Demonetisation: Too little to show for too much damage, says Kaushik Basu

The state-engineered shock of demonetisation will continue to course through the economy

In 1776, Adam Smith described the power of the market’s “invisible hand.” Although some economists have since overstated this power, dismissing the role of government regulation, it’s true that the market, when left to itself, often manages to meet a society’s economic needs in ways that no one fully understands. It’s a mistake for the state to disrupt it wantonly and for bureaucrats to try to do its job.

And that’s just the mistake India made last fall.

On Nov. 8, 2016, the Indian government suddenly declared that as of midnight that night all bills in denominations of 500 and