It’s been a few years since I’ve taught a course in behavioral finance, but back when I used to teach it, one of the first few lectures would always be this excellent debate between Fama and Thaler:
The video is excellent for many reasons, here are some of them:
It’s a good way to help students realize that the question (are markets efficient) is far from settled, one way or the other. Hey, if the Nobel prize winners can’t agree…
There is a way to disagree. Disagreement need not mean that the other person is vile, evil or an idiot. It simply means that the other person has a different take than yours. And that’s fine. This is an important, and currently very underrated lesson.
Regardless of which side of this debate you personally favor, there is much to learn by watching two experts express and defend their stance.
Reasonable dialogue, the purpose of which is to arrive at a synthesis, is a worthy way to engage in debate. This is worth repeating: the purpose of a debate is not to win it, but for all sides to arrive at a happy medium. Medium need not mean agreement, but it certainly can (and should) mean acquiring an appreciation of the other’s viewpoint.
Listening to two people debate is infinitely more entertaining, motivating and informative than listening to one person drone on for eternity
The reason I bring this up is because Pranay asked an excellent question on Twitter recently:
Which are your favourite intellectual debates? Reading them is quite useful because it exposes us to the best-case arguments on both sides. Ones I recall: 1. Musgrave vs Buchannan – Public Finance & Public Choice 2. Rawls vs Nozick – Justice 3. Bhagwati vs Sen – Growth vs…
It is excellent (this tweet), not just because it helped me write this post, but because it received some excellent replies – please do go through them.
And while I am not sure if Pranay intended this, but it also serves as an excellent reminder that there are ways to have debates in public. Civil disagreement is possible, and when both parties engage in good faith, crucial and desirable. That is how society learns and moves forward – through debate, disagreement and dissent.
Speaking of which, here’s your word for the day: erisology.
First, the question. We’ll get to who the “we” in the title is (or should it be “are” instead of “is”?) in a bit, and also to our answers.
Ideally in a democracy, there ought to be space for evidence-based partnerships with government whilst simultaneously holding the mirror. But when the space for holding the mirror shrinks, when freedoms are trampled upon, what should the public policy professional do? There is a real risk that the pressures of relevance can, and indeed do, push researchers to blunt critique, to inadvertently, perhaps, stop asking difficult questions and refrain from critical public engagement. Is there a need then to redefine our role, to question the narrow prism of relevance and impact that we judge ourselves by?
Paul Krugman has a textbook on international economics. Standard stuff, and quite a good textbook, running into multiple editions. I may be wrong over here about the specific topic, but I think it is in the context of national accounting with international trade that Paul Krugman asks us to imagine a country called Agraria.
In much the same vein, but for entirely different reasons, I’m going to ask you to imagine a country called ArreBhaiWah.
Because when it comes to India, we will have to spend a significant amount of time having heated debates about whether the space for holding the mirror has shrunk or not. I might (and do!) say that yes, it has shrunk. You, on the other hand, might say that it has expanded instead. And then we will argue and call each other names and get applauded for having reminded the other side of their grandmothers. That is fun to do, but would not be constructive, nor productive.
So let us, instead, focus on ArreBhaiWah.
If you are a public policy professional in ArreBhaiWah, and you see that the space for holding the mirror has shrunk, and you need to analyze what you should do about it – what framework should you use to arrive at your answer?
This isn’t about answering the question for ArreBhaiWah, you see. As with many posts on EFE, it is about supplying you with a framework to think about the problem. Please decide for yourselves whether the question makes sense, is applicable and finally, what your answer (if any) should be.
Which brings us to who the “we” in the title of this post are (or should it be “is” instead of “are”?). It is yours truly, and the late, great A.O. Hirschman. By the way, both Yamini’s piece and this Wikipedia article about Hirschman deserve to be read in their entirety, so please do.
Exit, Loyalty and Voice
Here’s ChatGPT’s summary of one of my favorite books in economics:
“Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States” is a seminal book by Albert O. Hirschman, published in 1970. The work presents a framework for understanding how people respond to dissatisfaction with organizations or states they are part of. Hirschman’s theory is built around three main concepts: exit, voice, and loyalty, which are mechanisms through which individuals can express their discontent and potentially influence change.
Exit: The option of leaving the organization or ceasing to use its products or services. This is a common response in economic markets; for example, if a customer is dissatisfied with a product, they can simply stop buying it and switch to a competitor. Exit is a powerful mechanism in promoting quality and efficiency due to the competitive pressure it creates.
Voice: The option of actively expressing dissatisfaction and seeking to improve conditions from within, rather than leaving. Voice can take many forms, including direct feedback, protests, or any attempt to change the organization’s practices or policies. Voice is particularly relevant in scenarios where exit is not feasible or desirable, such as in monopolies or with state governance.
Loyalty: Loyalty plays a moderating role in the exit and voice framework. It refers to a person’s attachment to an organization, leading them to endure dissatisfaction while trying to improve the organization through voice, rather than exiting. Loyalty can delay exit and give voice a chance to work, as loyal members or customers may seek to solve problems internally rather than abandoning the organization.
Hirschman’s framework is used to analyze a wide range of economic, political, and social phenomena. It provides insights into how organizations and states can deteriorate or improve over time based on the feedback mechanisms available to and utilized by their members or constituents. It also highlights the importance of maintaining the right balance between allowing exit and encouraging voice to ensure the health and adaptability of organizations and societies.
ChatGPT4
And this is an excellent framework with which to answer Yamini’s question: in ArreBhaiWah, what should the public policy professional do?
Should they choose exit, or voice? To what extent should loyalty influence your decision? Remember, loyalty refers to a person’s attachment to the organization (or the entity) in question.
This is where I step in.
What Are you Optimizing For?
Should you be optimizing for what is best for you?
Best for you in a professional context, or personal context?
Best for your conscience, or best for your career?
Or should you be optimizing for what is best for ArreBhaiWah?
Or should you be optimizing for what is best for the folks who currently run the government in ArreBhaiWah?
Because as Khyati Pathak, Pranay Kotasthane and Anupam Manur point out in their excellent book We, the Citizens:
Source: We, The Citizens, pg 19
So is your loyalty to the government, or to the nation? Or are you of the considered opinion that the two are the same thing? They are manifestly not, by the way, so even if it is your considered opinion that they are the same thing, please do read Chapter 2 from the book, We, The Citizens (and the rest of the book, while you are at it!)
As with everything else in life, there are only trade-offs, and no solutions. There isn’t an easy way to answer this question that Yamini asks, alas. Optimizing for any one of oneself, ArreBhaiWah or its government also implies not optimizing for everything else.
But there you have it: the framework that one should use while thinking about the answer to Yamini’s question in the context of ArreBhaiWah.
What should her answer be, you ask? Why, that is Yamini’s business and no one else’s, surely. Allow me to wish her luck for what lies ahead, and to thank her for her work thus far. You and I may have disagreed with her about some of her conclusions, but that, I would argue, was part of the point.
I’ve just about gotten around to catching up on a lot of reading, and I finally got a chance to read this Scroll article:
“A few days later, Radha walked into a sprawling, glistening factory in Sriperumbudur, on the outskirts of Chennai. It had rows and rows of workers, most of them young women like Radha, bent over work tables on which were laid out tiny, metal parts. They were assembling iPhones – the most expensive and coveted mobile phones in the world – made by Apple, the second-richest tech company in the world.
The factory was run by Foxconn, a Taiwanese company that is the world’s largest contract manufacturer of electronics. For long, most of its phone production for Apple was done out of China. But in recent years, with the relationship between the United States and China coming under strain, Foxconn had been scouting for new locations for its manufacturing units. The town of Sriperumbudur, situated in Tamil Nadu, one of India’s most literate states, seemed like a natural choice. Home to over 500 companies, including manufacturers of electronics, auto components and chemicals, it has grown into an industrial hub in the past two decades.”
As always, please read the whole thing. In fact, an especial plea this around – please take the time out, and go read the entire article, and then come back and read this. If you’ll allow me to be greedy, take even more time out and have a contemplative cup of coffee before coming back here.
The Chart
Hasan, R., & Jandoc, K. R. (2010). The distribution of firm size in India: What can survey data tell us?. Asian Development Bank Economics Working Paper Series, (213)
This is one of my favorite charts to stare at, and often endlessly. It’s outdated now, of course, because it is from well over a decade ago. But even so, this chart tells a powerful story. The story it tells us is that we have failed to generate manufacturing based employment in our country. That is a problem because without a significant increase in the share of manufacturing in our GDP, it is unlikely that we will be able to meaningfully reduce poverty in our country.
The Blogpost
I’ve written about it already in the previous week, but just in case you haven’t already, please do go and read the whole thing. I know I’m assigning a lot of homework today, but if you can spare the time, rinse and repeat the whole contemplative cup of coffee routine too, after you finish reading the whole thing. Here’s one of the key paragraphs (to me) from the blogpost:
“One of the things we often argue about on these pages is that growth is the single biggest moral imperative for India at its stage of development. We can try to optimise for many other ideals and virtues, but if they come to us at the cost of growth, we must learn to ignore them. Because lack of growth will make even those ideals worse than where they are today. To illustrate this point, somewhat provocatively, I have made the point that we shouldn’t get rich at the cost of our environment, but we must also consider that staying poor doesn’t do any good for the environment either in the medium to long run. At our stage of development, we should only ask if our today is better than our yesterday. It is possible that our today isn’t ideal or it may be far from what the developed world might have at this moment. But that should be of limited concern to us. Because in trying to aspire for that ideal state or in trying to make that quantum leap to what a developed economy already has, we will put at risk the gradual increment that we can make every day.”
RSJ here is arguing for not making the perfect the enemy of the good. The good, in this case, is the fact that more women are getting employed than before, at least at the margin. The perfect, in this case, refers to the fact that working conditions at the Foxconn factory are, well, less than perfect:
“The activist said that often women would not use the toilets at the hostel and would instead wait until they reached the factory. “This obviously took a toll on their health,” he said.
The problem of health has boiled over into a crisis in the past. In 2021, hundreds of workers from the Foxconn factory went on protest and blocked traffic on the Chennai-Bengaluru highway after a food poisoning incident that resulted in 250 workers falling ill, of which 159 were admitted to a hospital. The workers also complained that their living conditions were unhygienic and demanded that their employers take immediate steps to improve them.
After the protests, the factory stayed closed for a few days, until the administration promised to make improvements in the hostels and ensure hygiene in food preparation.
Since then, the situation has improved, workers said. But some women still do not see the living conditions and the restrictions as satisfactory.”
So what should we as a society choose? Should we choose the good and sacrifice the perfect, as RSJ and Pranay suggest? Or should we choose the perfect and give up on the good, as the Scroll article might imply to some?
Leave aside for now the question of how society should choose, because figuring out effective preference aggregation mechanisms is, er, impossible. What is your preference if you have to choose between the good and the perfect? What should be your preference, and why?
Far be it from me to tell you what your answer should be, of course, because as far as I’m concerned, you should read the Scroll article, RSJ and Pranay’s newsletter, this blogpost and a hajjar other sources and come to your own conclusion. I’m old fashioned that way.
My job today is to help you build out a framework for you to arrive at an answer, and to provide you with a lot of different perspectives. If you end up agreeing with my framework, end up using it, and end up with an answer different from mine, all is good with the world, for we can then debate our disagreements and arrive at some sort of a synthesis, and what could possibly be better, eh? Like I said, I’m old fashioned that way.
The Book
“The first time I met Wu Chunming, she was working for a foreign company, making a thousand dollars a month, and living in a three-bedroom apartment in downtown Dongguan. The last time I saw her, two and a half years later, she was working for a Chinese company, making $150 a month, and living in a single room in a part of the city known for small shoe factories with poor working conditions. By every calculus that mattered, she had fallen a long way. But she was more serene than I had ever seen her. In a city where a Mercedes was the measure of all things, Chunming had somehow broken free and developed her own personal morality.
“Before I was always hungry,” she told me. “If I saw a sweater I liked, I would have to get it immediately. Now if I don’t eat the best things or buy the nicest things, it doesn’t matter so much. If I see a friend or a family member happy, then that is meaningful.” She was no longer panicked about being single at the age of thirty-two, and she had stopped having affairs with men she met online. “I believe I’ll become more and more beautiful, and more and more healthy, and my economic circumstances will get better and better,” she said.
Chunming hoped to have children someday, and she often asked me about American attitudes toward child-raising. “I would like a child to grow up to have a happy life and make a contribution to society,” she said.
“A contribution to society?” I asked her, startled. “What do you mean?”
“I don’t mean to be a big scientist or something like that,” Chunming said. “How many people can do that? I think if you live a happy life and are a good person, that is a contribution to society.”
Chang, Leslie T.. Factory Girls: Voices from the Heart of Modern China . Pan Macmillan. Kindle Edition.
Factory Girls is a book worth reading because it talks not about the industrial policy of China, but about the resultant sociology of China’s industrial policy. To the extent that you agree with the notion that the economic growth of a nation is the means to an end, it is a book worth reading. It is possible, of course, that you are of the opinion that economic growth is an end in itself. The book is still worth a read, because it is important to read books that offer perspectives which differ from your worldview. (My Twitter feed, for example, is absolute torture for me, but I force myself through it on a daily basis.)
Think of India (or any country, for that matter) as a player on a board of snakes and ladders. Industrial policy, when done well, acts as a ladder. But unintended outcomes of industrial policy act as snakes, pulling the country back down to problematic parts. In this framework, it is hard for me to not think of China as having taken ladder after ladder over the last thirty years or so, only to fall a fair way back in the last two years or so.
And so yes, it becomes important for India to replicate the high growth eras that China and some of the East Asian countries accomplished. But it becomes as important, if not more important, for us to avoid the metaphorical snakes on the latter stages of the board.
One should absolutely aspire to match (and inshallah, exceed!) China’s growth rates from twenty years ago. But one should also aspire to avoid India’s youth going all tang ping on us twenty years from now.
Easy to say, I hear you say, and I can guess what’s coming next. How exactly, you ask, do we go about doing this?
Should our takeaway from the Scroll article be that we should ask Foxconn to four-letter-word-beginning-with-f off? Should our takeaway from Pranay and RSJ’s blog post be to ask Scroll to four-letter-word-beginning-with-f off?
Regular readers should be rolling their eyes round about now, for they know what’s coming. All together now…
How about offering workers who have completed three years of work at Foxconn fully subsidized vocational training? Not three, but two instead, I hear the left liberals say? Not three but five, I hear the libertarians say? Well, have at it, ladies and gentlemen – figure out what the right time frame should be. Why, I might even go so far as to say that development economists should run RCTs to figure out the appropriate time frame.
How about offering soft loans to folks who want to build hostels near Sriperumbudur? Or offer timely transport? Or other mechanisms to ensure a thriving housing market that allows women workers to make their own choices about freedom, perceived safety, food quality, and other parameters?
How about offering additional tax breaks to companies like Foxconn contingent upon them (companies such as Foxconn) offering better working/living conditions to the workers? Or linking PLI payments to Foxconn’s customers to incentivize such compliance? After all, Apple is one of the world’s best when it comes to sustainability, recycling, and other initiatives, and as we all know, can press its suppliers.
I’ll happily confess to not knowing if these suggestions make any sense, or go too far, or not far enough. I’m a beanbag economist, let alone the armchair variety. I’ve never worked in a factory, or regulated one, or designed regulations for labor policies in one. So if you are going to say that I don’t know what I’m talking about, I’ll be the first to agree with you.
But I will say, and defend vigorously, this much:
Asking Foxconn to eff off is a bad idea, because god knows we need more manufacturing, more employment and more women’s participation in our labor force. Asking Scroll to eff off is an equally bad idea, because we’re missing the point if we ignore those in our society who point out the excesses of our new industrialization.
This is an ongoing process that will never stop, but updating and simplifying labor regulations to reflect the modern factory is crucial. We need to do this to encourage larger-sized, better run firms that are globally competitive and can offer labor protections. We need reforms that will make India a competitive manufacturing destination without, eventually, the twin crutches of PLI or treatment of labor that ignores globally hard-won rights. The working class women of Tamil Nadu featured in the Scroll article are shouldering enough of a burden in contributing to growth; it is time we step up too. And when I say we, I don’t mean just the government. I’d include economists, policy-makers, think-tanks, the media and yes, society at large.
What the bazaar cannot provide by itself, sarkaar and samaaj must.
Don’t dilute the dialectic, dial it up!
Let differing opinions and ground reportage be offered up in the media, let’s all of us read/listen/see ‘em, and let’s figure out a middle ground by participating in the market for ideas.
India needs, like it or not, Foxconn to teach us how China did it. India also needs, like it or not, Scroll articles to help us realize that Foxconn may well be pushing the boundaries of what is acceptable working conditions for labor.
Personally, I’m on team RSJ/Pranay on this one, because what India needs right now is a lot of industrialization. But I also worry about where this path might end up, and I’d like to keep an eye on what might go wrong in the years to come. And so I’ll disagree with Scroll for now, but I’ll celebrate the fact that I live in a country where Scroll publishes articles such as these.
It’s fashionable these days to say that labels are out of fashion, but I’m going to call this the liberal position.
And finally, if you disagree with either the label or what I think it stands for, let’s have a debate! That’s my job da, and I’m very much up for it.
It is (as most conversations should be) gloriously unplanned, and I hope we get to cover a wide range of topics, including the three books that he has written. I’ve read only two of them, so if you’re coming along, see if you can figure out the one that I’m definitely faffing about.
The Fat Labrador serves excellent coffee, and at least one of the two people conversing tomorrow is always worth listening to. The other is hoping to learn as much as you are, so if you can spare the time, please join me in learning from one of India’s best public policy analysts.
Please note that this will not be recorded, it is an in-person event only.
Feel free to drop me an email if you have any questions about the event (or even better, a question for Pranay).
There is an impossible trilemma at play when it comes to writing explainers:
How does one manage to be simple, interesting and comprehensive all at once?
And the short answer to the question is that this isn’t possible. One can choose to be simple and interesting, but one must then give up on covering everything associated with a topic. One could choose to be interesting and comprehensive, but then one has to sacrifice simplicity. And finally, being simple and comprehensive is possible, but be prepared to bid adieu to being interesting.
Here’s the really bad news. None of us (present author included) manage to figure this out right away. When we create something – a blog post, a book, a video, an Instagram reel, etc., – we aspire to do all three things at once. Not only does this guarantee failure, but you may well end up achieving not one of the three goals.
And trust me, because I speak from many, many years of having experienced this, both as a consumer and a producer.
And that’s why I had a smile on my face while reading the introduction to We, The Citizens. Because the authors of the book are quite clear that it isn’t an academic tome that drones on and on and on. It is, instead, a book with a clear bias towards clarity and simplicity.
But they are quite clear about the fact that this book is also a starter, not the main course. Or, if you prefer, you should have two clear takeaways by the time you finish reading the book.
As a student, you should find your appetite properly and thoroughly whetted. Go read more books about public policy! Which ones, you ask? One of the three authors has a pretty good answer, you could begin there (and I talk more about this down below, so stay tuned). Or any other book of your choice, but please, do read more about public policy.
And the second takeaway as a doer is the one that the authors themselves leave you with:
Think of the rest of the book – the part between the introduction and the very last panel, as the answers to the questions one inevitably has:
What was this audacious dream (and why was it audacious)?
Why does the responsibility to fulfill it lie upon us (why doesn’t somebody else go and do this, yaar?)
Why do we have much work to do (75 years and counting and we still have work to do)?
The answers to these questions are given in a fashion that informs and entertains at the same time. And this alone is reason enough to buy the book, because very few of them (books, that is) manage to lie at the intersection.
And if you know your political history and current affairs, you will enjoy the many zingers that will leave you gasping, grinning and grimacing in equal measure. Even better, this holds true regardless of your political affiliation.
The book uses the same framework that we learnt about in Missing in Action:
In order to do this, they divide the world into three different aspects: the state, the market and society. Or, to use their terminology: sarkaar, bazaar and samaaj. Think of the individual, and the individual’s life, as being impacted by her interactions with these three ‘pillars’ of society. How do these pillars impact her? How do these pillars interact with each other?
But that framework is used, in this book, to introduce elements of public policy, economics (and related subjects) to the interested layperson, and that in an engaging, humorous fashion. The special trick that the authors manage is being able to do so without ever once appearing overly simplistic.
And if you think you know your economics (or your public policy, for that matter), you will still enjoy reading this book. I was wondering how to phrase this next bit, but I will outsource the job to the one and only Roger Ebert, who is talking about one of my all time favorite movies:
“The Princess Bride” reveals itself as a sly parody of sword and sorcery movies, a film that somehow manages to exist on two levels at once: While younger viewers will sit spellbound at the thrilling events on the screen, adults, I think, will be laughing a lot.
I very much plan on reading this book with my daughter, and taking my own sweet time over it. And I hope she sits spellbound as she learns the nuts and bolts of public policy, but I can assure you that her dad has already dished out an appreciative chuckle or two.
Why, the page of contents alone is worth the price of entry! Fun task for those of you who will read the book soon: can you spot Doordarshan, Ronald Coase, Times of India advertisements and Hayek in the page of contents? Funner* task: how many other references can you spot? And not just in the page of contents, mind you, but throughout the book. So even for those of us who are likely to think yaar, ye sab pata hai, the book is still worth a read.
Best of all, the concluding chapters do a good job of recommending books one might choose to tackle after having finished this one, beginning with In The Service of the Republic.
The one “complaint” I have about the book is that I found myself wishing for an extended “Here’s what you could read next” section. If you are, say, a twelve year old, you most certainly can (and should!) read this book, and then keep on reading many more books related to this topic. But which books? The answer will differ for all of us, and while there are some capital recommendations out there, they are perhaps a little bit too advanced for the younger reader.
But if I may be allowed a sly reference of my own, maybe the authors would consider “bridging” the gap between their own “capital” endeavor and these slightly more advanced lists? An intermediate book on public policy to bridge the gap, as it were.
On behalf of all of the readers of the book, present and future, allow greedy ol’ me to channel my inner Twist and ask the sirs (and the ma’am!) if we could please have some more?
Missing in Action is the name of the excellent book on public policy written by Pranay Kotasthane and Raghu Sanjaylal Jaitley. I had reviewed it earlier this year, and my recommendation that you read the book is even more forceful now than it was in January.
Why? What has changed between now and January 2023?
Well, lots of things, as is usually the case with the passage of time. But as regards this book, what changed was that I got to put parts of the book through a most stringent test: I used it as a textbook in a course on public policy. And not just any course on public policy – this was a course taught to 13-15 year olds.
It’s truly special, this cohort. They are young enough to not have their curiousity trampled upon by higher education, and old enough to be able to grasp ideas and concepts fairly quickly. Better still, they are old enough to draw parallels between what they’re learning and what they already know. And best of all, they do not hesitate to ask basic questions that adults would be embarrassed to ask.
“Wait, that makes no sense”, was a sentence I heard very often while teaching these students, and I reveled in how it was said without shame, worry or pretense. It simply was what it was: an admission that what had been heard did not make any sense, with an implicit demand to explain further.
And so for teaching these students, a musty old textbook full of diagrams, definitions and pompous declarations would make no sense. It would have to be a book that was rigorous in terms of its understanding, thorough in terms of its explanations, and light in terms of its treatment. And as I’ve explained in my review, this book does a very good job on all counts.
One reason it does so is because the book is very clear about what it is not. As they say in their introduction to the book, the authors are clear that this is not an academic work, not is it a work of journalism.
The book has, instead, stories. And in order to make sense of these stories, the authors make liberal (if you’ll forgive the pun) use of public policy frameworks. We learn about public policy, in other words, by looking at the world and by wondering why it seems to make no sense. In each chapter, the authors ride unfailingly to the rescue, armed only with their obviously wide reading and their deep expertise in public policy. One of my students made the observation that their “secret superpower” was sarcasm, and I wholeheartedly agree.
But having taught the course, I came away with a renewed conviction that public policy should be taught to as many people as possible, and at as early an age as possible.
Why as many people as possible? That’s an easy one to answer, and the authors of the book have themselves provided an answer to this question. It is because an India familiar with public policy will likely have three important features:
Our governments are likely to be more accountable, since their policies will be better scrutinized than before
We ourselves will be able to sharpen our demands from our governments
A better understanding of public policy will raise the level of public discourse
The cynic in me will not hold his breath for the first two, and is inclined to burst into laughter as regards the third. But even he will admit that an India that is more familiar with public policy certainly won’t make things worse. And these days, I’ll settle for that.
And why at as early an age as possible? Because I spent the better part of a day walking my students through the eight ‘principles’ of public policy, and am convinced that my students are better equipped to make sense of the world around them.
Note that I said “are better equipped to”, and not “are now able to”. I don’t think most adults are able to make sense of all that is around them, in part because of our own biases, limitations and limited understanding. But also because the world around is both more complicated and grows ever more so with every passing year.
But if a book, and eight principles within a book, can help us become aware of our biases, limitations and limited understanding – and if the basic framework of public policy can make the world seem a little less complicated – well then, it is probably worth it. No?
So just these eight principles. That’d be my wish when it comes to the teaching of public policy to folks currently studying in school. And if, for having learnt these eight principles, they decide to venture forth in search of new adventures in the realm of public policy, well then. Kya hi baat hai.
Or if I could be allowed to borrow a phrase from Pranay: Mogambo khush hua.
Speaking of borrowing from Pranay, these are the eight principles:
Unlearn what you know, and begin your analysis with a clean slate
Good intentions do not guarantee good policies
Sure India’s implementation of policies isn’t great, but sometimes the policies themselves aren’t great either
Change is permanent
There’s no public policy without economics. Other disciplines matter – a lot – but at the heart of public policy lies economic theory.
There’s no escaping politics.
There’s no good or bad policy; only better or worse outcomes
One policy should target only one objective
I hope you’re curious about what each of these mean, and I hope that this curiosity translates into you buying the book and reading it. If you like, you can move on from this blogpost to this podcast, and then on to the book.
Especially if you happen to be in school. Please, pretty please, do read the book. And especially if you are in school, please feel free to email me with any questions you may have about what you find in the book.
I’m already missing being told “Wait, that makes no sense”, you see.
Some books are entertaining, and some books are erudite. Rarely do we get to read a book that is both.
Why do I write this blog? There are many reasons, but one of the most important one is that this is my attempt at making learning fun for everybody. And the most important factor behind me liking this book is just this – they make learning about public policy fun.
The subtitle of the book is “Why You Should Care About Public Policy”, but something that us academicians often forget is that supply does not, in the case of learning, create its own demand. You can write the most impressive (not to mention comprehensive) tome on public policy, but that’s no guarantee that people will read it. But with this book, the two authors have pulled off an amazing feat: not only will you most likely finish this book if you pick it up, but you will learn a lot from it. And more, you will be entertained for having done so.
Pranay and Raghu’s book is a delightful romp, but not through the subject of public policy, and the distinction matters. It is, instead, a romp through different aspects of life, to which the tools of public policy are applied. My biggest complaint with textbooks is that they teach you the subject, and include “boxes” in which you are allowed to think of the world outside the textbook. This book belongs to that all too rare (and therefore even more delightful) category of books that does the opposite. You are asked to only think of the world, and they attempt to make the world a more understandable place by supplying ways of thinking about it.
In order to do this, they divide the world into three different aspects: the state, the market and society. Or, to use their terminlogy: sarkaar, bazaar and samaaj. Think of the individual, and the individual’s life, as being impacted by her interactions with these three ‘pillars’ of society. How do these pillars impact her? How do these pillars interact with each other? What happens when the interactions between the individual and these pillars do not go along expected or ‘ideal’ lines? What are the potential remedies for these problems, and what are the costs of implementing these solutions? That is the focus of this book, and the answer to the subtitle of the book is, well, the book itself.
These three aspects – the state, the market and society – make up the three sections of this book. Each section is divided into bite-sized chapters, each dealing with a separate, specific issue. Three things bring each of these chapters to chirpy life – the breezy tone that they adopt, their obvious mastery over the concepts that they are explaining, and their obvious love of Bollywood. One chapter may be titled on the basis of a famous line from a Bollywood movie (Aap party hai ya broker, for example), while another may explain how to think about atmanirbharta by talking about Manoj Kumar and his movies.
But my favorite usage of this lovely party trick is when you encounter a line like this one: “The foundational premise of modern India is that the state is ontologically prior to society.” This is just the kind of line that is likely to make your eyes glaze over, no? Those of us who have struggled with weighty tomes on dreary afternoons in musty college libraries have learnt to resign ourselves to hours of tedium while tackling with what follows prose such as this. But this is what I meant when I wrote that first sentence of this post – they choose to explain what this sentence really means by asking you to think about Shakti, a movie starring Dlip Kumar and Amitabh Bachchan.
Even better, they first speak about Shakti, and then foist that sentence upon you. A little bit like putting healthy veggies in a chicken pizza one might make for the young ‘un at home, if you see what I mean.
The authors mention in the book that it isn’t ‘an economic reasoning textbook’, but I’d beg to disagree. It absolutely is an economic reasoning textbook, and of the very best kind. It tells you how to get the most out of life, and better, tells you how and why one is unlikely to succeed in getting the most out of life if one gets basic tenets of public policy wrong.
Think of this book as the public policy companion to a book like The Economic Naturalist, by Robert Frank. Look at the world, and ask how the world becomes a more understandable place for having learnt public policy.
As an economist, I particularly enjoyed the sections on sarkaar and samaaj. Not, I hasten to add, because the section on the bazaar is in any way inferior, of course. It is simply because I am somewhat more familiar with the material in that section. But that’s all the more reason to buy the book, especially as a student of economics – becaue this book makes you more familiar with how the state and society also influence economic outcomes. Within the economic sections, the sandalwood story and the airline pricing story are my personal favorites. But practically every chapter brings along a delightful little nugget of information that is surprising, or a delicious twist of phrase that will likely make you chuckle, or sly titles to some of the chapters that will elicit both raised eyebrows and raised tempers.
The one complaint I have with the book is that I find myself wishing for an index and a bibliography at the end of the book, both of which are missing. It is understandable, for more than one reason, but as a fundamentally lazy person who also hopes to use this book as a teaching aid, both of these things would have gone a very long way. An online resource, perhaps, if one is permitted to be a little greedy?
But that minor quibble apart, there is nothing that prevents me from heartily recommending this book to you. Younger people might miss some of the references (“Vinod Kambli? Who he?” I can hear ’em go already), and they may also not have seen more than half the movies that have been referenced in the book – but that actually brings me to my final point.
A great way to read this book together would be to start a film club, and watch the movie in question in each chapter, before reading that chapter. Before the next movie screening, have a discussion about both the movie and the chapter, and all of the many “that reminds me” that might emerge from said discussions. Rinse and repeat for twenty-eight glorious chapters, give or take. I hope students in colleges and universities take up this suggestion, and spend some time in learning about movies, life in India, the role of the state, the market and society in the our own day-to-day lives, and a whole host of books, reports and papers as well. A positive externality that will result as a consequence of this will be the fact that you will have acquired a degree of expertise in public policy.
But as the authors themselves (and that wise old sage Crime Master Gogo) tell you, aa hi gaye ho, to kuchh lekar jao.
In all seriousness though, please do make sure that you read this book, if you are in any way interested in India. Recommended wholeheartedly.
I came across an excellent podcast on economics in Marathi recently. A friend had sent me the link about a month ago (and apologies, friend, because I promptly forgot all about it!), but in a happy coincidence, that same podcast linked to one of my posts, and it served as a useful reminder to check it out.
And it is excellent! Here is the post through which I was served the reminder, and here is a brief introduction to the blog itself:
And that also made me think about making it simpler for people at large. Economics and finance are English language topics, by default, due to their design and complexities around the world. But I wanted to bring some change to that by communicating in a regional Indian language, Marathi. That is the reason I have also created ‘econGully Marathi Podcast’. Here, I release three episodes a week and talk about different things happening around the world. Topics covered so far are broad in scope. From Srilanka’s economic crisis to LGBTQ economy and from the commodities market to climate change, the podcast tries to convey new developments and historical references affecting our lives directly or indirectly.
I want my career to be about helping more people learn about, and fall in love with, economics. But I’m chopping off my own legs, as it were, by writing only in English. All the more reason for me to admire the work that Swapnil is doing, and if you are familiar with the Marathi language, I strongly encourage you to subscribe to his podcast.
It’s bad enough that people are turned off from learning economics because of badly written textbooks, bored professors and outdated syllabi. But the very thought that lack of accessible material in your mother tongue might be a stumbling block is an especially painful one. All the more reason to celebrate the work that people like Swapnil Karkare, Alex M. Thomas, Pranay Kotasthane and Saurabh Chandra are doing. And there must be many, many more, of course!
Speaking of the many more, a request: if you happen to know of work being done to help spread knowledge of economics (and related fields) in India’s many local languages, please do let me know.
Anticipating the Unintended is an excellent newsletter, and you should subscribe to it. This past Sunday, the authors came up with a lovely read on the Agnipath scheme. You may or may not agree with their analysis, but I would heavily recommend that you read it. There’s a lot that is important in it, but for today’s blogpost, I want to focus on this excerpt:
Considering the constraints, it is difficult to see what else the government could have done here. The need to reduce wage and pension costs to fund modernisation is real. And given the fiscally conservative instinct of this government, it won’t deficit fund the modernisation programme. As is its wont, it has chosen to put a bold announcement with emphasis on other benefits while trying to solve its key problems under cover. There’s this myth that a big bang approach to reform is the only model that works in India. That’s wrong. A lot of what has looked like big reforms in India have actually had a long runway that’s often invisible to people. A more comprehensive reading of the history of ‘91 reforms makes this clear. So, the usual template has been followed so far: minimal consultation, no plans to test it out at a smaller scale and instant big bang implementation. The results are unsurprising.
What is the proposed solution?: That’s the Agnipath scheme in its entirety. I invite you, once again, to read the whole thing, but the first two to three paragraphs in the newsletter summarize the scheme very well, if you are not familiar with it yet.
Why is this solution important?: Their takeaway is that the main focus of the Agnipath program is to reduce wage and pension costs, and that this is necessary. I agree on both counts – no matter what else is being said, and no matter what else Agnipath might achieve (a younger military, among other things) it’s main aim is to reduce wage and pension costs. And even a cursory glance at our government’s finances should make clear that this is necessary.
The How: That’s what the rest of today’s blogpost is about! Here’s the thing: there is a problem, and it needs a solution. That (to me, at any rate) is clear. But is this (Agnipath) the best possible solution? And even if it is, is the current method of implementation the best way of going about it?
I don’t mean to get into a discussion of whether Agnipath is the best possible solution for this specific problem, nor do I mean to definitively answer the question of whether the method of implementation is optimal.
Instead, I hope to help you build a framework to start to think about the answer to these two questions (is this the best solution | is this the best way to implement said solution) in general. And then, if you like, you might want to use said framework to judge for yourself the Agnipath solution. I do exactly that in what follows: outline the principle, and apply it to the Agnipath case.
Minimal Consultation | No Plans to Test It Out | Instant Big Bang Implementation
Of the three things that RSJ and Pranay have highlighted in their excerpt , I plan to focus on the latter two in terms of the how question. The answer to the question about whether consultations were done or not, and whether they were minimal or not is essentially a grotesque Rorschach test, and I’ll skip it entirely. But the latter two – no plans to test it out, and instant big bang implementation – don’t just ring true, but are also truly important, especially if you are a student of public policy.
Let’s focus on the word “It” in the second phrase, “No Plans To Test It Out”. What does “it” mean, in this context? That’s simple, you might say – test the solution out.
And what’s the solution? Agnipath, you might answer a tad impatiently. Ah, but how do we know that this is the best possible solution? And here’s the simple answer to this question: you don’t know that this is the best possible solution, because as with everything else in life, the proof of the pudding is in the eating of it. Your models might tell you that this solution is the best one, but all models work well, if at all, only in theory. To mix an apt metaphor, no battle plan survives contact with the enemy.
In other words, Agnipath is one of many different solutions to this problem. Moving to something like the NPS might be one, a modified version of Agnipath might be another, curtailing expenditures in other areas might be a third (to those who know their public finances in an Indian context, no I don’t think so either, but play along for the moment). May be the final solution that will be implemented at scale will be a mix of all these and more, who knows – but the point is, there are many possible solutions, of which at least some are worth trying out in an experimental sense.
The process should be seen as experimental, and probably involve acting on multiple potential solution ideas at a time (instead of just one). It can also be accelerated to ensure the change process gains and keeps momentum (to more or less degree, depending on where one is in the change process and what problems, causes or sub-causes are being addressed). Trying a number of small interventions in rapid “experiments” like this helps to assuage common risks in reform and policy processes, of either appearing too slow in responding to a problem or of leading a large and expensive capacity building failure. This is because each step offers quick action that is relatively cheap and open to adjustment; and with multiple actions at any one time there is an enhanced prospect of early successes (commonly called “quick wins”).
Andrews, M., Pritchett, L., & Woolcock, M. (2017). Building state capability: Evidence, analysis, action (p. 288). Oxford University Press., pp 170
So begin small, and begin with many different potential solutions. See which of these work and which don’t – which need tiny modifications to be better, and which need major surgery. Which might be usefully combined with some other solution(s)? Iterate towards a solution set that works “best” – and then implement this solution set at scale. But never presume, and especially without on the ground small scale implementation, that a proposed solution is necessarily the best one.
Pritchett and Woodcock have an excellent diagram for helping us think through this:
Andrews, M., Pritchett, L., & Woolcock, M. (2017). Building state capability: Evidence, analysis, action (p. 288). Oxford University Press., pp 172
“A.” in this case is the status quo, and given that there are no overt protests about it, we can say that the status quo is administratively and politically possible. But it is, as we have discussed, not fiscally sustainable, and hence undesirable.
“D.” in this case is the Agnipath solution. Let’s assume that it is a technically correct solution, and let’s assume that it (or something very similar to it) has either solved a similar problem in other countries (empirically validated) or has solved this exact problem, but in a simulation (theoretically validated). But it is not, as we are observing, politically possible. Now, sure, you can talk about the political motivations of the organizers of the protests, you can (and you should!) condemn the use of arson and wanton violence, and you can bemoan the role of the media. But if you accept that there is at least an inconvenient iota of truth in the idea that some sections of society feel hard done by this decision (warranted or otherwise), then you do in effect accept that it is not altogether politically possible. Your assessment may well differ from mine (and that is fine) but hopefully only in magnitude and not in direction.
The point is that we are trying to move from “A” to “D” in one fell swoop. Not only is that not a good idea in public policy, but we don’t even know if Agnipath is “D”! The very definition of D (or Agnipath) has changed in the recent past, is changing as we speak, and is likely to further iterate in the days/weeks/months/years to come. Which is as it should be, of course – my point simply is that these iterations and experimentations should happen in the design stage, not the roll-out stage.
So the general principle is that iterating through potential solutions at restricted scales is better. Even better when you learn from these iterations, modify your solutions, and come up with a hybrid that stands a better chance of working at scale. This helps in building out buy-in for your proposed solution as well. Won’t work perfectly, because nothing ever does, but remember that in public policy utopia ain’t our aim, being better than the status quo is.
Also, if you’re wondering about the title of the blog post, it is a tribute of sorts to a paper that ‘started’ studies in this particular area. Look up that phrase and the the name “Charles Lindblom” to go down a very nice little rabbit hole.
Bottomline: Crossing the river by feeling the stones remains excellent advice.
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