unstable rules for usurpation of public and private wealth.  The modern economists can be likened to the ancient Acharyas who had advised King Dhritarastra to rationalize Pashakhela for usurpation of all land and properties of Pandavas in Mahabharata. 

Moral and ethical acts or transactions are defined by their conformity to Dharma, i.e., they do not cause usurpation of private and public wealth, even surreptitiously.  The constitution too does not allow any act or transaction which causes such usurpation.   This means immoral and unethical acts and transactions are unconstitutional.  This shows that morality or ethicalness is the same as constitutionality.   

Current rules of governance have been rationalized by volumes of ‘modern’ economics research published in top academic journals by authors serving as endowed professors in the esteemed and powerfully-connected academy of economics and finance.  The academy has indoctrinated rulers and their agents worldwide to adopt and justify sophisticated rules for usurpation of private and public wealth.  The modern pundits must be schizophrenic because they invoke God to justify financial catastrophes caused by manmade rules which they have established and perpetuated by rationalizing them so far through their ‘modern scientific’ research in economics and finance.  Such modern scientific research is not benevolent to humanity.  Neither is this constitutional.           

This has led to my research on first-best economic efficiency and constitutionality in a more general dynamic game-theoretic model of the economy than ever scripted in literature.[3]  This research proves within a general equilibrium model that rules which cause usurpation of private and public wealth are economically inefficient (second-best) and unconstitutional.  This research also obtains rules which are first-best efficient and constitutional.  Most rules governing markets and trading around the world are second-best inefficient and unconstitutional.  Current rulers and their ‘modern scientific’ Acharyas (economic experts) have established second-best rules to guarantee first-best status for themselves by subjecting the rest to second-best sustenance.  My research has proved since 1991 that second-best rules are unstable.  This has empirically come true as the established second-best system of money and finance has crashed everywhere and major economies have embraced (not fully yet) first-best efficient rules discovered in my research.[4]

President Obama agreed by not contesting Governor Romney’s challenge in their first presidential debate on October 3, 2012 to end the privilege, granted to mega banks by the Federal Reserve Act of 1913 and reinforced by the Dodd-Frank Act of 2010.  This legal privilege forces the public exchequer to write blank checks to mega banks.  This apparent bi-partisan agreement follows a barrage of my memos and papers on first-best efficient system of money and finance which proves that any form of privilege is economically inefficient and unconstitutional.[5] The privilege granted to mega banks causes usurpation of public and private wealth.  The privilege is the crux of the second-best system (rules) of money and finance.  This system has been propped by modern scientific wisdom professed by the academy of economics and finance funded by the usurpers.  The second-best system has crashed.  The US lawmakers have blamed the promoters of the second-best system and mega banks for the financial catastrophe of 2008.       

The system of privilege is as old as ancient India.  But Mahabharat of ancient India has invented the universally longed Dharma of governance as necessary for stable and prosperous civil co-existence.  Dharma has become the kernel of modern constitution.  The Indian freedom fighters struggled to institute the modern constitution after independence.  Given its glorious philosophical history, India does not need to perpetuate the ‘modern scientific’ second-best system bequeathed by the colonial rulers upon independence. 

Perhaps because Indian freedom fighters did not struggle for institution of a first-best efficient system and only wanted to overthrow the British, Winston Churchill was sure that in independent India: "Power will go to the hands of rascals, rogues and freebooters. All Indian leaders will be of low calibre and men of straw. They will fight among themselves for power and India will be lost in political squabbles." 

Will India be lost?  Churchill can be proved wrong if the current Indian rulers and their agents give up their temporal lust for profits and power based on their decreed unconstitutional rules.  Decreed rules, for example:

  • Facilitate real-estate transactions between a private agent and a builder, which cause unconstitutional usurpation of lands from farmers and of savings of homeowners.  How?
  • Even if they are willing to sell their lands, farmers fetch less from the rulers’ agent than the price they could obtain by negotiating through their own agent with the builder, once the government fully discloses the complete information about the development plans.  The constitution mandates that the government create equal economic opportunity for all.  This means all economic and development plans of the government must be made public at the same time. 
  • Direct negotiation with the farmers will cost the builder less for the land than when powerful rulers and agents interfere for huge commissions. 
  • Involvement of powerful rulers and agents raises the cost to the homeowners and lowers the quality of construction. 
  • The unconstitutional usurpation (from farmers and homeowners) is inefficient for the economy because the builder and the homeowners land up borrowing more when powerful rulers and agents are involved than they would need to do otherwise. 
  • Publicly insured banks lend more for lower quality of construction when powerful rulers and agents are involved. 
  • The public ultimately lands up holding bigger personal home loans for inferior homes and bears higher taxes due to inflation as the government prints money to cover losses in bank loans made to the builders.
  • Printing money or borrowing by the government - to fund losses due to excessive borrowing caused by unconstitutional rules decreed for usurpation - decimates the international value of national currency. This makes the nation financially insecure and people mortgaged to serve foreigners for pittance.
  • Funds, if any, received from foreign charity organizations for uprooting unconstitutional usurpation in India are miniscule, as compared to (i) the gargantuan annual remittance of about $75 billion made from incomes earned from service to foreign nations and (ii) foreign direct investment of capital from foreign countries, which the rulers and their crony agents scheme to perpetuate their power and privilege through unconstitutional usurpation.  



  1. Morality or ethicalness is one-to-one with constitutionality which is the same as Dharma of ancient India to not usurp public and private wealth, even surreptitiously. 
  2. All rules passed by rulers have to conform to the constitution because rulers too have sworn in the constitution.  The constitutional election process chooses rulers.  But it does not grant a mandate to pass rules, which transgress the constitution. 
  3. Only constitutional rules can maintain stability (avert public outcry). 
  4. Pundits and agents of rulers should desist from rationalizing unconstitutional rules as legal.  Their argument that legality automatically stems from endorsement of democratically elected leaders is specious at best. 
  5. Pundits and agents of rulers should also stop misleading the public about the unconstitutional rules designed to bestow privileged power and profits for rulers as merely immoral or unethical, to be by praying God, not by the constitutionally established institutions like the Supreme Court or President.
  6. Constitutional rules are necessary for first-best economic efficiency needed for prosperity and economic equilibrium (stability) of a nation and for robustness of national currency, security and prosperity.

With profound regards,

Sankarshan Acharya

Sankarshan Acharya