Here’s part 2:

Date: 10th October, 2003.

The digital divide seems to be all the rage these days. Take for instance the recent two days I spent in Chennai. The M S Swaminathan Research Foundation (MSSRF) had organized a Policy Makers’ Workshop at their campus in Chennai on October 8th and 9th. The workshop was supported by two “Canadian crown corporations”, the International Development Research Centre (IDRC), and the Canadian International Development Agency (CIDA). (Those two have a budget of about Canadian $100 million.)

The workshop was a great opportunity to meet many people from the government ranks, the private sector, and various NGOs. It was an honor to meet Prof. M.S.Swaminathan, of course. Two days is sufficient time to get to know at least a couple of people well. I was fortunate that I met many people who I would like to follow up with.

The information package for the workshop asked (among other questions):

Can ICTs be useful for rural and remote areas of developing countries, especially the poverty-stricken regions?

The two days gave me an opportunity to reflect on the issues that the participants raised. I think it would be useful for me to create a framework within which I can discuss the various specifics of debated by the participants of the workshop. I will do so in a seemingly roundabout way because what I would like to do is not what a journalist or a reporter would do. I am seeking to explain something that is not trivial, neither in its conception or its impact. So it may be many days before I can say that I have made the point that I have set out to make.

The ICT Question

Date: 11th Oct 2003: Yesterday I noted one question posed at the Policy Makers’ Workshop:

Can ICTs be useful for rural and remote areas of developing countries, especially the poverty-stricken regions?

We need to examine that question for a moment. At one level of analysis, it is hard to not answer that question in the affirmative. At another level, it is a meaningless question. Merely because it is syntactically correct does not imply that it has any content.
Consider the question:

Can magnetic levitation superfast monorail transportation systems be useful for rural and remote areas of developing countries, especially the poverty-stricken regions?

Clearly, yes. Not just magnetic levitation superfast monorail transportation systems, but an almost unending variety of things would be useful for the development of poverty-stricken remote areas. Not merely for those areas, all of those unending variety of things would be useful for the development of not so remote and not so poverty-stricken areas of any developing country. Thus that question is actually content-free.

It is hard to argue that ICT, or anything else for that matter, cannot be useful in development. There are only two problems:

• Our resources are limited. Anyone who does not keep that in mind is clearly out of touch with reality.
• Prioritizing the needs and sequencing the required intervention is an impossible task unless considerable thinking goes into the analysis of the problem.

Therefore a meaningful question would be: How appropriate is ICT for rural and remote areas of developing countries, especially the poverty-stricken regions?

Or, how should we sequence the use of ICT, both temporally as well as spatially, for economic development? That is, should we take our resources and thinly distribute it all across the country or should we focus on some areas first and then move to other areas? Should we use our limited resources to bring ICT tools to the most remote and the poverty-stricken areas of the country and neglect other areas? Should we concentrate on ICT for remote and poverty-stricken areas before we concentrate on other needs of those areas?

These are important questions and need to be debated and discussed before we waste any more resources than we already do with the gazillions of ICT for development conferences and initatives.

Myths and Misconceptions

To confront the cliches and shibboleths of one’s age is neither easy nor rewarding. The emperor’s new clothes exist only in the imagination of those committed to maintaining an obvious falsehood for fear of falling out of favor. I believe it is time that we examine some of the ICT related myths that drape the development emperor. I will categorize them as myths, misunderstandings, misconceptions, and misapprehensions and number them randomly. I may even intersperse them with some facts.

Misapprehension #78: There is a digital divide and it is the cause of retarded development. Hence, if we bridge the digital divide, development will occur.

The reference is to the fact that broadly speaking, the rich have computers and cell phones and the poor do not. No argument there: the rich have not just that, but they have cars, and airconditioners, and washing machines, and toilets, and medicines, and excess food. So what is so astonishing about them having more digital gizmos? And why is that digital divide more important than the other scores of divides such as the airconditioner divide or the toilet divide or the food divide?

Fact #84: ICT is neither necessary nor sufficient for development.

The rich countries developed long before the fathers of digital revolutions were born. There are many reasons why developed nations developed and when and how they developed; and none of those reasons have anything remotely to do with the digital domain.

Misconception #12: ICT is the cause of development.

The confusion between causes and effects is rampant. Part of the time it is a simple confusion between correlation and causation, such as when two things frequently occur jointly, the tendency is to believe that one is the cause of the other. But even when there is a causal link between two features, one cannot randomly assign one as the cause and the other to the effect. Confusing the cause for the effect is a distressingly common occurrence.

Why the confusion? Number of reasons, really. First, plain old fashioned inability to think through the issue.

Second, laziness. Even if one is capable of thinking, it is harder to think things through rather than to jump to a convenient
conclusion.

Third, even if one is not inclined to be lazy, there is the hurry to get on the bandwagon lest one gets left out on the sidewalk. So what, one may ask, is going on in the bandwagon rolling through town with the cry ICT for Development, All Aboard! Where do did they start off from and where are they headed to?

The ICT for development bandwagon starts off in Cart-Horse-ville. There people put the cart before the horse. They notice that developed (rich) countries use a lot of ICT. Ergo, they reason, ICT causes wealth. It is no use telling them that it is because that they are rich that they can afford all the digital gizmos and not the other way around. It is no use telling them that in developed countries with high wages (and labor shortages), labor saving capital-intensive goods will be cheap relative to labor and hence they would use ICT more intensively.

Analogically, one can present the case this way: in developed countries, lots of people have cars, while in poor countries very few people have cars. So they reason that cars make people rich. Ergo, they conclude, that for poor people to become rich, all they need is cars.

The horse of the cart-horse confusion is dead and there is no point in flogging it any further.

The Need to Do Arithmetic

John McCarthy of Stanford University has the following in his .signature file: Those who refuse to do arithmetic are doomed to speak nonsense.

Over the years I have seen too many instances of errant nonsense that a little bit of arithmetic would have prevented. I think that the power of arithmetic is not fully appreciated. Even people in very powerful positions utter complete nonsense when they refuse to do simple calculations.

In the recent workshop that I was at, I had presented our model we call RISC (Rural Infrastructure & Services Commons). The model is based on the recognition that the provision of infrastructure is a necessary precondition for services that are necessary for rural development. Infrastructure investment is ‘lumpy.’ You have to have at least a certain minimum amount of investment before it is of any use to anybody.

Since there is a minimum scale below which infrastructural investment is not viable, and since total investment is limited, providing infrastructure to every of the 600,000 Indian villages is not an efficient option. Therefore, RISC recommends that infrastructure investments be made in locations that are accessible by a large number of villages to start off with. Later, as economic conditions improve, village level development of infrastructure would make more sense. This, of course, implies that the facilities will not be immediately accessible to everyone. Some will incur a travel cost. Moreover, the travel cost will be relatively greater on women than on men considering that men are more inclined to travel the 10 kms or so the average facility may be located.

One participant objected to the model based on the differential travel cost. She held that the solution is that every village should have all facilities. Here is where we need to do some arithmetic. Add up all resources for infrastructure investment at our disposal. Divide that by 600,000 and you have quantity x, the available resource per village. Find out the investment cost of the minimum viable unit of infrastructure and call it y. Now compute the ratio y over x and call that number z. If z is equal to or less than 1, we can provide every village with the required infrastructure base. Otherwise, we need to invest y resources in a central location that z villages will have to share.

It is true that women would be at a disadvantage relative to men when it comes to travel. But then the answer is not that infrastructure resources should be squandered based on gender equity considerations but rather that women should be assisted in some way so that they overcome their mobility issues. (It is always more practical for Mohammed to go to the mountain than for the mountain to come to Mohammed.)

Let’s do arithmetic and persuade others to do some arithmetic as well.

{These are previously published but uncategorized posts.}

“Oh what a tangled web we weave, When we first practice to deceive,” lamented good old Scotty (the poet that is, not the guy with his warp drives and dilithium crystals). But I have noticed that in our attempt to un-deceive ourselves, which is what learning is about, we are also forced to weave a tangled web. It is a tangled web of relationships we slowly build in our minds and gradually a pattern emerges if we are lucky. Unresolved variables and dangling references scattered around the edges of our minds wait to be added to the mental construct over successive iterations.

This blog is a learning device for me. By attempting to express myself through writing bits and pieces, I am learning by revealing to my conscious mind what I subconsciously know but don’t know that I know. It is a slow, plodding, painful process at times but then learning is often that, and naturally it has its rewards because learning is always rewarding. The occasional joy of having expressed oneself well makes taking the next step in self-actualization a little easier.

Like pieces of a jigsaw puzzle, the ideas wait to be put together in a coherent manner. For now I am just sorting through the pieces in no particular order. Some I am eager to fit within the frame but cannot do so without laying out the surrounding pieces first. Patience is called for. Also a bit of hard work – which I am afraid that I am congenitally incapable of. But if one is having fun, then a bit of hard work does not sound that hard.

OK, so now that I have explained why I titled this (hopefully) long rambling series “The Tangled Web”, I should get on with it.

Models

Economists do it with models. Their attraction to models is understandable because models help them to understand how the whole complicated shebang works. Take, for example, the model economy we call the Robinson Crusoe economy. At its simplest, it has one person in it, Robinson. We carefully examine him (his abilities, his goals), his endowments (what he has been able to salvage from the shipwreck), his environment, his technology (what he knows), etc.

Models are stories. Here’s a simple model of a democracy. Two lions and one lamb. They are voting to figure out what to have for lunch. Majority rule. Fairly easy implications follow.

I have a slightly more elaborate model for what is happening in India. The next time.

George Akerlof’s seminal contribution to economic theory is in the area of information imperfection and how it affects markets. Information asymmetry between the buyers and sellers of used cars (very poor quality used cars are the lemons that Akerlof talks about) leads to that specific market failure. The role of expectations is critical in that specific case. In fact, I am persuaded that expectations play a very important role in how human systems behave dynamically.

The most important advance in the economics toolkit in the past century is undeniably game theory. Game theory informs economics because economics studies what happens when economic agents behave strategically. That is, the result of the “game” of human activity is not chosen by any economic agent. Like in those activities that are games (sports such as football, or board games such as chess and checkers), formal games model how the outcome emerges from the interaction of the choices that individuals make motivated by their own self-interest. The strategic part lies in how a player chooses to do something that is based on his expectation of how the others players will respond to his move.

Once you start thinking about expectations, it is surprising how pervasive the role of expectations in outcomes is. There is a definite and positive link between expectations and results. Personal anecdotal evidence is persuasive. I have noticed that I generally aim to achieve that is expected of me. Some of my mentors cleverly used that tendency. Whenever I am expected to be good at something, I try hard to be good at it; if I am expected to be lazy and unproductive, I usually am.

In the US, I noticed that Americans of African descent do much worse than Americans of Jewish descent in most spheres. Jews are expected to be good at whatever they do, whether scholarship or the arts, while blacks are expected to generally drop out of school, engage in crime and end up in jail. I believe (and this is a conjecture only) that from early childhood, people understand what is expected of them and they do as the script dictates. We are prisoners of our own expectations, expectations that get communicated to us by our families and by the environment that we are immersed in.

We behave to a large extent on how others expect us to behave.

It is interesting to understand how expectations are formed. Within a closed system, expectations are endogenous by definition. In open systems, at least part of the expectations must be exogenous. Since individuals are not closed systems – that is, they are influenced by events and things outside of themselves – there is a role for others to influence the expectations that individuals have. For now, I will not go into how expectations are formed. I am only asking how the aggregation of individual behavior influenced by expectations gives rise to macro phenomenon.

People expect trash on the streets in India. That is they expect others to throw trash. That expectation allows them to feel free to add their own (small amount of) trash. Aggregated over many people over an extended period of time, the trash accumulates as the expectation itself gets reinforced. Eventually you have Singapores and Mumbais.

People expect the politicians to be crooks. Their expectation of a lower moral standard allows the politicians to be immoral scum. The immorality of politicians is widely known. The pile of immoral acts grows and at any time there is an average level of depravity. The next politician seeing the huge pile, feels free to add to the heap and indeed goes a little deeper in the depravity department. The average sinks further and people adjust their expectations downwards even more and the vicious cycle continues.

Take a publication such as a newspaper or magazine, such as The Time of India. There is an average quality of the articles. Then it accepts a very low quality article. This brings down the average very slightly in the short run but can have a large negative effect in the long run through the mechanism of expectations.

Assume that in general, writing article that are above the average at any particular time is more costly than writing below average articles. The publication of a very poor quality article expands the range of articles that are accepted for publication. So the average creeps downwards as more below the current average articles are submitted. The submission is based on the expectation that it will be accepted as was demonstrated by the very poor quality article. As the average creeps downwards, the quality of the readership changes to reflect the poor quality of the publication, and the good writers move on.

I believe that revolutionary change at its core is the raising of expectations of the people far above the prevalent average. It takes leadership, courage, vision, and heaps of chutzpah. Which, in our case, we do not have. But imagine if we did. Imagine that somehow our expectations were raised sufficiently that we would not tolerate crooks and criminals in high office. Imagine that there would be revolt in the streets when we find that the highest political offices are held by murders and embezzlers. Would not that change the political climate, would that not allow the good guys to hold office in India?

[Links: The wikipedia on The Market for Lemons.]

One of the puzzles that cosmologists grapple with is the question of why the universe is lumpy. The universe has structure today – from super clusters of galaxies to galaxies and stars and all sorts of other objects down to planets and asteroids. But it was much simpler earlier in its history. How did all these clumps of matter evolve from an undifferentiated soup of elementary particles and forces that existed in the early universe following the Big Bang?

A lot of very clever people have been doing a lot of hard sums for many years and have been partially successful in explaining why the universe is the way it is. There are inflationary models and there are string theories, for example. We just don’t know for sure. But the fact remains that the universe is lumpy. And we should be really grateful that it is so because its lumpiness is what makes the universe interesting. Not just interesting, it also makes us possible so that we can marvel at the nature of the universe. We should pause to consider that if the universe were uniform, it would have been sterile and we would not be here. The non-uniformity of the universe which arose for who knows what reasons is what makes for an interesting universe.

So the universe evolved gradually and became increasingly differentiated; parts of it became distinct from other parts. The inside of a star is quite different from the cold emptiness of space. At all scales, the universe is uneven. This unevenness is fractal. At every level of detail, the universe is evolving to be more uneven.

The Lumpy Life

Consider, if you will, life. As far as we can tell, it arose on earth a few billion years ago. Then it was mostly simple unicellular ooze. As time went by, all sorts of amazing life forms arose from bacteria to blue whales. The tree of life, once it took root, grew to be impressively massive with hundreds of millions of branches. One of those branches bears our species and we are the leaf nodes on that branch. Our species too appears to follow the basic rule that with the passage of time, we become more uneven.

Even at the level of the individual, embryonic stem cells are have an uniformity which in later stages of development is missing in the cells of the mature organism. Development is the differentiation of cells into specific specialized units. Though the cells have a common origin, processes yet not fully understood push them into a state of non-uniformity.

The Lumpy Society

During the hunter gatherer stage of human history, there was uniformity. There were very few people in the world; fewer than a couple of million. It was an Hobbesian existence: nasty, mean, brutish and short. Everyone was equally poor. Even with the advent of settled agriculture, equality in poverty was the norm and only a few feudal lords escaped the common lot and had some wealth. The quality of life of the vast majority actually declined with the move to an agrarian lifestyle. But slowly, things began to change when human society became more complex and nation states came into being. The nation states became unequal and within nation states itself, different people started having more wealth and power than the average.

Inequality and Development

If uniformity is characteristic of early stages of development of an entity (universe, society, individuals), then inequality in some sense is characteristic of development. Inequality grows with time. Whatever be the moral and ethical dimensions of inequality, the fact appears to be that there is a monotonic increase in inequality among the entities that constitute an entity.

Here I will confine myself to the entity called an economy. Individuals are the basic building blocks of an economy, the cellular units of the body. My conjecture is that as any economy grows, the degree of inequality continues to grow. This is almost as if it were a natural law. Let’s look at the broad sweep of human history.

Five hundred years ago, wealth among humans was unequally distributed. But compared to the unequal distribution of wealth today, it was much less unequal. Granted the fabulously wealthy then had a lot more of land and all sorts of precious stuff but aside from living more comfortable lives, they had access to the same goods and services that the average person had. They could not, for example, get antibiotics or triple heart bypasses or buy first class air travel. Technology has increased what is on offer and thus accentuated the inequality. It is much more meaningful to be fabulously wealthy today than it was ever before in our history. Bill Gates, who epitomizes the wealthy individual, is richer than not just the current generation but is richer than any generation that ever existed. By the same logic, future Bill Gateses will be far richer than the present one.

Poverty and Inequality

It is almost an article of faith that whenever someone mentions poverty, they have to also mention inequality. It is as if you cannot decry poverty without also pointing out the growing inequality. My opinion is that they are not conjoined twins. Although often seen together, their personalities and characteristics are quite independent. Their growth (or decline) follow independent trajectories. You can have one without the other.

From a dispassionate point of view, inequality is neither good nor bad. It merely is. From an individual’s point of view, it is of course good to be on the winning side of inequality. From the other side, inequality induces envy and perhaps provides the motivation to move up the ranks. As inequality is a basic and persistent feature of the universe, I suppose envy and the attempt to become richer will also persist.

The point I wish to make is that unlike inequality, poverty is definitely not good and is not inevitable. Inequality is relative but poverty (in some sense) is absolute. Warren Buffet is poorer than Bill Gates but is definitely not poor. One can imagine a world of rich and poor without having any poverty in the world.

I think empirical evidence suggests that even as the inequality in the world is increasing, and the gap between the rich and the poor is increasing, poverty is decreasing. My prediction is that in a generation or two, poverty will be almost completely eliminated. Yes there will be poor people but there will be no poverty.

The basis of my claim is this. There is a monotonic decrease in the percentage of poor in the world over time. One can reasonably claim that by today’s standards, in the year 2000 BCE, nearly 100 percent of the people were living in poverty. In the year 1000 CE, it must have been 90 percent. Today that number is perhaps 50 percent. Twenty years hence, it could be 10 percent. And fifty years from now, it could be zero percent.

Of course poverty is a matter of definition as well. In the US, a family of four with an income less than $18,000 per year is considered poverty stricken. By that definition, around 98 percent of India is under the poverty line. The definition of poverty will vary across time as well. It will be naturally revised upwards.

My definition of poverty is this: if you have sufficient food, clothing, shelter, education, opportunities for recreation and creativity so as to allow you to live your natural human lifespan, you are not poverty stricken.

My Point

So what is the point in all this rambling on about poverty and inequality, you may ask. It is this. Policy makers should stop worrying about inequality. Not just that, they have to stop attempting to reduce inequality. It is a fool’s errand. It cannot be done, it is not required, and more importantly it could lead to real harm.

I do realize that there is a reason for harping upon inequality. The envy it evokes is sufficient to mobilize political support from the poor for redistributive policies. It is a way of gaining and maintaining political power. It is that fact that keeps socialists in power. Ultimately, socialism is what keeps people not only poor but also keeps a large percentage of the poor in poverty.

The newspapers regularly report how India has 10,000 (or whatever thousand) millionaires whenever they discuss poverty. That is generally meaningless. Let’s do the numbers. Assume that the average millionaire’s wealth in India is $2 million. So their aggregate wealth is $20 billion. Redistribute that to the billion Indians and you have the princely sum of $20 per capita increase in the wealth of the non-millionaires in India. See my point?

The wealth of the few rich (and yes, ten thousand or even 100 thousand is few relative to a billion) does not matter in any real sense. What matters is the general level of wealth and the overall distribution. What matters is not how little there is but how we can arrange matters so that the amount of wealth increases. If we stop focusing on inequality, perhaps we could spare some time and understand that the way to create more wealth is by freeing the economy from the socialistic mindset of poverty. That’s all.

The question naturally arises: why do different societies end up with different rule sets? Who’s in charge of making the rules? And there is a follow-up question. Rules have public good characteristics. That is, they are not physical objects that are rival in consumption. If you use a rule, I too can the same rule without depriving you of the use of the rule. So if you have a good rule set, I can costlessly imitate the set and achieve equally good results. Rules are like secret sauces except for that they are not secret. So the question is why don’t people copy good rules. To explore these two questions, let me begin with addressing a personal matter.

I have been meaning to write about books that matter to me for a while. Since some have explicitly asked that question, it’s time to come clean. Thomas C. Schelling’s Micromotives and Macrobehavior (1978) is the book that had the most influence on my decision to study economics formally. Why does a person behave the way he does? And what is the effect of the aggregation of individuals behaving according to their own preferences? These questions naturally arise if you have the least curiosity about the world of people.

Schelling is brilliant in his analysis and lays out the arguments in terms that any lay intelligent reader would intuitively grasp. It is one of the best introductions one can have to game theory. There is hardly any algebra and yet his arguments are formal, elegant and rigorous. If for nothing else, one should read that book slowly just to learn how to write clearly. Of course, writing clearly on a topic requires thinking clearly about it. Schelling is a master wordsmith. I have been randomly flipping through the book and every page recommends itself as worthy of quoting. So here is a sample:

The Commons

Some years ago Garret Hardin chose a title that is insinuating its way into our common vocabulary to describe a motivational structure that is remarkably pervasive. He gave an address entitled “The Tragedy of the Commons” what was published in Science (Dec 1968.) References to the commons are showing up everywhere, and the term is beginning to server the same shorthand purpose as words like “multiplier,” “noise,” “zero-sum,” “critical-mass,” or “bandwagon.” A decade earlier “prisoner’s dilemma” escaped the domain of game theory and became shorthand for a commonly occurring situation between two individuals, the one in which two people hurt each other more than they help themselves in making self-serving choices and could both be better off if obliged to choose the opposite. Hardin’s common grazing grounds are a particular multi-person version of the same motivational structure.

The image is provocative. Every time one of us noses his car onto a crowded highway he is likely to be reminded of cattle overgrazing the common grassland. Soon, people at a meeting who have something worth saying, but not quite worth listening to, may begin to look like the cows that eat and trample the grass that another cow has its eyes on. Economists have a long history of attention to the commons, and it is neither accidental nor the unique genius of Garrett Hardin that that concept is now regularly applied to the dumping of sewage in the common waterway as well as the extraction of oil from a common pool or the killing of whales in a common sea, and even to the proliferating human population for which the earth and its resources have been likened to a common breeding ground.

“The commons” has come to serve as a paradigm for situations in which people so impinge on each other in pursuing their own interests that collectively they might be better off if they could be restrained, but no one gains individually by self-restraint. Common pasture in a village in England or Colonial New England was not only common property of the villagers but unrestrictedly available to their animals. The more cattle (or sheep or whatever) that were put to graze on the common, the less forage there was for each animal – and more of it got trampled – but as long as there was any profit in grazing one’s animal on the common, villagers were motivated to do so. . .

Looser definitions of “the commons” will include situations that are similar but not identical in analytical structure. Hoarding library books, hogging pay telephones at a busy airport, sitting through intermission for fear of losing one’s eat, and exercising tenure in a rent-controlled apartment when one would prefer to move but has no seniority elsewhere, are other examples of the “wasteful” collective use of scarce resources.

I will resist the temptation to quote any further from the book. Add that to your reading list. I would recommend his “The Strategy of Conflict” but it is more specialized and is definitely harder to read. Although I never met him, I consider Schelling to be one of my economics gurus and was delighted when Schelling won the economic Nobel prize in 2005. I would recommend his prize acceptance speech which you can find here.

As I continue with my Tangled Web set of posts, I will return to books that were useful to me in developing my thinking. It may take me time, however, as I am not the most disciplined of people and tend to get easily distracted.

So I will come back to the matter of rules and why they matter later. For the next post, I would like to explore a matter that I believe is not fully appreciated: poverty and inequality.

For the last couple of years I have been doing an informal survey. Every now and then I ask people a simple question: Have you read the Indian constitution? I may pop that question while addressing a meeting; or in a discussion with a small group; or to the person sitting next to me on a flight. I estimate that I have asked this question to about 10,000 people at random – friends, family, acquaintances, strangers. Not a single person among the whole lot has ever admitted to having read the Indian constitution.

One wonders why. Everyone surveyed was most certainly literate, most even had higher education. Many of them were involved in – or at least had a deep interest in – socio-political matters. All of them were definitely citizens of “the socialist, secular, democratic, republic” of India.

Is the Indian constitution not worth reading? Is it like some ancient esoteric document that is written in an arcane language and is not really relevant in today’s circumstances? Is it like what the Vedas and the Upanishads are to the inhabitant of India? Those texts are usually something that they have heard about from time to time but have only a vague idea of what they contain, and they leave it to those who have a professional interest in them to study and do what they like with them.

The survey was informal but the results lead me to believe that a vanishingly small percentage of Indians have ever bothered to read the constitution. That should make you sit up and take notice. The constitution is the supreme law of the land. It is the basic set of rules. It also has meta-rules, rules on how to make rules. The constitution is the most important political document whose impact is felt by the citizen in every aspect of life everyday. Its effects are as pervasive as the air that we breathe. It defines the basic characteristics of the society that we live in. Indeed, in a very strict sense it builds the society that we live in. I believe that the constitution is the DNA of a society and the genes it encodes determine whether the society prospers or not.

Comparing Constitutions

I instinctively compare India and the US whenever I wish to learn about something that has socio-economic implications. I consider both countries home and have strong emotional, social, professional, and educational links with both. It does bother some people, though, that I am forever comparing the two. Be that as it may, the fact is that the rest of the world has a lot to learn from the US experience.

I believe that the Constitution of the US is the foundation upon which the considerable successes of the United States of America rests. It is the work of fallible humans but at least in the crafting of that document they came fairly close to a perfection that I think will be hard to duplicate. Four handwritten pages. That is all. Just four pages in long hand. Add to that the Bill of Rights, the first ten amendments. Though you could easily read it over a lazy cup of tea, it is best read slowly and deliberately as it is worthy of reverence. It is less than five thousand words long.

I have read the Constitution of India. It is around one hundred twenty thousand words long. It would easily fill a 400-page book. It did take me two days to read it. Every now and then I would wonder what was the point behind something but then I moved on. There are bits that makes me think that one of us – either the writers or I – must be a bit stupid.

The US constitution is clearly not only a shorter document but it is also more robust. In the nearly 220 years of its existence, it was amended only 27 times, with the first 10 amendments being the Bill of Rights. The Indian constitution has been amended 94 times in the 56 years of its existence. If the US constitution had seen the same frequency of amendments, it would have had around 400 instead of 27 amendments.

I want to say more about the two constitutions but later. For now, here is my concern. The constitution is the document which actually governs the nation. The politicians and bureaucrats are just the agents that carry out what the constitution dictates. If practically nobody has read the one single document that sets out the rules of the game, is there any point in saying that we are people who are governed through our consent? Isn’t it a person’s consent that distinguishes a democracy from an aristocracy or dictatorship? And if a person has not read the rules, can he be said to have consented to the rules?

Rules must be known to be meaningful. Furthermore, the rule set has to withstand scrutiny. If unexamined, a bad set could continue to rule society. It worries me that not only do people not read the constitution, what is worse is that nearly half of Indian citizens cannot read it even if they wanted to because they are illiterate.

I don’t wish to make too wide a claim but I think that the inability of the people to know the rules of the game is a contributing factor in the degeneration of the government of India. Criminals rule because the ruled don’t know the rules. The logical conclusion we seem to be headed towards is when the entire government – from the very top to the very bottom – is comprised of people whose moral turpitude is evident and shocking.

It is time to sit up and take a good look around. I will be back.

I live in a development called “Magarpatta City” on the southeastern edge of Pune. Like most other recent real estate developments around the country, it is a gated community. It is far from complete and but most services are available, although choices are limited. One service essential to me is internet connectivity. The only service provider within the complex is VSNL TataIndicom Broadband.

It is “broadband” only if you have a sufficiently flexible definition of broadband. (You know, like “2 + 2 = 5” for sufficiently large values of “2”.) It is actually fairly narrowband. But stuck between a rock and a hard place, you takes what you gets and you pays whatever they demands because they are a local monopoly. The choice is simple: take it or leave it. And that is precisely the attitude that TataIndicom takes around here. The system fails fairly regularly and when you call their customer service, you get no service. Your call ends up at some call center. The impression that I get is that these call centers are staffed with people with subhuman IQ. It is a frustrating experience getting them to actually understand what the problem is. But perhaps it is not their fault entirely. The systems that they rely on are pathetic.

The last few times that I called, I was told that I should take up my complaint with billing. At billing they said that they couldn’t help me because the problem was with the service. My service had been interrupted even though I had pre-paid for it. But they would not be able to figure out why because the records are not available as my service has been suspended. The only way for me is to renew my subscription before they can tell me what was the reason that my previous subscription was suspended.

The Tatas are a reputable company. But doing business with TataIndicom is no different from doing business with a public sector monopoly. Last year, I had been a TataIndicom customer when I lived in a different part of the city. I got fed up with their unacceptable service. Fortunately I had a choice. I switched to AirTel and their service was far superior. I had paid a hefty non-refundable setup charge to TataIndicom which I had to write off as a sunk cost. This time I don’t have the luxury of switching suppliers. It is either TataIndicom or nothing.

TataIndicom has market-power in this situation. Standard economic theory predicts that market-power translates to poor service and high prices. The consumers are trapped in a sellers’ market and lacking choice, put up with whatever the supplier deigns to provide and on terms that the supplier chooses. Given sufficient time, consumers re-calibrate their expectations and poor service is accepted as the norm.

Systems Matter

I have been living in India for nearly four years. The previous couple of decades I spent in California. I had gotten used to a system where the consumer is king and the suppliers did their best to get your business. Service quality complaints (which arose relatively infrequently) were dealt with expeditiously and in many cases reasonable compensation was promptly given for the inconvenience caused. The interesting point is that in practically all cases, the calls were handled by call centers in India. There’s a lesson in there. It is not the people but the systems that dictate what the outcome is.

The systems in place to deal with service issues in the US are superior to those in India. When you place a person in the system, irrespective of whether the person is Indian or Croatian, he or she performs as the system allows and/or mandates. An Indian within an American system would be no different from an American in an American system. Conversely, an American in an Indian system will be indistinguishable from an Indian in an Indian system.

Why do Indians born and brought up in India when they arrive in the US just happen to be remarkably successful? There is the matter of selection bias of course. Those Indians who get to the US are more educated, more driven, and more talented than the average Indian (or the average American, for that matter.) Even if you control for that bias, there is a residual degree of above average success among Indians in the US relative to Indians back in India. My conjecture is that the American systems are superior to the Indian systems and that accounts for the difference.

That raises the question: surely, the American system was not designed by god almighty. That Americans designed good systems and Indians did not must speak to the superior system building skills of the Americans compared to the Indians. So in a sense it is not sufficient to just say that Indians and Americans are inherently equally capable, and that the Americans are more successful than Indians because they have better systems. You have to also explain why Americans could build better systems.

Abhi Rulz

I have a tentative answer. Let me tell you a story. One evening I was visiting with my friends Sudha and Vijay, and their two kids Anu and Ahbi, in Rancho Palos Verdes in southern California some years ago. We were watching a video when Abhi, then three years old, had to take a bathroom break. He was promised that we would pause the video while he went and did his business. When he got back, he realized that we had not “paused” the video but had instead stopped it. He was furious. “Paused! Paused!” he yelled. He was hopping mad. He said that the rule was you have to “paused” the video, not stop it. It took a while for us but we all accepted that we had messed up and it won’t happen again. He was placated.

He was in a phase where you could resolve any dispute between him and his older sister, or get him to do something, by merely invoking the appropriate rule. You had to tell him, “Abhi, the rule says such and such . . .” and he was willing to go along with it because that was what the rule said. He was not sufficiently sophisticated to challenge the source of the rule or why it was a reasonable rule. To him, a rule was a rule and it had the force of law and everyone had to abide by it.

I still cannot think of how important rules are without recalling with a great deal of sweet nostalgia that incident of Abhi absolutely insistent that we had broken the rule that we had agreed to. I think rules are important and if you agree to a reasonable set of rules, you can actually build wonderful systems. Let me get to that the next time.

You can learn a lot from talking to people. Long train journeys were a prefect setting to have long conversations with perfect strangers, people who have a different point of view, a different set of life experiences. Now that these days there are very few train journeys, long cab rides are the substitute setting for me to conduct an impromptu interview. Books and other publications generally give you a macro-level view of the world. For a micro-level understanding, you have to talk to people who you would not come across in the pages of a newspaper or a book.

My innate curiosity about how others see the world overcomes the introvert in me. On my journey to Mumbai recently in a cab, I spoke at length with the driver. He did not appear to be terribly upset that he was forced to (indirectly) pay the cops for the privilege of plying his trade. He considered it as part of the cost of doing business, just like paying for diesel or the road tolls. He was just a very small cog in an immensely large machinery. He had no mental model of how intricate the system was but that ignorance did not prevent him from being an integral part of it. He did the best he could and had a resigned attitude towards what was beyond his control. He was willing to settle because even though things were bad, they were tolerable enough. Raging against the machine was not part of his thinking.

Hard Candy

Systems that gradually deteriorate over time allow people to adjust and accommodate themselves as best as they can within it. Along each point of its slow deterioration, the system degradation is matched by equally slight changes in the expectations of the people. Finally, one settles into a state of such diminished expectations that getting next to nothing is acceptable because it is still better than the nothing that is the only conceivable alternative.

A colleague told me this story. In a recent survey of social services in a particular district in Bihar, he found that the government social worker was not doing her job. The scheme is called “Integrated Child Development Services” (ICDS) and is supposed to provide a comprehensive set of services from nutrition to preventive healthcare to hygiene instruction. At least some part of the funding to deliver these services must have been there. Yet he found that all the social worker was doing was this: every morning at 11 AM, the worker would hand out one piece of hard candy to every child. That is all; nothing else. And for that, the children would dutifully wait till 11 AM to get their one piece of candy.

He spoke to the people and to his surprise realized that they were willing to defend the social worker and were not prepared to complain about the lack of services. He explained to me later that it could be that they were afraid that if they complained, the social worker may lose her job, and they would lose the one piece of candy they were getting. Furthermore, he was just an outsider and merely passing through. He had nothing to offer them. The social worker was someone who at least gave them something and was therefore less of an outsider.

Soft Power

The role of diminished expectations is absolutely fundamental in the emergence and persistence of sub-optimal system we see all around us. Changing expectations is fundamental to breaking out of this vicious cycle. Our expectations determine what is normal and therefore acceptable.

Last Thursday, there was no power supply between 10 AM and 6 PM in my part of the town. It was an inconvenience to me, just like it must have been to a few thousand people. But it is a regular inconvenience and we have all factored it into our routine. Initially I used to get worked up about it. I would rave and rant about the sh**-heads who managed the whole power infrastructure for their incompetence in not being able to plan for and provide a basic necessity such as electricity for a city in the 21st century. Now I take that as a given. I am thankful that there is power much of the time.

I think it was Kurt Vonnegut who had warned that one should not live too long in California. He said that it made you soft. In my case at least, that’s what happened. I had become soft. I expected service that I had paid for. Now I have revised my expectations downwards and after paying for the service, I pray that I get something and don’t demand more than say 50 percent of what I should get.

Let me tell you a story of what my experience with VSNL TataIndicom has been. Next time.

Someone I used to know in California died rather suddenly. It was about 20 years ago. She and her husband were casual friends of mine. The perfect yuppie couple, they had everything going for them. Then she started having back pain. They were into fitness and perhaps the back pain was due to some sprained muscle while at the gym. A few visits to the doctors, a few more to chiropractors, a bit of muscle relaxants and pain killers, a few more visits to the medical establishments—a few months went by and the symptoms kept getting worse. Finally, it was diagnosed as cancer. She died within six months of that determination. It was later said that if they had discovered what the problem was, she might have had a fighting chance against the cancer. As it happened, she had lost too much time while her misdiagnosed symptoms were being treated.

That incident left a deep impression on me, not just because it involved the death of someone young and fit. The lesson was forced viscerally upon me: there is a distinction between symptoms and underlying causes. Since then I have been obsessed with always trying to distinguish between the two. Death observed even as some remove has a way of focusing the mind. Being an intelligent, thoughtful, and introverted person, I kept thinking about her death, and drawing lessons. For instance, I truly learnt that there is a distinction between being healthy and being fit. Around the time when the first symptoms appeared, she was definitely fit but she was deeply unhealthy.

I thought it was curious that because she was so physically fit that it was hard for people to suspect that she was not healthy. Therein lay another lesson: things aren’t always what they appear to be superficially. I had always had a deep suspicion of superficialities since I am a card-carrying cynic. That death made me further convinced me that if I have to understand the world, I have to look underneath the surface very carefully.

Vagabond

As I said, this happened a long time ago. I was myself a young upwardly mobile professional working in product marketing at Hewlett Packard in the Silicon Valley. HP was the company to work for, California the place to live in. Life was good and the living was easy. Yet, something kept nagging me at the back of my mind. Having been born and brought up in middle-class India, I could not take the wealth I saw around me for granted. Why, I naively asked myself, was India so much poorer than this wonderful place that I lived in? The question was insistent and no doubt arose within me for some deep psychological reasons. It made me uncomfortable. Some of my friends and coworkers were Indians. I observed that they were not particularly interested in that question. I envied them their easy preoccupation with their work, the stock market, the real estate and which Indian restaurant served the best food.

It was not mere intellectual curiosity that forced the question of poverty upon me. I was (and still am) an emotionally sensitive person. I hurt easily. I am easily distressed by the sight of pain and suffering in others, leave alone personal pain and suffering. A great deal of needless pain and suffering is rooted in poverty. Naturally, one turns to books for answers. And then it occurred to me that perhaps I should take time off and explore India for a bit with new eyes. I sold my house, quit my job, and became a vagabond.

There is a reason for the autobiographical interlude here. It may look like I am rambling but trust me that there is a point.

I spent some years doing nothing in particular. I would wander around India, then wander around Europe, and wander a bit more in the US. In the US, thanks to the absolutely amazing public libraries, I got myself a continuing education. I highly recommend aim-less wandering as a systematic way of learning about the world. Those were the days of living the Zen life: eat when you are hungry, and sleep when you are tired. Those were also the days that I seriously started learning about Buddhism.

I had given myself five years to figure out what I would do next in my life. In my not so random reading, I found that there were some books that captured my attention and sparked my curiosity more than others. It turned out that these were written by economists. It began to dawn on me that this was so because the question that I was struggling with was informed by economics more than by any other discipline. And what I did not know about economics could easily fill a library. My education so far had been in engineering and computer sciences. It was not easy but I did get UC Berkeley to admit me to a doctoral program in development economics.

If you are looking for an easy program of study, forget economics. Though hard, studying economics is great fun. For my money, combinatorics and discrete math don’t hold a candle to game theory. Here’s a bit of gratuitous advice: learn game theory.

A Cab Ride

OK, I will spare you any more autobiography for now. But let me tell you what happened the other day on my way to Mumbai from Pune. Sometimes, when the mood strikes me, I take a cab instead of a bus or a train. You can hire a cab outside the Pune railway station. It costs around Rs 1,200 (approximately, US$30) for the 150 km distance, including tolls (about Rs 150). The easy part of the journey is on the highway, 90 km in an hour; the hard part is within the cities—two and a half hour for 60 km.

At the place where you get the cab, you are accosted by dozens of guys wanting to arrange your ride. Competition is fierce. These guys are not the cab drivers themselves. They are the middlemen. Haggling is the norm and it takes a bit of time and effort to finally settle the deal. After that, it is all very civilized. I generally ask the driver his name, where he is from, and other matters of interest as we drive along.

I asked how much he has to pay to the middlemen. I was fairly surprised when he said that he gets only Rs 800. I was taken aback that just for a few minutes of herding the customer, the middleman gets a third of the fare paid. Which means, that after paying toll, the driver makes around Rs 550 (or around US$16.) Out of that, diesel fuel for the journey costs around Rs 350. Subtract a minimum of Rs 200 for operating wear and tear, and the guy is left with the magnificent sum of Rs 150 (or around US$4.) That means, his average hourly wage for driving the car is Rs 40 (US$1.)

Makes you wonder why he puts up with getting ripped off of Rs 400 right off the top. I expressed my outrage. The driver took it in his stride. “Sir,” he explained, “the middleman really makes only Rs 50 or so. The rest he has to pay the cops.” That’s what they call the “hafta” or weekly payment. And does the cop on the beat get to keep it all? Not a chance. He has to pay his bosses up the line.

It is a tangled web of corruption that hurts most the ones that are hardworking. The implications are wide-ranging. Let me get to that the next time.