Isn’t this basically a version of the prisoner’s dilemma where both parties are aiming at short term gains and ignoring the long term benefit that both parties would derive ?

I have little faith in macro analysis of economic situations in India or elsewhere. I am mighty glad, therefore, that you brought a micro-focus with this post.

I don’t know how it is now, but in my days – 60’s to 80’s – economics curricula were woefully inadequate in micro. Incentive compatibility has been given short shrift in most analyses then, and I am afraid, now. I suspect, decades of socialist thinking and misplaced faith in central planning, have much to do with it.

It’s not necessary to look much beyond agency theory to determine the causes of suboptimal investment in public goods and services. I will only add that the suboptimality could go either way. Under and over provisioning. As an example of over provisioning, consider the highway pork barrel in the United States.

As to why the Indian politicians and bureaucrats are particularly incompetent and corrupt, I think one needs to take a long and hard look at the document called the Constitution of India, a hodge-podge derivative of the Government of India Act, 1935, that has been amended 104 times in just 60 years!

I was not suggesting that Indians are born any different than people in other countries. I have been trying to understand the way Indians rationalize things, for ex. if service in a particular restaurant is bad or a lowly govt. official does not carry out his duties as he is supposed, and you ask why it is so a common answer is that well the job pays so less what do you expect? It is not that all the jobs in developed countries are well paying, but the janitors or people working the night shift in Mcdonalds do not provide you with bad service just because they think they have such a low paying job. It is this attitude that I call ‘Uniquely Indian”.

The question you raise is different but a very important as well as interesting one too. As to the question that I have been researching, I do find some clue’s in the book I referred to.

People are not born with original sin. They are merely responding rationally (in whatever limited sense) to the conditions that they are born into. At one level of analysis it is certainly true apathy may explain why the conditions are bad. But one should go further and ask why they are so. I think it has something to do with the processes that are in place. Indians are no different from people of other nationalities. An Indian transplanted into a developed economy does not behave substantially differently from others born there.

Why Indians have not been able to change the processes and the systems that are in place — those things that perpetuate the dysfunctional state of affairs — is an interesting question which we should grapple with.

A lot of what goes on in India is due to the apathy of Indian shitizen’s (including me) apathy. I have for a long time tried to understand what breeds the unique Indian attitude towards things. I think I found the answer in the book I am currently reading “India – A wounded Civilization” by VS Naipaul. You may have already read it, If not I would be interested in hearing your critique of what Mr. Naipaul wrote.