Economics

Unbundling “household work” to get more women to work

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At a recent Takshashila roundtable, I met Shruti Rajagopalan and we discussed the challenges faced by working women in detail. An enriching conversation, Shruti provided various insights such as looking at the female labour force participation as an inferior good. As the household income increases, the demand amongst households to send the women to work reduces and is substituted with women focusing only on household chores. Reasons as Shruti pointed out varied from lack of household help to the increasing pressures of being a working mother. The conversation brought out an interesting insight: the biggest problem with reducing household chores for women is that it is a bundled good.

What is commonly referred to as “household work” contains a bunch of varied tasks like cooking, cleaning, stocking food, managing the assets at the house, managing vendors and neighbors, etc. A set of two or more goods or services when sold or consumed together are called bundled products. Due to the bundled nature of the products, it is difficult to create specific markets for individual subsets within the bundle. For instance, it is difficult to break down the household tasks such that separate agents manage vendors and assets at the house. The closest we have come to distributing the tasks is still within the household unit and yet to create a market where external agents that can be hired for it.

Each of the tasks under “household work” would cost a certain amount to the household. Hence, when a household reaches a certain income, instead of hiring an external agent, the household substitute the cost by letting go of the income earned by the female in the house. Only two chores have been unbundled till date- cooking and cleaning. The exclusive nature of the tasks and clear job description has helped in building both demand and supply for these chores. Hence, being able to unbundle the tasks would help households to outsource the chores as the income increases rather than substituting it with the income earned by the women.

The other obvious solution is to reduce the pay gap between men and women such that the income earned by women are not dispensable enough to be substituted for household chores.

More than a source of empowering women, creating a market for household chores would help solve the increasing job crisis in India. We need to create 20 million jobs per year in order to cater to the people entering the workforce and the disguised unemployment in the agriculture sector. One of the ways to generate these new jobs would create a services market for household chores. As per the study was done by  Bela Bandyopadhyaya, and Hilary Standing in the paper “Women’s Employment and the Household-Some Findings from Calcutta”, high-income families create 1.5 jobs per household for the child and household care (full time and a part-time employee). As most of the domestic care is under the purview of the women in the house, each working women helps increase the household income and generates jobs for a cook, a housekeeper, a cleaner and for general domestic work.

As I unravel the giant problem of declining female labour force participation rate in India, I have realised that social mindsets play an integral part in keeping the status quo intact. Hence, the change in the viewpoint towards household chores and the distribution of the agency would only improve as the social narratives are altered. Until then, making it easier for women to chose between staying at home and working should be a step in the right direction.

Are EU Markets More Competitive than Those in the U.S.?

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In a really interesting paper in NBER, authors Germán Gutiérrez and Thomas Philippon argue that US markets have gradually become less competitive and markets in the EU have seen the opposite trend.

In many cases, the EU markets exhibit lower levels of industry concentration and excess  profitability, as well as fewer regulatory barriers to entry.

They suggest that divergence in market competitiveness between the U.S. and Europe is related to the powers granted to EU regulatory institutions at their inception. They note that both the European Central Bank and the Directorate-General for Competition were given more political independence than parallel institutions in the United States and thus have been able to pursue more aggressive antitrust enforcement in recent years.

In almost areas of competition law, they find that there was increasing enforcement in the EU and decreasing enforcement in the US, which has also seen more number of cases registered and higher penalties imposed in the EU. This has had a direct impact on consumer welfare in terms of prices. Prices for many products and services (such as broadband internet) which are under the scrutiny of the anti-trust authorities are significantly higher in the US than in the EU.

A large reason for this is also the lack of political independence for the regulatory authorities in the EU. They note that there is “higher levels of both lobbying and campaign contributions in the U.S. than in the EU. Political campaign contributions are 50 times higher in the U.S. than in the EU”. 

Another important trend here is the level of profits for EU and US firms. US firms have had significantly higher profits, on average, than EU firms. My question is this: does the excessive regulation in the EU prevent profits for firms? Will this have a negative effect on innovation and new firms starting up?

UDAN May Come Crashing Down

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The government’s low cost, regional connectivity scheme is facing massive turbulence on route (Do excuse the terrible airline puns). Though it initially led to the development of a few airports and the introduction of new routes, three out of the four airline carriers relying on UDAN are set to shut shop.

Except TruJet, the other three regional airlines – Zoom Air, Air Deccan, and  Air Odisha – are in a terrible financial state. While Zoom Air has not flown a single passenger since July, Air Deccan and Air Odisha have managed 3,000 and 1,000 passengers, respectively, in these four months. This is despite the government providing viability gap funding – a fancy term for subsidising low fares.

Unfortunately, the seeds of destruction were sown in 2016 itself, when the scheme was announced and the 4 companies started operations. Since established commercial airlines deemed it commercially unviable to fly on the routes that were proposed by the government, UDAN tried to bring in newer airlines. A company with paid up capital of Rs 5 crore could apply for a regional airline permit. Further sops followed- airport charges and taxes on fuel would be waived off and the government would even pay the airlines to sell half of the seats at Rs 2,500. The 4 airlines in question were enticed by this offer and decided to take up on the offer.

These regional airlines were quite aggressive when bidding for routes. Air Deccan and Air Odisha bagged 84 routes- 60 percent of those on offer. However, just one year later, these airlines are operating in only 10 out of the 84 routes. Basically, though it was easy to enter the sector, operating and sustaining business in it was really hard. The ecosystem was just not conducive.

This excellent piece in Business Standard by Arindam Majumdar explains why the scheme failed for the regional airlines:

Start-up airline operators in India, without any credible background, pay around 10 months of lease as a security deposit. Then the aircraft remains grounded for at least 2 more months waiting for clearance from DGCA and other regulators.

ZoomAir had to wait 5 months for the required license and lost out 6 crores in the process. Also, as the government had put a deadline for registering under the scheme, the airlines did not have the required time to plan the routes and choice of aircrafts. They bought small aircrafts (19 seaters), though it is much more expensive to run. Add to this the problem of finding pilots who are trained to fly these outdated smaller aircrafts and the entire thing is an operational mess.

The smaller the plane, the more expensive it is to operate. Cost of pilot, crew — everything remains the same. If you divide that over a lower number of seats, it becomes more expensive.Without pilots and spare parts planes are frequently grounded leading to high cancellation. Data from aviation regulator DGCA shows that the two airlines had an average cancellation rate over 50 percent since starting operations.

Then, there was the problem of infrastructure. Large airports in the metros did not want to waste precious real estate on the small regional flights and the airports in rural areas did not have the adequate infrastructure to be functional, even though they were inaugurated with pomp and show.

But electoral compulsion meant that the first flight could not wait. After all, an airport gives a government bragging rights in election season.

So, Bastar Airport in Chattisgarh was inaugurated by PM Modi in June. Nothing like getting air connectivity to a Maoist hit area in a poll bound state. Except that the airport was not ready for a landing in monsoon. Bastar is a VFR (Visual Flight Approach) airport meaning if visibility drops below 5,000 metre, landing is cancelled. “We used to prepare every day for take-off from Raipur and then cancel it as Bastar was not ready for landing,” said an Air Odisha executive. Then the aircraft remained grounded for maintenance which meant more cancellations. “Imagine the loss of revenue and public confidence in the service”.

Since July, the airline has cancelled flight for at least 30 days. It flew only 45 passenger in entire July- that’s barely one per day.

The entire scheme seems to be in shambles for the regional carriers. Some of the big carriers who have the ability to scale and can take advantage of the scheme are doing well though. However, they will still not fly on all the routes that the government wants them.

Cities and their names

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We, the people of India, have been in a flux over the recent proposals being made to change the name of our beloved cities based on their historical or religious past. There are various sides and nuances to the conversation. In the past decades, the names of the cities were changed either to reclaim the names they had before the colonial rule or based on the linguistic preference of the local community. The argument against the recent change of names is that it has religious connotations and is biased towards one majority community’s preference. Although an interesting conversation, as someone who has been studying urban governance for half a decade now, I wonder how does it help the cities.

I have a proposal. Let’s allow the person who grants the largest amount to the city municipal corporation to name the city. This would not only make the process immune to the religious and linguistic impositions but would help the cash-strapped urban local bodies raise money to provide better public service. For instance, if a rich businessperson can afford to pay for it, she should have the option to rename one of our metropolises to her parent’s name. This would be a classic win-win situation.  

The municipal corporations that have been highly reliant on union and state governments to make the ends meet would gain significantly from the grants for a small price of changing the city’s name. The grants would have a provision for the grantor to provide a pre-defined amount to cover for the administrative costs that may be incurred in the process of changing the name. While the city would make financial gains, the grantor would be able to give one of the most significant forms of homage to an individual or an institution of their choice. This won’t be very different from the schools and institutions being renamed based on the wishes of the grantors.

To keep the cost of the transactions to a minimal, cities can restrict bidding to once every 25 years. This way the cities can plan large scale expenditures based on when the next grant would be flowing in. Of course, the large-scale expenditure can range from building a statue or creating a robust public health system. The final decision will be with the city municipal corporation or the state government, that oversees most of the significant urban functions. I believe this proposal would be appealing to all sides as it caters to none and the final winners would be the real underdogs, the cities.

India’s Defence Production Optimisation Problem

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The Caravan has an excellent in-depth story on the Rafale controversy. Beyond the specifics of the current controversy, the investigation throws light on the problems in defence production that continue to haunt India’s strategic ambitions.

On the face of it, defence production suffers from an acute case of what I had referred to earlier as hyper multi-objective optimisation. My argument was that the reason some government policies in India fail is because they try to optimise several objectives simultaneously, ultimately creating a solution that meets none of the objectives.

Now defence procurement is essentially an oligopsony i.e. it is a market where only a few buyers exists — only a few nation-states in the world have the financial muscle to buy 10 submarines or 100 multirole aircraft for example. My argument is that this oligopsony makes the optimisation problem even worse. The government believes that because it has more weight in the market, it has the luxury of optimising many more objectives in the process.

Let us look at what the government is optimising when it sets out to purchase defence equipment today.

  1. defence preparedness: primarily determined by the end users i.e. the armed forces
  2. costs: both explicit and opportunity costs
  3. strategic value: every defence purchase from foreign players raises the question that should we buy from existing trade partners or not
  4. creating an indigenous defence-industrial complex: this is further divided into two sub-goals. One is sustaining the ailing government-owned public sector companies. The second one is spurring investment from private Indian entities.

Now, even without any prior background, optimising all these objectives appears to be a herculean task. But even while India’s procurement processes were notoriously lethargic, new objectives were being added. The fourth objective was explicitly added  through an offset policy in 2005 and more recently through a strategic partnership model in 2016. And quite naturally, it is this fourth objective that has become the main sticking point in the Rafale controversy.

So with the government’s flagship reform failing, we are back to the starting point: what should be the mechanism to address India’s defence requirements? What principles should govern procurement and purchase?

One of the ways to resolve hyper multi-objective dilemmas is withdrawal. The government could let go of the aim to indigenise when it is looking to make a specific defence purchase. Get rid of the offsets policy altogether for a few years. The indigenisation problem should then be targeted at a later point of time. This is just one method. There could be other variations of choosing objectives that can work better but what is clear is that the current method needs a complete and urgent shakeup.

 

 

What Explains the High Demand for Low Paying Government Jobs?

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We are increasingly seeing the phenomenon where there are an enormous amount of applicants for a few government postings. Take this story where a million people applied for 700 clerical postings in Telengana. Or where there were 302 applicants for each posting of railway gangman:

On 17 September, 1.9 crore applicants will appear for the Railway Recruitment Board (RRB) examination to fill 62,907 vacancies at ‘Level 1’, earlier called ‘Group D’.

That is, 302 applicants for every job — jobs that are at the lowest level in the railways, including posts such as gangman (those who maintain tracks), gateman, pointsman, helper in electrical/mechanical/engineering/ signal/telecommunications, porter etc.

A majority of applicants for these jobs are graduates, post-graduates and even engineers, according to RRB sources.

Or take this case:

3,700 PHDs, 50,000 graduates, and 28,000 PGs have applied to fill 62 messenger posts in UP Police; position like this requires the minimum skills and has the lowest bar of eligibility.

Stories such as these have become all too common and are perhaps the most accurate reflection of India’s ongoing jobs crisis.

The big obvious question here is regarding the inexplicably high demand for low paying government jobs by apparently overqualified job seekers. My hypothesis is that this can be explained by three factors:

  1. The number of private jobs available are obviously too few. Job creation has stagnated and even receded in the private sector. Thus, industry does not have the capacity to absorb the large number of graduates and post-graduates who are passing out of the system. Since supply of labour far outstrips the demand for labour, employees have increasingly stringent qualification requirements. Only the best of the lot get a good, high paying job in the private sector.
  2. There is also an obvious skills mismatch. A lot of the students who pass through the Indian education system are not as qualified as their degrees tend to signal. A typical Post-Graduate often has the skills of a person who has passed the 12th grade and thus, cannot obtain or at least retain a high paying job which would require the skills of a Post-Graduate (One report, for instance, finds that nearly 80% of the engineering graduates in India are unemployable as their skills set do not match the requirement of the industry). What further complicates this issue and turns it into a vicious cycle is the fact that a lot of individuals end up studying due to the lack of job opportunities. These are students who enter into an educational programme solely due to the signalling value and to differentiate themselves from the nearest competitors. However, while the degree gained has some signalling value, the skills gained are inadequate for industry standards.
  1. A person who has gained a degree but not the appropriate skills cannot get a job in the private sector which will assure a reasonably high salary and job security. The private sector option is typically a low paying job, which can be lost at any time and with no benefits. Given this scenario, a government job that is assured of job security, even at the cost of lower salary seems attractive.

 

Copping out on Privatisation

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The recent bank merger between Bank of Baroda, Vijaya Bank, and Dena Bank is essentially a move of cowardice, and not the bold reformist step it is touted to be. The original plan (for reforming the banking sector) was to have just 6 public sector banks, and while Modi has reduced the number from 26 to 19, there’s still a far way to go. Further, the plan was not to achieve the reduction in numbers by merging all of the public sector banks into 6 mega banks that are still in government control, but to privatise them eventually. However, the traditional governmental dislike for privatisation and the lack of political will in an election year resulted in this sub-optimal solution of merged banks.

The merged entity is set to become the third largest Indian bank, however the size is hardly important. In fact, it would actually deter any real progress in reforming the banking sector. Another move of cowardice was in giving the assurance that no jobs would be lost due to merger. Thus, the banks cannot really cut cost and achieve economies of scale in this aspect.

The history of such mergers is not reassuring. The merger of New Bank of India (NBI) with Punjab National Bank (PNB) in September 1993, of Global Trust Bank with Oriental Bank of Commerce in 2004, and the spate of merging the associate State Banks with the main State Bank have all worked poorly. The strong bank in the merger eventually ends up suffering considerable losses. The editorial in The New Indian Express comments:

“When a strong and weak bank merge, the combined entity loses competitiveness and the merger is counterproductive. An RBI working group recommended avoiding such events without first restructuring weaklings—a step now being bypassed.”

Failures are the essence of capitalism, so before gaining size, we need measures that allow banks to fail safely without causing systemic shocks like Lehman Brothers. No math can correct errors made out of lack of self-discipline, and as we still fight the last NPA war, rather than planning for the next one, it’s time to act bold, taking haircuts and ceding control to private parties. For, in a growing economy, banks should lend without worrying about provisions or sacrificing profits at the altar.

 

Employment Elasticity of Growth in India

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Recently, there have been a spate of articles on employment elasticity of income in Indian newspapers and how important that is to job creation in India. The Hindustan Times has a series on India’s job challenge, Mint’s editorial discussed quality of jobs created, and the Economic Times cautions against India mimicking China’s strategy in creating jobs.

But what exactly is employment elasticity? And why is it important?

According to an RBI working paper by Sangita Misra and Anoop K. Suresh, employment elasticity is a measure of the percentage change in employment associated with a 1 percentage point change in economic growth. It indicates the ability of an economy to generate employment opportunities for its population as a per cent of its growth or developmentprocess.

An employment elasticity of 1 denotes that employment grows at the same rate as economic growth. Elasticity of 0 denotes that employment does not grow at all, regardless of economic growth. Negative employment elasticity denotes that employment shrinks as the economy grows.

This is crucial as it is commonly believed that economic growth alone will increase employment. However, as we examine the data, we see that despite India’s impressive economic growth, employment has not grown alongside. Ideally we would like to see an employment elasticity >=1, but, from the Misra and Suresh paper, we see that employment elasticity in India declined from 0.44 in the first half of the decade 1999–2000 to 2004–05, to as low as 0.01 during second half of the decade 2004–05 to 2009–10.

YearsEmployment Elasticity
1999-2000 to 2004-050.50
2004-05 to 2009-100.01
2009-10 to 2011-120.18

Similar trends have been witnessed at the sectoral level. In agriculture and manufacturing, employment elasticity between 2004-05 and 2009-10 has been negative.

Sector1999-2000 to 2004-052004-05 to 2009-102009-10 to 2011-122004-05 to 2011-121999-2000 to 2011-12
Agriculture1.09-0.39-0.44-0.41-0.08
Manufacturing0.80-0.271.740.100.33
Mining & quarrying0.870.20-1.76-0.140.34
Utilities0.67-0.277.601.421.17
Construction0.881.63-0.251.121.01
Trade, transport, hotels0.45-0.020.540.130.25
Finance, real estate1.400.34-2.32-0.450.06
Other services0.46-0.112.960.480.47
All sectors0.500.010.170.060.20

The negative employment elasticity in agriculture indicates movement of people out of agriculture to other sectors where wage rates are higher. This migration of surplus workers to other sectors for productive and gainful employment is necessary for inclusive growth. However, the negative employment elasticity in manufacturing sector was a cause of concern particularly when the sector has achieved 6.8 per cent growth in output during Eleventh Plan. It did bounce back during 2009-10 to 2011-12, but the average employment elasticity in manufacturing between 2004-05 and 2011-12 was still only 0.10.

 

References:

Misra, S., & Suresh, A. K. (2014). Estimating Employment Elasticity of Growth for the Indian Economy. Reserve Bank of India.

Planning Commission, India. (2013). Twelfth Five Year Plan, 2012-2017. Sage Publications, India.

Why Bangladesh Matters: Yet Another Illustration

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I have argued earlier that the vacillating nature of India’s neighbours need not overly worry Indian foreign policy makers.

beyond the security domain, there is very little that small states in India’s neighbourhood can do in India’s pursuit of prosperity for its citizens in the immediate future. As we enter a world economy that is getting increasingly protectionist in nature, international trade will become increasingly difficult. Fortunately, India’s big, relatively young, and diverse population means that greater domestic consumption alone can help us maintain high economic growth for the next 10 years or so. Barring Bangladesh, no other Indian neighbour has economic prowess that India cannot substitute domestically. So, in the short run, the economic benefits accruing from small states in the neighbourhood will continue to be marginal. [INI, April 7 2017]

A news report in Business Standard today gives an example for why Bangladesh is an exception.

The value of two-wheeler exports from India to Bangladesh jumped 50 per cent in FY18 to $277 million (Rs 19 billion), making it India’s biggest export market, ahead of Sri Lanka. The value of shipments to Bangladesh has more than doubled since FY16, when it was just $128 million…

Bangladesh is estimated to have exported readymade garments worth $29 billion in the calendar year of 2017. Riding on robust economic growth, the nation’s demand for motorcycles soared 50 per cent in 2017 to an estimated 360,000 units. The high double-digit growth continues in 2018 as well. [Business Standard, 20 Jul 2018]

In essence, India’s relationship with Bangladesh is strategic for multiple reasons. It can directly impact the peace and prosperity of a large number of Indians. The opportunity costs of not having Bangladesh on your side are far higher compared to our other neighbours.

Anticipating the Unintended Consequences of Regulating Cinema Halls

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Movie-watching in Indian cinema halls has become a highly politicised commodity. First, a few state governments capped movie price tickets. An unintended yet easily anticipated consequence followed. The prices of complementary goods —  popcorns, soft-drinks, and snacks — rose.

And now, the Maharashtra government has gone one-step ahead. IT also wants to tackle the rise in prices of these complementary goods. The Food and Civil Supplies Minister said this on the floor of the Maharashtra Legislative Assembly:

There is no ban on patrons carrying outside food to multiplexes and if the multiplex authorities prohibit it, they could face action.

Not to be outdone, the Karnataka government has said that it will soon follow suit.

I’ll leave the discussion on entitlement and endowment effects for another post. For now, let’s anticipate the unintended consequence of this latest move.

  1. The movie-watching experience can be expected to be less than satisfactory. Movie halls will be littered with homemade food. There will be fights over dietary habits. If the governments go further and cap food and beverages prices as well, theatres will have even lesser avenues to run profitably.
  2. Demand for substitute goods will increase. At the margin, people will decide to choose something else over watching movies at cinema halls. This works well for the likes of Netflix, video pirates, and theatre plays.
  3. Prices of other complementary goods will rise. One can expect an increase in the parking charges at movie theatres or a charge (instead of a refundable return) for the 3D glasses.

In short, I’m not going near a cinema hall anytime soon.

 

 

Who gains from the new Maternity Benefit Act Amendment?

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The new Amendment will harm the women working in the formal sector more than those in the informal sector.

There was a recent uproar about the new amendments were made to the Maternity Benefit Act of 1961, which extended the paid maternity leave to 26 weeks from 12 weeks. Although the move sounds positive at first glance, it holds negative repercussions for the women in the workforce.

One of the most obvious criticisms for the Act is that it would make it costly for the employer to hire women whom they would now have to give a paid leave for 28 weeks. Team Lease did a study titled “The Impact of Maternity Benefits on Business and Employment” which stated that 11 lakh to 18 lakh women will face difficulty in finding jobs in the Small and Medium Scale Industries. 

The second and the less discussed repercussion is that the amendment would impact women employed in the formal sector more than ones employed in the informal sector. There are two broad reasons. First, the formal sector is scrutinised more than the informal sector. Second, women in the formal sector are paid higher than in the informal sector. This makes the maternity leave a more expensive affair for the formal institutions.

To grasp the magnitude of the problem, we need to start with some basic facts:

  • Number of women working in the informal sector in India (2018): 90%
  • Gender pay gap in India (2017): 20%
  • The difference between the male and the female employment ratio (2017): 79% – 27% = 52%

As women in the informal sector are already cheap labour and the regulatory oversight is limited, the chances are higher than the employment rate for women in the informal sector would remain the same. Meanwhile in the formal sector, where even after the wage gap, providing a 26 week paid leave would be an expensive affair for the firm. With the formal contracts in place, the higher regulatory oversight also ensures that the employer would rather hire a male employee than overlook the new amendment. The final outcome of this would be that we will see a decline in the female labour employed in the white collar jobs, even if the status stays the same for their informal counterparts. Leaving us with the question of who is the actual beneficiary of the Act.

Instead of increasing the cost of hiring women, one of the key solutions is to make more jobs formalised. This initiative need not be just for the women. With just  6.5 per cent of the jobs formalised, the regulatory reach of the State is several limited. Increasing the formal net would allow more people to access the safety benefits provided by the state and ensure better working conditions for more people. One of the other key impacts would, of course, be that it would help empower more women to seek their rights.

Scott Alexander, Bryan Caplan and Nitin Pai on fighting crime (feat. Matt Levine)

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The basic idea is that coming down hard on a small number of high-profile crimes can have disproportionate effects in terms of curbing crime

It all started with the pseudonymous blogger Scott Alexander, in what seemed like a justification of outrage. Or maybe it started earlier – with a post by Bryan Caplan deploring outrage. Caplan was commenting about the propensity of people to jump on to bandwagons deploring seemingly minor crimes while not caring enough about worse crimes that were not in the public spotlight already. Caplan had then written:

I can understand why people would have strong negative feelings about the greater evil, but not the lesser evil. But I can’t understand why people would have strong negative feelings about the lesser evil, but care little about the greater evil. Or why they would have strong negative feelings about one evil, but yawn in the face of a comparable evil.

Now, while “Alexander”‘s response seems to justify outrage (and I’m no fan of online outrage), he did so with an interesting analogy, on how to curb crime when the police has limited resources. He writes:

[…] the police chief publicly commits that from now on, he’s going to prioritize solving muggings over solving burglaries, even if the burglaries are equally bad or worse. He’ll put an absurd amount of effort into solving even the smallest mugging; this is the hill he’s going to die on.

Suppose you’re a mugger, deciding whether or not to commit the first new mugging in town. If you’re the first guy to violate the no-mugging taboo, every police officer in town is going to be on your case; you’re nearly certain to get caught. You give up and do honest work. Every other mugger in town faces the same choice and makes the same decision. In theory a well-coordinated group of muggers could all start mugging on the same day and break the system, but muggers aren’t really that well-coordinated.

The police chief’s public commitment solves mugging without devoting a single officer’s time to the problem, allowing all officers to concentrate on burglaries. A worst-crime-first enforcement regime has 60 crimes per day and solves 10; a mugging-first regime has 30 crimes per day and solves 10.

And then it is again Caplan’s turn to respond. I’m bad at detecting satire, so I’m not sure if he is being serious (I don’t think he is). But he proposes a “sure fire way to end all crime”:

Step 1: Credibly announce that all levels of government will mercilessly prosecute the first crime committed in the nation each day.

Step 2: There is no Step 2.

But then, I’m sure that Nitin Pai is being serious in proposing a similar method to curb the spate of violent crime in India based on WhatsApp forwards. In his piece for the Quint, he writes:

the Home Ministry ought to use its considerable powers to tackle the problem. It’s not hard either. One well-advertised arrest, prosecution and sentencing will deter the cowards that comprise lynch mobs. Three high profile arrests and prosecutions – and see how quickly lynchings stop. The smallest police station in the remotest village can stop lynchings if the local sub-inspector has received clear political messages against it.

Finally, the reason why I figured Caplan’s “solution” is satire is because of this passage from Matt Levine’s excellent Money Stuff newsletter (likely it’s behind a Bloomberg paywall, but it’s free if you subscribe by email). Commenting about high frequency trading, Levine writes:

But the answer in actual U.S. market structure is, come on, there is no such thing as “the same time.” Do you know how many nanoseconds there are every single second? (A billion.) The odds that each of us would hit the “Buy” button at the exact same nanosecond are infinitesimal. So if I put in my order to buy the stock at 10:45:06.543210876 a.m., and you put in yours at 10:45:06.543210987 a.m., then I got there first and I win.

Is this a good answer? It has a simple appeal. It just gets rid of the question “who gets the stock if we put our orders in at the same time?” It replaces an economic question about how to allocate the stock with an empirical question of who got there first.

So the problem with fighting the first crime of the day, or year, or whatever, is that a criminal will know fully well, given a reasonably high enough crime rate, that the probability of his crime being recorded as the first in the year or day or whatever is less than one. And the higher the crime rate, the lower the probability that his crime will be recognised as the first one. And so there is a high chance he can get away with it.

And that is where Nitin’s idea scores. Rather than going after the “first crime”, pick a few crimes arbitrarily and “go after them like hell”. Since in this case most of the people who are forwarding dangerous forwards are “ordinary people”, this will likely shake them up, and we’ll see less of these dangerous forwards.