The Policy Maker's Burden?

Consider these two seemingly disconnected pieces.

1.       This is from Steve Landsburg’s blog:

The EPA announced yesterday that new regulations mandating fuel efficiency standards for heavy trucks will cost vehicle buyers $8 billion, but that will be paid for in fuel savings over a year or two. Oh. Sounds like the mandate is quite unnecessary then, no? With numbers like that, consumers will demand high efficiency vehicles with or without the EPA. Unless, of course, the EPA is, umm….lying.

(http://www.thebigquestions.com/2011/08/10/turn-off-their-lights/)

2.       These bits are from an article by Abhijit Banerjee and Esther Duflo that appeared in Foreign Policy sometime back:

If the gains are so obvious, why don't the poor eat better? Eating well doesn't have to be prohibitively expensive....why did anaemic Indonesian workers not buy iron-fortified fish sauce on their own? One answer is that they don't believe it will matter -- their employers may not realize that they are more productive now. (In fact, in Indonesia, earnings improved only for the self-employed workers.) But this does not explain why all pregnant women in India aren't using only iodine-fortified salt, which is now available in every village. Another possibility is that people may not realize the value of feeding themselves and their children better -- not everyone has the right information, even in the United States. Moreover, people tend to be suspicious of outsiders who tell them that they should change their diet. When rice prices went up sharply in 1966 and 1967, the chief minister of West Bengal suggested that eating less rice and more vegetables would be both good for people's health and easier on their budgets. This set off a flurry of outrage, and the chief minister was greeted by protesters bearing garlands of vegetables wherever he went... We often see the world of the poor as a land of missed opportunities and wonder why they don't invest in what would really make their lives better. But the poor may well be more skeptical about supposed opportunities and the possibility of any radical change in their lives.  (emphasis added)

(http://www.foreignpolicy.com/articles/2011/04/25/more_than_1_billion_people_are_hungry_in_the_world?page=full)

The idea that connects them is simple. If there are intertemporal arbitrage possibilities or a possibility of investing a small amount today to reap substantially higher returns in the future, when liquidity (or the availability of money to spend) is not a binding constraint, why are such opportunities not made use of? The standard economic justification would be the high discount rates that make the future look much less attractive to people involved in decision making today. However, high discount rates are not a typical feature of consumers in developed countries. Even in case of poorer consumers, the discount rate effect is likely to be nullified if the gains are relatively larger. As Banerjee and Duflo report- “in another study, in Indonesia, researchers tested the effects of boosting people's intake of iron, a key nutrient that prevents anaemia. They found that iron supplements made men able to work harder and significantly boosted income. A year's supply of iron-fortified fish sauce cost the equivalent of $6, and for a self-employed male, the yearly gain in earnings was nearly $40 -- an excellent investment.” Then the constraining factor evidently is the lack of information. People are unable to forsee into the future and cleverly calculate all the trade-offs to be made. This is not surprising, though I feel that it an important point to be appreciated. Perhaps, this is like saying that present self of the consumer imposes an externality on her future selves. In Coasean spirit, then, this points to the existence of transaction costs in the bargaining process between the selves in different time periods. The transaction costs arise as there are hindrances, psychological or physical, in accessing and processing the required information. In general, it is similar to the market failure argument. (I am aware, though, that with the last statement I am stepping on risky ground owing to large literature in economics debating the definition of ‘externality’, a part of which has been criticised for confusing externalities with market failure in general.) It is then a natural corrective to provide relevant information to those who display a seeming lack of it.

This brings me to two related issues. It is possible to dismiss such an approach as excessively paternalistic towards the poor, considering them incapable of deciding for themselves, a sort of ‘policy maker’s burden’. It is a valid point, especially when economists in their positive outfits are more than willing to treat preferences as exogenous. But I have three objections against this. One, as first piece tells us, it is not only the excessively poor who might suffer from informational constraints of this sort but also the relatively better educated and wealthier middle class consumers in the United States. Two, this sort of humanistic chauvinism that puts excessive emphasis on the individual might well be self defeating. After all, humanism is about all of us being humans, with our talents and rationality, but also with our failings. And three, this again appears to be classic problem of putting means before the ends. We must not let a basic value (letting a poor person uplift herself out of poverty/ a car owner make gains that she’s ready to forgo because she’s not aware that they can be had) be overridden by a less fundamental one (of imposing on her a mask of individual dignity). The problem of not being able to lead dignified lives in society is not solved by anointing the ‘underprivileged’ by facile notions of dignity, but by letting them realise a dignified living for themselves.

Also, it underlines the importance of situating policy prescriptions well within the institutional setting, or the policy makers will always come away with vast amounts of resources wasted, if not garlands of vegetables. Dr. Amirullah Khan, , pointed out during a guest lecture that even though under sanitation programs the government has spent a lot of money constructing proper toilets, they aren’t being used because people traditionally prefer to defecating in the open. Similarly, to gut information down people’s throats would be useless. Perhaps they won’t even care for it. This is surely the case with some of the environmental awareness programs which do not help people see any stake in conserving the environment, making a mockery of the entire thing instead. So, while education might be the best solution, it might not mean education in a conventional sense. It is important to make people believe in the information, which they may be unwilling to do in some cases. Thus, it is about credibility of the authorities in some sense. And such credibility tends to be institutional, in the sense that it is a self perpetuating 'rule of the game'. Obviously, this is not to deny that the information must actually be true. Otherwise believing in wrong things will end up doing more harm than good. The feedback is apparent here: If we do not believe our governments to be saying the right thing, we will not want to believe them, even if they say the right thing. 

And in this way the entire system falls apart. To a large extent, isn't this what is happening in our country?

A Guest Post!

It has almost been an year since the last post. What better way to start posting again (and hopefully continue this time) than with... A Guest Post! The other day Aparajita sent me this poem she wrote as the sky outside her window assumed a pensive, 'pink and rainy' mood. I was blissfully surprised for I never knew that she writes so well (though I have always assumed to my advantage that she is an extremely deep and thoughtful person). So, here's 'The Rainy Sunset':

In a cluttered mess the cars canter past,

Below the overhead bridge on which the trains tanker fast,

A fresh smell, the sky a fresh pinkish blue

Washed by angry raindrops that pelt through

The concrete jungle that I can see

Rushes past me, changing lives at tumultuous speed,

A sudden fear of being left far behind,

An instant reconciliation with a happy prime

As I watch through the latched windows

I yearn for less yet stronger it grows.

In an effort to move I stretch the rested feet,

The calm of the moment but, is too pretty to cheat

Amidst the buzzing circus, evolving yet stagnant,

My mind drifts afar, in all the noise silence is poignant

As screams the view below, of dreams, desires, and hope

Seeks work and pleasure, sobs tears of the heart that today broke

I hear it so clear and yet so vividly far,

Numb of apathy am as distant as the farthest star,

Content with my peace and yet by it perturbed

Am I human enough, if by mankind not stirred?

Doubt of a moment, washed away in lesser,

Ingratitude, hatred, treachery teach indifference is better,

Look away from the glass pane before the thunder,

Life is my own game, am the only runner.

'Bond'ing at Home

Some books on the shelf are often ignored. Not intentionally or not because they have no worth, but their abiding presence makes them inconspicuous. Seeing them day in and day out makes them a part of the routine landscape and they do not stand out against the fresh paperbacks. Yet, a jump out of the oblivion is sometimes more pleasing than the addition of several new ones.

It was bought when I was in seventh standard, eight years back. Schools habitually host book fairs, and I had made it a habit of parents’ to buy me something from each of those. It was, then, the thickest volume I had ever owned. The cover page has a bluish texture inset with a crayon drawing of an armchair by the window gazing out on to the mountains – two parallel ranges, the one in the foreground dark, lower, and the at the back snow-clad, white. The title reads RUSKIN BOND: Collected Fiction.

I do not remember when I was introduced to Ruskin Bond. It might have been a passage in a primary school reader, or a chance mention by someone, but I cannot recall not knowing about him. The first notable stint, and the one that left a lasting impression, came when I was thirteen. ‘Our trees still grow in Dehra’ is a collection of short stories that was the prescribed text for our literature course. It is a book that I judged by the cover, but it did not disappoint. From what I can recall from memory (though memory is often what we want it to be), the cover had a picture of Chir Pine, set against a dusky background, just like the one outside the Dining Hall in School. It was that spectre of the imposing bunches of needles, through which peered that moon as we waited (or rushed) for dinner, which never made me forget the book or its characters. Bansi, the tonga- wallah who would ride the young boy to Rispana, Binya, the mountain girl, the banyan tree who befriended the author and let him know of the friendship by making one of its leaves caress against the authors cheek, the boy who grazed buffaloes and then led them to a waddle in the lake. All Simple folk, no flounce or paraphernalia, like the ones you meet in those distant, faraway places - places which are a lot closer home. Or even if you do not meet them, even if they are too undemanding to be real to literary eye, they engender a romance.

They are not people who would be ideal subjects for philosophical dissection. Rather, they stand out because they merge so well into the surroundings. Theirs is not a rebellion, but a synergy with their ambience. They blend into their landscape to form a greater meta-landscape, a distinct reality. It is this reality, often devoid of a proper plot, just a node in time, which forms the story.

To qualify For the Scholars’ Blazer in school it was mandatory to read 20 books at least, and then have a discussion with a panel of masters on those books. Out of 20, in my case, 5 were Ruskin Bond’s. The Headmaster asked me that what explained the conspicuous appearance of one particular author on the list. The answer is this – it is a striving to create a sense of belonging to and identification with a place that has only existed in memories, several of which are acquired or imagined, yet none of which are untrue. Mr. Bond writes about a place that he calls home and that I call home. Yet the place he writes about, and the place I perceive as I exist in my daily routine, though geographically the same, seem to diverge in experience. My reading Ruskin Bond, very often, is a subconscious attempt at reconciliation.

This, in fact, is the charm of literature. It is a relief from the empiricism of everyday life, a getaway into the more subtle of human experiences, an exploration of alternative realities. This is not to say that literature is escapist – escapism is for cowards. Literature is for the brave – for those who attempt to delve deeper into reality to uncover the finer layers, to discover ‘what-could-be’.

A few years back, I was in Mussoorie, walking along the crowded Mall, when I saw Mr. Bond at a distance. He had a leisurely gait and I knew I could catch up. I remember being at a loss for words when I actually did manage to sneak in a hello. All I remember telling him was that I had read his books. He appeared unfazed; I must have been quite red for I stammered. I am sure I was inconsequential enough to be mentioned in one of his writings. Yet, hill people (and I would be glad to call myself one) can be unpredictable in their simplicity. I would be happy if he stays true to this image.

As I write, sitting in the Verandah of my house, I can see the Mussoorie hills shrouded by dark, heavy clouds. The sky overhead too is gathering itself up. In the house opposite mine is a mango tree that has been there since before me. In my own house, there used to be three litchi trees. Now one remains. The rain, when it does come, would swell up the fruits, making them juicier and sweeter. The old Dehra might be disintegrating, but right now, I can sense a drizzle.