Quotable Quotes from Le Guin

Ursula K. Le Guin’s The Dispossessed is an intellectual tour de force. While there are enough ideas in the book to write a full-blown thesis, I will restrict this post to highlighting two quotes that are reflective of the state of the country today, in the light of the recent spate of mob lynching.

The first quote goes thus:

Coercion is the least efficient means of obtaining order.

And the second one:

You can’t crush ideas by suppressing them. You can only crush them by ignoring them.

What do these passages tell us about tackling mob lynching?

First, is a new law, as the Supreme Court recommended in its order last week, the best way forward? A law is a blunt instrument and is coercive more often than not. Amit Varma has already written about this in a recent post, where he mentions the lack of a rule of law as being of more concern than the absence of a legal provision.

Second, are there more subtle solutions for addressing the rumours that spark a lynching than restrictions on services like WhatsApp or a blanket shutdown of internet in a region? The second passage might hold the key here. However, I would argue that the ignoring that is mentioned there cannot be passive. This is a case where there might be merit in fighting fire with fire, instead of being a firefighter.

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

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.

 

Which States are Financially Underdeveloped in India?

Which states are the least (most) financially developed in India? To answer this question, I construct a Financial Deprivation Index (FDI); the higher the FDI, the less financially developed a state is. FDI is based on three dimensions: branch coverage, deposit mobilisation and credit disbursal. The first dimension relates to the financial infrastructure, other two are the variables relevant for the long-term saving, consumption smoothing and investment.

To construct the FDI, deprivation scores are calculated by dividing the population of each state by the number of reporting branches, total deposits and credit outstanding as on 31st March, 2017, respectively. A simple average of these scores would be misleading as they carry different units. To get around this problem, the scores are centred about the mean and normalised by dividing by the range. Finally, a simple average of the normalised score is calculated which serves as the Financial Deprivation Index.

So much for the data and methodology. As for the results, they are depicted in the map shown above. The least financially developed states in India are Manipur, Bihar, Assam, Nagaland and Uttar Pradesh.

The most financially developed states/UTs in India are Chandigarh, Goa and NCT of Delhi. Given the level of urbanisation, this is hardly surprising. Among the larger units, Punjab, Kerala, Haryana, Karnataka and Maharashtra are the most developed states. Somewhat surprisingly, hilly states such as Uttarakhand, Sikkim and Himanchal Pradesh have fared well.

One surprising finding of the analysis was the extent of heterogeneity in the North-Eastern states. Assam, Manipur and Nagaland figure among  the least financially developed states in the country; Arunanchal Pradesh, Mizoram and Sikkim show decent performance in terms of FDI. Understanding the reasons of uneven development may provide valuable lessons for policy formulation.

Vulnerability in jobs in India

India has been infamous for the magnitude of informal jobs in the country. Though a significant issue, informality is just a part of the bigger issue, i.e, the increase in the number of highly vulnerable jobs. Vulnerable jobs usually include own-account workers and family members working informally. Basically anyone who does not have a stable contract or flow of income, and are open to exploitation. All informal workers are vulnerable to an extent since they aren’t on any payroll or have a formal contract.

This long standing problem has become significant as the number of vulnerable employees has been increasing in the past few years. As per International Labour Organisation (ILO), 77 per cent of workers in India will have vulnerable employment by 2019. In a country where 92 per cent of the employed population is in informal sector, it is a concern if the ratio of vulnerable jobs increase.

 

Source: World Employment Social Outlook2018, International Labour Organisation

The ILO report also pointed out that

“a significant portion of the jobs created (in India) in the services sector over the past couple of decades have been in traditional low value added services, where informality and vulnerable forms of employment are often dominant.

It is no solace that the problem is global in nature,

Globally, the significant progress achieved in the past in reducing vulnerable employment has essentially stalled since 2012. In 2017, around 42 per cent of workers (or 1.4 billion) worldwide are estimated to be in vulnerable forms of employment, while this share is expected to remain particularly high in developing and emerging countries, at above 76 per cent and 46 per cent, respectively. Worryingly, the current projection suggests that the trend is set to reverse, with the number of people in vulnerable employment projected to increase by 17 million per year in 2018 and 2019.

This is not a surprise as 80 per cent of the casual workers and 31 per cent of the regular/salaried workers in 2016 earned less than the national minimum wage of Rs 66 / day. If looked at on the basis of gender, 95 per cent of women working as casual labour got less than the minimal wage as against 74 per cent men. Lower wages make workers more susceptible to being caught in the low income trap. With income not enough to save and invest, people earning low wages are unable to earn or multiply their money and get stuck at living at basic sustenance levels. The only way to move from the equilibrium is by earning a higher amount and saving it.

With low income levels in the country and substantial number of informal workers, India needs to look at vulnerability within jobs as a criterion in itself while assessing jobs problem. In order improve the conditions, the jobs created in the country need to assure a certain level of stability and redressal mechanisms. More than skilling, the government needs to create avenues for job creation. A good starting point would be to modify the labour laws and reduce the cost of doing business in the country.

No Sympathy for Exam Stress

As Indian high schoolers received board examination marks last week, their Chinese counterparts are appearing for their annual gaokao exams this week. The gaokao system, like the Indian board exams, receives a lot of flak for its many flaws. The gaokao examination in China usually determines where these students can pursue their college-level education. However, the main problem is that colleges require high gaokao scores for students who do not originate from that province. This is linked to the hukou system or the household registration scheme (almost an internal passport) which determines where you can work depending on your parent’s origin. As this Atlantic Times article puts it,

China’s prestigious Peking University and Tsinghua University, both based in Beijing, will collectively take about 84 students out of every 10,000 Beijingers who took the gaokao this June; 14 students from every 10,000 who took the gaokao in nearby Tianjin, 10 out of every 10,000 test-takers from Shanghai, and only about three per 10,000 candidates from Anhui,  and a mere two from every 10,000 taking the test in Guangdong.

This has led to a wave of ‘gaokao migrants’- people who move to other provinces or purchase land there so that their children will be able to take the exam in a province that has better universities. So authorities in provinces are now cracking down on those who are hoping to circumvent this system. According to this article in Sixth Tone, the province of Fujian, which has been seeing an increase in such gaokao migration, has cracked down on it:

To stem gaokao migration, Fujian education and police departments issued a joint notice on Monday clarifying the policies for students from elsewhere: Students must have had Fujian household registration for at least one year, and studied at a high school in the province for at least one year, before they qualify to take the exam in Fujian. In addition, their parents must have residency, stable employment, and records of social security payments in the province for at least one year.

Going forward, regulations will become even stricter: For students sitting the gaokao in 2019, the requirements will increase to two years, and three years for those taking the exams in 2020.

What this will mean is that migrants and people from low-income household will lose out either way. This is particularly disheartening, for a system that prides itself on its being a meritocracy.

Women: The Unpaid Workers

“With an increase of 22.3 million in the male workforce between 2004-05 and 2009-10 being virtually cancelled out by a fall of more than 21 million in the female workforce, the need to understand the gender dimensions of employment trends in India has acquired a new urgency.”

Let the statistic sink in. The paper on ‘Gender Dimensions: Employment Trends in India, 1993-94 to 2009-10’ by Indrani Mazumdar, Neetha N, drives home the magnitude of the problem in front of us. The authors highlight that “the most striking revelation of the National Sample Survey Office’s (NSSO) 66th round survey is a significant fall in the Female Labour Force Participation Rate (FWPR )between 2004-05 and 2009-10.” The paper expands on how the liberalisation, unlike the popular opinion, did not lead to an increase in the female labour force participation.

One of the key insights of the paper is the drastic increase in the number of unpaid women helpers. As per the NSSO, the employment activity categories have been segregated as self-employed, regular salaried and casual labour. Out of all the three segments, the highest proportion of female workforce is in the self-employed group. However within the self-employed group, the largest proportion of women are employed as unpaid women helpers. From 2004-2009, the total number of employed women rose from 61 to 72.5 per cent, while the regular salaried women only accounted for 9 per cent of the total number. These numbers clearly show that the increase in the FLFPR was mostly due to the increase in the unpaid job rather than the formal jobs.

The paper also shows how the characteristics of the unpaid jobs also varied between rural and urban regions. In rural regions, unpaid workers vary from peasant to supervisors. The jobs are also significantly dependent on the economic background of the household. For instances, the women are usually supervisors only if the land is owned by either their husbands or in-laws or fathers or parents. In urban spaces, the nature of the job is largely different as 43 per cent of the women are engaged in community and personal services which includes domestic workers, teachers, launderers, beauticians, and so on. The second biggest sector that hires unpaid women in urban region is the manufacturing sector (primarily home-based, piece-rated work). 

This disparity in the type of jobs and the variety of them is an indicator of how most of the women work at minimal wages and how vulnerable their jobs are. While in rural regions the family income defines their jobs, in the urban spaces they are mostly engaged in low wage and high risk jobs. With the large segment of women working in the informal spaces like domestic help and agriculture, one of the keys solutions to look at can be to formalise these sectors. A good example would be the increase in the number of online platforms like BookMyBai.

Government should divest 100%, not 51% of bank shares

The government plans to merge four state run banks and then sell 51% of its stake in the new merged bank.  Why not sell 100% stake and divest all bank shares? The banks are a drain on government funds, and the government does not need to be present in the banking sector except as a regulator. Even the PM’s Jan Dhan Yojana does not require you to open an account with a state run bank. A private bank will do the job nicely.

The four banks in question are bleeding money. Their combined net losses were over Rs. 21,000 crore (> US $3 Billion) in the year ending March 31, 2018. If the losses keep piling up and divestment is not done quickly, we will end up in with a situation similar to what’s happening with the Air India sale – no buyers!

India Needs an Aggressive China Insurance Policy

What should India’s conduct with China look like? This question is on the minds of a lot of people in India’s foreign policy circles. I currently have a two-part answer to this question:

Part 1: Assuming that yogakshema for all Indians is defined as the national interest, India’s asks from China would be: peace on the borders and investments in the Indian economy. From a Chinese perspective, these asks are extremely beneficial too. Peace on the Indian border allows them to concentrate their efforts towards challenging the US in the South China Sea. And India is perhaps the only market with the scale and the stability to promise returns on Chinese capital currently flowing to weaker economies.

Part 2: Part 1 is insufficient because China’s recent movements – in Maldives, Nepal, and Doklam – are indicative of its tendency to eschew a mutually beneficial path and pick an openly hostile front instead. To prevent this switch, India needs to invest in I call an Aggressive China Insurance Policy. The motive of this policy is simple: should Xi Jinping’s China get aggressive with India, India should have readily available capacity to inflict significant pain to China in return. The insurance “premium” for this policy includes a variety of measures:

  1. Establish contacts with the key members of World Uyghur Congress and other such organisations.
  2. Shift the focus of “Act East/Look East” to one country — Vietnam.
  3. Offer Trump deals that can deepen the US-India engagement.
  4. Sponsor studies that puncture the “Chinese Leaders Do No Wrong” narrative.

This two-part policy can help India modulate its relationship with China.

Farm Loan Waiver in Karnataka – A Crisis and an Opportunity?

The Karnataka Chief Minister made a statement on May 30th that the newly elected government will come up with a policy to waive farmer loans worth ₹53,000 crores within 15 days. Given this policy context where some form of a waiver looks imminent, the question that confronts us is this: can this waiver be used as an opportunity to bring in structural reforms?

I spoke on this topic to Anusha Ravi of The New Indian Express. The newspaper report is here. These are the questions and my responses to them:

Are politicians compromising on the economic health of Karnataka with the commitment of such a waiver? 

Helping distressed farmers is a political imperative that finds resonance across the board. Especially so because Karnataka has been facing drought over three successive 3 years. At the same time, this immediate crisis gives a golden opportunity for the state to take up structural reforms that will help raise revenues.

Can a state with budget outlay of Rs 2,09,181 crore afford a farm loan waiver of Rs 53,000 crore? 

The total expenditure budget estimated for 2018-19 is 1,98,095 crores. Given that the total loan waiver amounts to nearly one-fourth of the budget size, the government will have to spread its liabilities over multiple years. At the same time, the government will have to mobilise additional sources of revenue to be able to pay off these liabilities.

Where can the state raise revenue to implement such a waiver?

The government has the opportunity to use this crisis as an opportunity for structural reforms. There are several opportunities available. Reforming the electricity sector by making consumers pay the actual cost of power is one such move. Power subsidies currently amount to a whopping 9250 cr per year. The Karnataka government also runs a total of 93 PSUs. 12 are in a non-working state and government must speeded up the divestment of such firms. Better land use, monetising parking in city areas, and improving property tax collections are some other areas the government can think of. States such as Kerala, Punjab, and Sikkim allow lottery schemes to function to raise revenues – this should also be considered.

Would such an implementation mean cutting back allocation for other sectors? 

If this policy announcement of assisting distressed farmers is not simultaneously backed by structural reforms  to raise revenues, the government will be left with no other option but to cut down expenditure in other areas.

Political Will To Solve Jobs Problem

The recent 12th grade results declared by the Central Board of Secondary Education were a pleasant surprise for the Delhi government where the government schools took a 9 per cent lead in performance over private institutions. Although it is comforting to see that appropriate steps are being taken to improve the education system at school levels, we are yet to look at the larger problem facing us in the next few years- the problem of jobs.

One of the key features for the change was the political will and upfront commitment to bring about the change. Rohan Joshi, who has a vast experience of working in Education and Skill Development sectors, attributed the success to systematic engagement with the external stakeholders. He also mentioned that the political will translating into driving bureaucracy to focus on education quality among other factors have led to the remarkable achievement of Delhi Government Schools. He did, however, flag that while celebrating the achievement, we must also continue tracking progress in the coming years. Typically, 3 years is too short a time to reform an entire education system of a state. Overall, Delhi government has certainly taken the steps in the right direction, the point now is to build further upon this great start.

It is this political will that is required to solve other pressing issues like the jobs problem. With 12 million new people joining the workforce every year in the country for next few years and 29 million labour lying redundant in rural areas, it is the evident that India needs to create around 20 million jobs annually for next few years to satisfy the demand. This problem currently faces two broad issues- lack of political will to create systematic solutions and limited attention given to the quality of the solutions.

The lack of political will can be seen in the redundant attempts being made to redefine the level of unemployment rather than having discussions on increasing the number of jobs. One of the key learnings from the success of the Delhi government is that external stakeholders can have huge impact, if they are given proper targets and feedback. Hence, if there are NGOs incentivised to skill the labour or reduce the labour employee mismanagement, it would go a long way. This, of course, does not take the burden away from the government to create policies that ease up the labour laws and helps promote large manufacturers.

The other problem lies in how little attention is being paid to a problem of such magnitude. The atmosphere created over the years by the Delhi government focused on quality rather than quantity. Hence, the solutions went beyond just throwing money at the issue. With respect to jobs problem, the conversation hasn’t come to a point where the quality of jobs are being discussed. For instance, Prime Minister Modi in his infamous remark claimed that jobs like that of street-food vendor should also be included in the employment numbers. The conversation went back and forth on this paradigm but there is yet to be a substantial remark on the quality of jobs that need to be created for a country with the poverty and demographic levels as ours.

We have to take the conversation beyond just jobs or occupations and talk about sustainable work environment and employment options in the country. For instance, the policymakers should look at creating incentives to increase jobs that provide sustainable wages and decent work environment.

It is evident that enough work needs to be put in to sustain outcomes that the Delhi government saw in this year’s exam results. This one successful attempt has enough learning on how a motivated policy move can show positive results.

The Nipah Outbreak and Kerala’s Public Health Systems

On May 25, the Ministry for Health & Family Welfare announced that the Nipah outbreak in Kerala had been contained. This came as a relief as the highly contagious virus had already claimed 18 lives.

The Indian Express has a good report that applauds Kerala’s public health systems for containing the spread:

By the time the NiV virus was confirmed, the health infrastructure in the district had been promptly spruced up by setting up isolation wards at the Medical College and the local hospitals. In the days that followed, people who had been in direct contact with the infected were immediately transferred to the isolation wards as they began showing symptoms thus breaking any further chance of spread of infection. Family members of the infected were put on home quarantine, their samples taken and their daily health parameters routinely checked by local officials. “We didn’t allow the virus to proceed in its natural cycle. Otherwise, there would have been a lot more fatalities. We were able to intervene at the right time,” said Dr Arun Kumar. [The Indian Express, May 26]

While the report appreciates the co-ordinated response of the Kerala and Union governments in dealing with this outbreak, it fails to highlight another important point: the highly decentralised nature of Kerala’s public health systems. In fact, in a study we completed last year on Public Health Expenditure in India (2005 – 2015), Kerala stood out in devolution of implementation functions in healthcare to its urban and rural local governments.

The differentiating feature is:

Unlike most other states, Kerala also does not provide much by the way of specific purpose transfers to panchayats and Municipal Councils in health. Instead, Kerala gives large amounts of general purpose transfers to local bodies (nearly 25 percent of the plan expenditures), some of which can be used for health and other expenditures. The local governments then decide how these funds should be allocated. Kerala also has an “Information Knowledge Mission” dedicated to running a system of accounts and payments for all local bodies in Kerala. They maintain a database that can disaggregate local body expenditures in health, water & sanitation and other sectors [Public Expenditure on Health in India: 2005-06 to 2014-15, Pavan Srinath et al].

My hypothesis is that this well-settled decentralised form of health administration had a big role to play in containing the outbreak. The empowered local governments were able to move quickly, without having to wait for explicit directives from the higher levels of government.

This claim needs more investigation but it is worth studying because it can help shape the self-governance debate in India.

 

Making flying viable for everyone

To successfully provide affordable air travel, government needs to ensure economic viability of its policies.

This year the Indian government decided to connect 56 unserved airports, under the Ude Desh ka Aam Naagrik (UDAN) scheme. The aim of the entire scheme is to make air travel affordable. Although the intentions of the scheme are noble, the steps taken have limited the scope of implementation. One of the key failures lies with the inability to understand the repercussions on the economic viability of airlines.

While the capital invested in buying and maintaining even a single airplane is already high, fuel cost and hiring the crew to keep an airline going add to the expensive affair. To give a ball park figure, domestic airlines in the U.S. spends a combined $2 to $5 billion on just jet fuel every month. Keeping the costs in in mind, it is important for the airline industries to ensure that the flight routes are economically viable. One of the ways this is ensured is by connecting less frequented routes with the major stops in order to cross subsidise the cost. In India, we follow a hub and spoke model where the major cities are the hub or the centre of the wheel and the all the traffic is connected to the centre and passes around the spokes. This helps increasing connectivity while keeping the flight routes viable. This heavy traffic is the the primary reason why most major cities in the world have two airports. The traffic going to and fro from these metropolis does not only keep the city running, but the airlines too.

It is in light of this distribution between traffic that the government policy to connect underserved airports can be questioned. That said, the current scheme tries to provide Value Gap Funding to certain routes for first few years to cover for the additional cost incurred. VGF is an economic tool that includes tax redemptions and financial support provided by the government to make the project viable. For instance for UDAN, the union government contributes 80 per cent of the VGF amount, while the remaining comes from the state governments concerned and in the case of north-eastern states and union territories, the sharing ratio is 90:10.

Although, the funding does provide incentives for flight to opt for the routes till they are being subsidised, it does not create enough incentives for the routes to remain viable after. The inherent flaw in the policy move, therefore, make it unsustainable. The grimness of the possible outcome is captured best in an article in  The Economist :

“High per-passenger costs on seldom-used routes will force Mr Modi to draw the line somewhere. Inevitably, he will conclude that not every commoner deserves the gift of flight.”

To make the airports truly viable, union government needs to look at making the cities more attractive for regular travellers or tourists. Hence, to bring a ghost airport to life it is important for the government to put some life into the host city.