Monday, May 28, 2007
1. What are the questions?
2. Don't get it right, start writing.
3. Tell me your story.
these do seem a little inconsistent in the way they are worded, may be i need to spend a little bit of waking hours to figure out a consistent phraseology.
Monday, May 21, 2007
The author traces the historical roots of this assumption. From the time of Aristotle and Plato, it was believed that political economy was the science of “right” action. Businessmen and civil servants were told what was morally correct and they had to do it. David Hume and particularly, Adam Smith removed this moralistic perception. They held that private individuals, at any rate, maximised their own utility in the market place. However even Smith held that public interest governed public policy. This was the difference between homo politicus and homo economicus. Homo politicus thought of maximising the public interest. A contradictory bifurcated view sprang up. This held that the same people that participate in market activities engage in public policy making as well- either directly or indirectly. Thus government officials too maximise their own interest in formulating public policy.
This assumption is far more realistic than that held in traditional thought. It follows that the government isn’t altogether efficient and is no champion of equity and equality. This also implies that government intervention isn’t a necessary cure for market failures. Unfortunately, the author does not investigate as to whether market failure is a sufficient condition for government intervention, which it may as well be, especially in case of what Sen and Dreze consider as ‘errors of omission’. For instance, in the case of a famine that has originated due to a lack of purchasing power to buy food grains, the market has committed an error of omission. It hasn’t generated enough purchasing power. Thus this is a sufficient condition for the government to start an income and employment generating relief programme. As far as Public Choice is concerned, students of this discipline will hold that politicians would propose this programme in order to get re-elected. It is in their self interest. This assumption is a practical one.
The author holds that the asymmetry of information problem is far more acute in the case of political markets. While one is likely to research the features of an automobile one would like to buy, one’s vote would merely be one in a million while electing a political leader. Thus one would not have an incentive to research the integrity and efficiency of that leader. While markets target well informed consumers, politicians target badly informed citizens. This deduction has an inherent flaw- it has not considered the role of the media. After all, the media provides a fairly researched insight into the activities of various political figures. If a politician is caught taking bribes or politicising economic decisions (locating PSUs in their own constituencies) the media is quite likely to inform the public of it. However, it may sensationalise facts to serve its profit motive but this will only bring short-term profits. In the long run and in a fairly competitive market, the media’s consumers will not like being misinformed.
The author gives the impression that students of public policy are cynical about the role of the government. Thus they believe that government functions should be privatised, as in, contracted out. Also they should be decentralised. Instances of each have been provided. The efficiency of contracting out is evident in that the United States’ privatised military procurement has proved to be more efficient than the military’s production of its own material. This is possible even in India and is now being carried out in the form of PPP (Public Private Partnership). As per decentralisation, a lot of community members often get together and take decisions on the administration of the community schools, hospitals etc. They also decide upon issues like how late an individual may play music or what colour each individual should paint her fence. This internalises externalities and would be particularly effective in India. If the teachers of a rural school were responsible to the parents rather than to the State Ministry of Education, teacher absenteeism and poor teaching quality would be greatly reduced.
Thus Public Choice is a discipline with a largely realistic outlook. However, it is far too cynical about the government. In a country like India, government investment is highly important, especially in fields like education, health and infrastructure provision where there is scope for positive externalities and where the asymmetries of information are many. A poor woman, who takes her child to a not-so-well-known private clinic as she cannot afford to go to a private clinic or hospital of repute, may not know whether she or he is being injected with plain water instead of vaccine. Surely, it is in the interests of the clinic to inject the child with plain water as this minimises costs. In case of a government clinic however, the treatment is more likely to be of a particular standard. Thus government investment in improving the condition of these clinics is a must.
 See Sen and Dreze, ‘Development and Participation’, Chapter 2.
It is of course, not surprising that ‘Phatphat Sewa’ has seen a 50% decline in revenue as per the estimates of the van drivers. Though this stream of taxi vans, which picks up various passengers along established routes, provides a cheaper travelling alternative to passengers from Shahadara, Maujpur, Krishna Nagar, Selampur, Bhajjanpur and Connaught Place, it is far slower and less comfortable than the Metro. The Phatphat Sewa line of taxi vans that once ran from Connaught Place to Chandni Chowk had to be disbanded altogether due to lack of demand. Evidently, commuters prefer the Metro.
However, a rickshaw puller claimed that his returns have increased so much so that he earns Rs. 20 more than he did before the ‘Yellow Line’ became operational. This is primarily because rickshaws complement the Metro unlike Phatphat Sewa, which acts as a substitute. Most commuters leave their vehicles behind in metro station parking lots, take the metro to Chandni Chowk and then climb into rickshaws. Thus this approximate increase of Rs.20 per day in returns, and hence profit on the part of the rickshaw puller is a small wonder indeed.
As per the food market, one particular trend may be observed. The shops closer to the metro station have by and large, experienced larger increases in returns than shops that are further off. Chaina wala may have been recognised as the best sweet shop in 2006 by The Times Group and it may have won the Times Food Award for three years in succession, but it has experienced no significant increase in returns. Bikanervala which is slightly closer, reports a 2-4% increase. However, the far more proximate Vishal Mava Bhandar estimates a 25-30% increase, despite the fact that it is only 20 years old while Bikanervala is 44 and Chaina wala, 59. Another beneficiary, in terms of returns, is Tewari and Sons which has estimated a 10-15% increase in profits. However, it is a deviation from this trend as it is closer to the Metro station than Vishal Mava Bhandar, and just as old. Of course, this observation need not hold true at all, as the profit figures might have been either overestimated or underestimated by the shopkeepers, for various reasons. The owner of Bhikarams chose to lay the blame for his less than significant increase in returns upon the fact that Chandni Chowk has far too much rush and bustle and far too many strikes, to attract customers. According to him, there shall be no increase in business until there is a change in the state of affairs.
It may seem odd that Kanwarjis, the famous 125 years old, desi ghee sweet shop has seen no significant changes in returms. Paranthewali gali on the other hand, has received scores of visitors. ‘The Power of Paranthas’ owned by P.T. Gaya Prasad Shiv Charan estimated a 20-30 percent increase in revenues. Of course, this shop dates its origin to 1872. Yet even the merely 95 years old Babu Ram Parantha Wale has earned a 50% increase in returns. Kanwarjis have not been as successful as their prices are too high and they cater only to an exclusive clientele.
It is however significant that even those shopkeepers, who have not acquired a significant increase in revenues, add that Delhi Metro has been a huge convenience. It has caused a decrease in congestion as people no longer park their vehicles in Chandni Chowk . They take the metro and then, find a rickshaw. Even shop assistants, employees and owners can easily commute to their work areas in Chandni Chowk and no longer need their cars and scooters, leaving the narrow galis to pedestrians. Parking space, however, is to be increased, which shall reduce congestion even further. As per strikes, as the owner of Bikanervala put it, “Strikes don’t happen all the time.” Most shop-owners estimate a future increase in returns-even if they aren’t too high at present. They estimate that with traffic regulations and a lesser wastage of commuting hours, business shall soon boom in Chandni Chowk.
(Just a little primary interview based survey taken long back. Hope it can be of interest.)
Friday, May 18, 2007
Oh and what are the topics that have been floated ... also if ppl could just let us know the topic they would be working on, it would be great !
Undoubtedly a very well researched article. A very quintessential example of how obscure government policies can be. If I extrapolate a bit further the recent spat over reservations in institutes of higher education quite rightly points out the skewed outlook of our policy makers. Reservations were meant (as proposed by Dr. Ambedkar ) just for the first 10 years post independence … but it has continued even after more than five decades ! Arguments of the HRD are based on some 30 yr old census which is of no consequence today. Policy makers hence need to open up and need to take a more sensible, mature and rational stand on issues, instead of just continuing with old norms and laws thereby making a mockery of the entire system !
I would also like to add that this “license fee” system is not new to me. I feel it is the socialist and the communist outlook that is very strongly instilled in people – especially the middle class. If we analyze, we would realize that it is the “job security” and the perquisites that people are running after. They are ready to pay a hefty sum just to ensure they land up in a govt job and settle comfortably in the lethargic system. I have seen people paying huge amounts of money to secure a government job.
Regarding the current article, there are still some questions that are left unanswered, or rather have raised some questions in my mind-
- Is this phenomenon prevalent just in and around N.Delhi? Has the demographics got something to do with it?
- What is the background in terms of educational qualifications of those offering to be porters?
- Are the perquisites same across all railway divisions?
- If railways is such a profitable organization, what then are the bottlenecks in increasing thenumber of porters and granting them employee status?
Oh and what are the topics that have been floated ... also if ppl could just let us know the topic they would be working on, it would be great !
I was surprise to read Porters article as it elucidated the legalities pertaining to aforementioned class in general. I was taken aback by the topic, as I never thought of such niche segment in general. However, this one article seems to be paradoxical. Though on one hand porters are not employed on Government of India’s payroll but the same is licensed (controlled) by the railways to earn a livelihood by offering his services to railway passengers for transport of their luggage.
As like all other policies, people have found ways to go around it and have been successful in finding the gaps, which exists, in the present framework. All I suggest is that at least porter policy should be privatized which will result in better functioning with some degree of control over the price charged and number of hours worked by the goverment. For instance: Toll Tax collection on Delhi borders which was rendered in private hands few years back have resulted in better collection and operation. It’s even a good method to measure the effectiveness of policy thus changed, as management of porters must have been left to a private agency. Though this is not a casting stone solution and there might be other ways to puzzle out this challenge.
My thoughts though!!! Anticipating your comments!!!!! Cheers!!!
Thursday, May 17, 2007
Wednesday, May 16, 2007
There is room for government mediation even in the normal functioning of markets and this is provided for through the 2nd theorem of welfare economics which states that any pareto-efficient allocation of goods can be sustained by a set of prices in a competitive market equilibrium... The allocation of goods is left to an agency likethe government and to its perception of what equity is. There is no such thing as a perfectly competitive market. In reality markets are plagued by externalities, assymmetric information, imperfect-competition, existenceof a class of non-excludable and non-rivalrous goods (public-goods, ex:defence)which may lead to their non-existence or their failure. In cases of market failure there is room for the existence governments and their market-excluding operations to compensate for the errors of commission of markets. However, even though it is possible to think of a system of public intervention which will lead to a pareto-superior outcome, in reality government's and PSE's are not models of efficiency and its is generally more beneficial to allow the private provisioning of such goods (except public goods) subject to regulationby the government. In case of a market failure, should a government take over the provisioning of the good or not?! For this the 'Double Market Failure criterion' is really useful! A government should only interfere when a)the existence of market failure and itsrecurrence has been credibly proved, and b) there is absolutely no scope for a more efficient outcome by private provisioning of the good, subjectto government regulation.
Even free markets need a regulatory and judicial framework for theirsmooth functioning. The fulfillment of contracts cannot be left to the spirit of cooperation or the 'fundamental-goodwill' of free people. Only the disincentive of judicial action and a credible judicial framework can lead to the smooth functioning of markets.
The government plays an important role in initiating, creating, moulding and sustaining markets. An example is Japan, where the ministry of InternationalTrade and industry (MITI) undertook considerable R&D activities earlier in 20th century and provided the enormous technical know-how and the phenomenal technological and knowledge base which enabled Japanese firmsto excel in the production of cars and the like and gave Japan the competitive edge they have in global markets.
Thus economists while criticizing the negative role of the government should also account for the positive role of the government. The need for intervention in the provision of social infrastructure (health, education, etc.), public goods and certain types of public infrastructure shouldn't be overlooked.
Sunday, May 13, 2007
That’s the word that comes into ones mind after reading Lawrence W. Reeds’ “Seven Principles of Sound Public Policy”. Skim through it and you might call it gibberish, like I did. Give it a thorough reading and you’ll realize that the extremity of his views is somewhat moderated by the logic in what he says.
I find many of his remarks, well, remarkable biased in favor of free markets and economics thereof. Their primary premise being the superiority of Market economies over welfare states, he proclaims this assumption to be a ‘settled truth’ among the intelligentsia.
Some of his principles actually make a lot of sense, such as the ones which emphasize the consideration of long terms impacts and policy effect on incentives while the formulation of any public policy. Whereas, at some points, his views simply fall short of convincing.
His first principle is attractively titled ‘Free people are not equal, equal people are not free’. The word ‘ Free’ and ‘Equal’ having serious economic interpretations only. Therein, Reeds makes an unfair compromise between social and economic equality. He says that in free markets, the economic outcomes are different for different people as they represent their individuality and free markets should be left at their own devices. He consider these economic disparities to be benign but obvious consequences of market dynamics and are emblematic of the different virtues, choices, abilities and talents of the people. He insists that unequal people should not be equalized.
He goes on to credit the failure of any welfare state ( He uses the example of the Soviet Union ) to the differential treatment meted to public and private property. He says that Common property falls into derelictions and disuses whereas Private property is much coveted and well taken care of. His perspective towards socialism is summed up in this witticism and I quote:
‘While socialists are fond of explaining that’s you have to break some eggs in order to make an omelet, they never make any omelets, they only break eggs.’
Agreed, Welfare states have invariably been socio-economic nightmares, but to say that free markets are all peaches and cream, would be gross over exaggeration. Beyond a point, its just not possible to justify the widening economic disparities and concentration of economic power in the hands of the elite few by saying that individual abilities and talents are the sole determinants of economics. Just because people are not equal, does not imply that they have to suffer a raw deal for no fault of their own. It were life scenarios like these that lead to the emergence of Marxist theories and the social revolutions that followed. When any society reaches a stage where there are only 2 classes, the rich and the poor, one realizes the lethal impact of uncontrolled markets. A contemporary example is that of life saving drugs, most AIDS/Cancer medicines are exorbitantly expensive. Is it not unfair then to not let governments intervene and let these essentialities reach the people who need them? Or are we too elitist to believe that poor people don’t have a right to live?
Reeds says that governments are spendthrift, callous, corrupt and costly. He believe that a free and independent people do not require governments for their sustenance, but someone should tell Mr. Reed, that an economically oppressed and dependant people do. Perhaps this statement is a misfit in Contemporary Indian politics, but then I assume governments to be welfare oriented, not just bureaucracy.
Please cease from thinking that I am a left agent or supporter of sorts. I am all for the free markets and minimization of deadweight losses caused by government policies. But to believe that pure free markets are THE solution, does not go down too well with me.
No society can exist in extremes, Socialism collapses. Free markets might not, but they are like a boiling pot of economic frustration, which lead to eventual implosion.
PS: Looking forward to working with intelligent and bright people like you all. The very best.
Licensing here?? in 2007, when licensing is suppposed to be word of the past, it exists and that too in the most unlikeliest of places, a railway station for coolies!Not that this is licensing with the same negative effects which led to pre 1991 but in essence the basic facts are still the same.
In reply to the two previos posts is see, even i did not find anything in the article about the status of unlicensed coolies in the stations. However, im inclined to hink that they would be very little in no. 2reasons for that:
1. Illegal and hence possibilty of railway authorities clamping on them
I agree this is an idialistic reason as one would expect bribrery and corruption to take care of that.
2. This is much more practical. Lack of assistance by unions for the unlicensed due to liabilities and obvious reasons and moreover, no participation for them in the cartel work division aspects.
In any case the fact that coolie profession could yiled 15,000 INR a month with additional railway benefits astounds me. But it certainly makes the reason for a 4 lakh premium on a license obvious!
In any case, this nexus has to be broken. Whether or not a new system is to be imposed, is a matter of debate. Personally , i feel that amenments are sufficient to this present system. I dont say do away with licensing, i say make licensing only relevant for accepting applicants for employment and a certain psychological control over the employment procedure and give order to it.
Cut away the premiums and corruption and we would have a pretty effective system!
Saturday, May 12, 2007
I also read the articles on the coolies in Delhi railway stations. I do not know if there are unlicensed coolies in Delhi, but there are many in Bangalore's railway stations. The large number of licensed coolies in Delhi, and also the fact that there is a Union of these workers goes to say that it is very difficult for the unlicensed workers to make a place for themselves here. In Bangalore, however, there is a comparitively lesser number of licensed coolies, and therefore also a comparitively larger number of unlicensed coolies.
Does that somewhat explain the large cost of the badges in Delhi?
Maybe I can make some enquiries as regards the prices of these badges in Bangalore stations...
I read the paper on the licensed coolies in the Delhi railway stations.it revealed the sorry state of affairs.there was something which came to my mind,are there non-licensed porters in the those stations? i think there are, and if they do exist then there arises another side to the whole thing.the competition significantly increases and therefore the income comes down,does it then explain why someone should fish out 2 lakhs for the shabby metal badge round the arm?
What do you think?
Friday, May 11, 2007
Its a whole new experience to be researching reality as in effectively life itself.
Existentialism apart, it feels great to be doing an internship with CCS.
A few more libertarian organizations like this would make all the difference
is today's differential world!
The only way to ensure growth, and when i say growth i mean wholesome growth,
economic, social, the whole 'doo-dah' and of course, individual is to enliven the train of
thought called unbiased freedom and CCS intends to do just that.
I look forward to an extremely enriching and eventful internship.
Oh, and @Renu; Thank you for the blog! Finally, i'm blogging again!
Thursday, May 10, 2007
Wednesday, May 9, 2007
Welcome to the CCS Blog!
Write! Comment! Criticize! Suggest! Review! Interact! Share!
We give you the space for all of this and more!
You can start by posting about the articles in the “Internship Reader”; we want to know your opinion.